1,000,000 UNITS
STREAMEDIA COMMUNICATIONS, INC.
(a Delaware corporation)
Each Unit Consisting of
One Share of Common Stock and
One Redeemable Common Stock Purchase Warrant
_____________, 1999
UNDERWRITING AGREEMENT
REDSTONE SECURITIES, INC.
As Representative of the Several Underwriters
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
-1-
1. INTRODUCTION. Streamedia Communications, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A attached hereto (the "Underwriters") for whom you are acting as
representative (the "Representative") pursuant to this Underwriting Agreement
(this "Agreement") an aggregate of One Million (1,000,000) Units (the "Units")
of Streamedia Communications, each Unit consisting of (i) one share (a "Share")
of common stock, $0.001 par value per share (the "Common Stock"), and (ii) one
redeemable Common Stock purchase warrant to purchase one share of Common Stock
(a "Redeemable Warrant"), at a price of Eight and 50/100 Dollars ($8.50) per
Unit. The Units and the Shares and Redeemable Warrants included in the Units,
each as described in the immediately preceding sentence, are herein collectively
called the "Firm Securities." In addition, the Selling Shareholders (as
hereinafter defined) and the Company propose to grant to the Underwriters an
option to purchase all or any part of an aggregate of One Hundred Fifty Thousand
(150,000) additional Units (the "Option Securities") consisting of 150,000
shares (the "Option Shares") of Common Stock (30,000 of which are owned by the
shareholders of the Company named in Schedule B attached hereto (the "Selling
Shareholders") and 120,000 of which will be issued by the Company) and 150,000
Redeemable Warrants (the "Option Warrants"), at a price of Eight and 50/100
Dollars ($8.50) per Unit, solely for covering over-allotments, if any. The
1,150,000 shares of Common Stock issuable upon exercise of the Redeemable
Warrants included as part of the Firm Securities and Option Securities are
hereinafter referred to as "Public Warrant Shares." The Firm Securities, Option
Securities and Public Warrant Shares are hereinafter sometimes referred to as
the "Offered Securities."
The Shares and Redeemable Warrants may not be separately traded until
[November ___, 2001] unless earlier separated upon ten (10) days' prior written
notice from the Representative to the Company. Each Redeemable Warrant shall be
exercisable after the Redeemable Warrants become separately tradeable and until
five (5) years from the date of the Prospectus (as hereinafter defined), and
shall entitle the holder to purchase one share of Common Stock at a price equal
to $12.75 per share, which price is subject to adjustment in certain
circumstances to prevent dilution. Commencing [November ___, 2001], the Company
shall have the right, at any time, to call each of the Redeemable Warrants for
redemption upon not less than thirty (30) days' prior written notice at any time
at a redemption price of $.05 per Redeemable Warrant, subject to adjustment,
provided that the closing sale price of the Common Stock on any national
securities exchange, or Closing Bid Price (as hereinafter defined), has equaled
or exceeded [$17.00] per share (subject to adjustment in certain circumstances
to prevent dilution) for ten (10) consecutive trading days within the 30 day
period immediately preceding the date notice of redemption is given (the
"Redemption Price"). "Closing Bid Price" shall mean the closing bid quotation on
The Nasdaq SmallCap Market (the "NSCM") as reported by Bloomberg Financial
Markets ("Bloomberg"), or, if the NSCM is not the principal trading market for
such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price of such security in the over-the-counter market on the pink sheets or
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the last closing trade price
of such security as reported by Bloomberg. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as reasonably determined in good faith by the Board of Directors of the Company.
The Redeemable Warrants will be issued pursuant to a warrant agreement dated the
date hereof between the Company and American Securities Transfer, Incorporated
(the "Public Warrant Agreement"), a form of which has been filed as Exhibit 4.__
to the Registration Statement.
The Company also proposes to issue and sell to the Representative,
pursuant to the terms of a warrant agreement, dated as of the First Closing Date
(as defined in Section 4(c) below), between the Representative and the Company
(the "Underwriters' Warrant Agreement"), warrants (the "Underwriters' Warrants")
to purchase up to 100,000 Units for One Hundred Dollars ($100). The
Underwriters' Warrants shall be exercisable during the four-year period
commencing twelve (12) months from the Effective Date (as defined in Section
2(a) below), at a price per unit of 120% of the initial public offering price,
subject to adjustment in certain events to protect against dilution. The 100,000
Units issuable upon exercise of the Underwriters' Warrants are hereinafter
referred to as the "Underwriters' Units"; the 100,000 shares of Common Stock
underlying the Underwriters' Units are hereinafter referred to as the
"Underwriters' Shares"; the 100,000 Redeemable Warrants underlying the
Underwriters' Units are hereinafter referred to as the "Underwriters' Redeemable
Warrants"; the 100,000 shares of Common Stock issuable upon exercise of the
Underwriters' Redeemable Warrants are hereinafter referred to as the
"Underwriters' Warrant Shares"; and the Underwriters' Warrants, the
Underwriters' Units, the Underwriters' Shares, the Underwriters' Redeemable
Warrants and the Underwriters' Warrant Shares are sometimes hereinafter referred
to collectively as the "Underwriters' Securities." The Offered Securities and
the Underwriters' Securities are sometimes hereinafter referred to collectively
as the "Registered Securities."
The Registered Securities are more fully described in the Registration
Statement and the Prospectus referred to below.
The several Underwriters have advised the Company that they desire to
purchase the Units. The Company confirms the agreements made by it with respect
to the purchase of the Units by the Underwriters as follows:
-1-
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter as of the date hereof, as of the First Closing
Date (as defined in Section 4(c) below), and as of the Option Closing Date (as
defined in Section 4(c) below), if any, and agrees
with each Underwriter, as follows:
-1-
(a) The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (No. 333-________) covering
the registration of the Registered Securities under the Securities Act of 1933,
as amended (the "Act"), including the related preliminary prospectus or
prospectuses. Promptly after execution and delivery of this Agreement, the
Company will either (i) prepare and file a prospectus in accordance with the
provisions of Rule 430A ("Rule 430A") of the rules and regulations of the
Commission under the Act (the "Rules and Regulations") and paragraph (b) of Rule
424 ("Rule 424(b)") of the Rules and Regulations or (ii) if the Company has
elected to rely upon Rule 434 ("Rule 434") of the Rules and Regulations, prepare
and file a term sheet (a "Term Sheet") in accordance with the provisions of Rule
434 and Rule 424(b). The information included in such prospectus or in such Term
Sheet, as the case may be, that was omitted from such registration statement at
the time it became effective but that is deemed to be part of such registration
statement at the time it became effective (i) pursuant to paragraph (b) of Rule
430A is referred to as "Rule 430A Information" or (ii) pursuant to paragraph (d)
of Rule 434 is referred to as "Rule 434 Information." Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "Preliminary Prospectus." Such
registration statement, including the exhibits thereto and schedules thereto, at
the time it became effective (the "Effective Date") and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the Rules and Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the Registered Securities is herein called the "Prospectus." If Rule
434 is relied on, the term "Prospectus" shall refer to the preliminary
prospectus dated ____________________, 1999, together with the Term Sheet, and
all references in this Agreement to the date of the Prospectus shall mean the
date of the Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the Prospectus or any Term
Sheet or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("▇▇▇▇▇"). The Company will not, so
long as any Redeemable Warrants, Underwriters' Warrants or Underwriters'
Redeemable Warrants remain outstanding and exercisable, file any amendment to
the Registration Statement or any amendment or supplement to any Preliminary
Prospectus or the Prospectus unless the Company has given reasonable and prior
notice thereof to the Representative and counsel for the Underwriters and none
of which shall have reasonably objected within a reasonable period of time prior
to the filing thereof.
-1-
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, nor has the Commission or any such authority instituted or
threatened to institute any proceedings with respect to such an order. At the
times the Registration Statement, any 462(b) Registration Statement and any
post-effective amendments thereto becomes effective and at all times
subsequent thereto up to and on the First Closing Date (as defined in Section
4(c) below) or the Option Closing
Date (as defined in Section 4(c) below), as the case may be, (i) the
Registration Statement, the 462(b) Registration Statement, the Prospectus,
and any amendments or supplements to any thereof, complied and will
comply in all material respects to the requirements of the Act and the
Rules and Regulations, (ii) the Registration Statement, the 462(b)
Registration Statement, the Prospectus, and any amendments or supplements to
any thereof, did not and 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 statements therein
not misleading; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in or omitted
from the Registration Statement or Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf
of the Underwriters specifically for use in the preparation thereof; and (iii)
if Rule 434 is used, the Company will comply with the requirements of Rule 434
and the Prospectus shall not
be "materially different," as
such term is used in Rule
434, from the prospectus
included in the Registration
Statement.
Each Preliminary Prospectus and each Prospectus filed as a part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Rules and
Regulations, complied when so filed in all material respects with the Rules and
Regulations, and each Preliminary Prospectus and each Prospectus delivered
to the Underwriters for use in connection with the offering of the
Registered Securities were identical to the electronically
transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by
Regulation S-T.
-1-
(c) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority (corporate and other) to own its
properties and conduct its business as described in the Registration Statement
and Prospectus and is duly qualified to do business as a foreign corporation and
is in good standing in all other jurisdictions in which the nature of its
business or the character or location of its properties requires such
qualification, except where failure to so qualify will not have a material
adverse effect on the Company's business, properties, assets, condition
(financial or other) or results of operations (a "Material Adverse Effect"). The
Company holds all authorizations, approvals, licenses, certificates, franchises
and permits from state, federal or other regulatory authorities necessary for
the conduct of its business as presently conducted and as described in or
contemplated by the Registration Statement and is in compliance with all laws
and regulations and all orders and decrees applicable to it or to such business
or assets and there are no proceedings pending or, to the best knowledge of the
Company, threatened, seeking to cancel, terminate or limit such authorizations,
approvals, licenses, certificates, franchises or permits.
-1-
(d) The authorized, issued and outstanding capital stock of the Company as of
March 31, 1999 is as set forth in the Prospectus under "Capitalization"; all
shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, no options, warrants, or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of capital
stock of the Company have been granted or entered into by the Company; and the
capital stock conforms to all statements relating thereto contained in the
Registration Statement and Prospectus. The issuances and sales of all such
capital stock complied in all respects with applicable federal and state
securities laws; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company.
-1-
(e) This Agreement, the Public Warrant Agreement and the Underwriters' Warrant
Agreement have been duly and validly authorized by the Company, and this
Agreement constitutes, and the Public Warrant Agreement and the Underwriters'
Warrant Agreement, when executed and delivered pursuant to this Agreement
(assuming due execution by the Underwriters and/or the appropriate parties to
such agreements), will each constitute, a valid and binding agreement of the
Company, enforceable against the Company in accordance with their respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, (ii) as enforceability of any
indemnification, contribution or exculpation provision may be limited under
applicable federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought ((i), (ii) and (iii) are hereinafter
referred to as the "Enforceability Exceptions").
-1-
(f) The Company has full power and lawful authority to authorize, issue and sell
the Registered Securities to be sold by it hereunder on the terms and conditions
set forth herein, and no consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or agency
is required in connection with such authorization, execution and delivery or
with the authorization, issue and sale of the Registered Securities, except such
as may be required and have been obtained under the Act, state securities or
blue sky laws and from the National Association of Securities Dealers, Inc.
("NASD").
-1-
(g) The Units and the Shares have been duly authorized and, when
issued and delivered pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable. The Redeemable Warrants have been
duly authorized and, when issued and delivered pursuant to this Agreement, will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms, subject to the Enforceability Exceptions, and will
be entitled to the benefits provided by the Public Warrant Agreement. The Public
Warrant Shares have been reserved for issuance upon exercise of the Redeemable
Warrants and, when issued in accordance with the terms of the Redeemable
Warrants and Public Warrant Agreement, will be duly authorized, validly issued,
fully paid and non-assessable. The Underwriters' Warrants have been duly
authorized and, when issued and delivered pursuant to this Agreement and the
Underwriters' Warrant Agreement, will constitute valid and legally binding
obligations of the Company enforceable in accordance
with their terms, subject to the Enforceability Exceptions, and will be
entitled to the benefits provided by the Underwriters' Warrant Agreement.
The Underwriters' Shares have been reserved for issuance upon exercise of the
Underwriters' Warrants and, when issued in accordance with the terms of the
Underwriters' Warrants and Underwriters' Warrant Agreement, will be
duly authorized, validly issued, fully paid and non-assessable. The
Underwriters' Redeemable Warrants, when issued in accordance with the terms of
the Underwriters' Warrants and Underwriters' Warrant Agreement, will be
duly authorized and will constitute valid and legally binding obligations
of the Company enforceable in accordance with their terms, subject to the
Enforceability Exceptions, and will be entitled to the benefits
provided by the Public Warrant Agreement. The Underwriters' Warrant Shares
have been reserved for issuance upon exercise of the Underwriters'
Redeemable Warrants and, when issued in accordance with the terms of the
Underwriters' Redeemable Warrants and the Public Warrant Agreement, will be
duly authorized, validly issued, fully paid and non-assessable. The issuance of
any of the Registered Securities will not violate or otherwise be
subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company, and none of the
holders of any of the Registered Securities will be subject to personal
liability by reason of being such holders.
-1-
(h) The Company is not in violation of any term or provision of its Certificate
of Incorporation or Bylaws or of any contract or agreement or of any statute or
any order, rule or regulation or of any other regulatory authority or other
governmental body having jurisdiction over the Company. Neither the execution
and delivery of this Agreement, nor the issuance and/or sale of any of the
Registered Securities, nor the consummation of any of the transactions
contemplated herein, nor the compliance by the Company with the terms and
provisions hereof, has conflicted with or will conflict with, or has resulted in
or will result in a breach of, any of the terms and provisions, or has
constituted or will constitute a default under, or has resulted in or will
result in the creation or imposition of any lien, charge or encumbrance upon the
property or assets of the Company pursuant to the terms of, any indenture,
mortgage, deed of trust, note, loan or credit agreement or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party, or by which the Company
may be bound, or to
which any of the property or assets of the Company is subject; nor will such
actions result in any violation of the provisions of the Certificate of
Incorporation or the Bylaws of the Company or of any contract or agreement, or
of any statute or any order, rule
or regulation applicable to the Company
or of any other regulatory authority
or other governmental body having
jurisdiction over the Company.
-1-
(i) Except as described in the Prospectus, no default exists in the due
performance and observance of any term, covenant or condition of any license,
contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or
any other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company are subject.
-1-
(j) Except as described in the Prospectus, the Company has good
and marketable title to all properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant
or important in relation to its business; all of the leases and subleases
under which the Company is the lessor or sublessor of properties or
assets or under which the Company holds properties or assets as lessee or
sublessee as described in the Prospectus are in full force and effect, and,
except as described in the Prospectus, the Company is not in
default with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right of
the Company to continued possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to
in the Prospectus; and the Company owns or leases all properties and assets
described in the Prospectus as are necessary to its operations as now conducted
and, except as otherwise stated in the Prospectus, as proposed to be
conducted as set forth in the Prospectus.
-1-
(k) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have audited and given their reports
on certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are incorporated in the Prospectus,
are, with respect to the Company, independent public accountants as required by
the Act and the Rules
and Regulations.
-1-
(l) The financial statements, together with related notes, set forth in the
Prospectus or the Registration Statement present fairly the financial position
and results of operations and changes in cash flow position of the Company on
the basis stated in the Registration Statement, at the respective dates and for
the respective periods to which they apply. Said statements and related notes
have been prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent during the periods involved, except as
otherwise stated therein, and all adjustments necessary for a fair presentation
of results for such periods have been made. The information set forth under the
captions "Dilution," "Capitalization," and "Selected Financial Information" in
the Prospectus fairly present, on the basis stated in the Prospectus, the
information included therein.
-1- (m) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, (i) the Company has not incurred any
material liabilities or obligations, direct or contingent, or entered into any
material transactions other than in the ordinary course of business; (ii) there
has not been any change in the capital stock, funded debt (other than regular
repayments of principal and interest on existing indebtedness) or other
securities of the Company; (iii) there has not been any adverse change in the
condition (financial or otherwise), business, operations, income, net worth or
properties, including any loss or damage to the properties, of the Company
(whether or not such loss is insured against); (iv) the Company has not paid or
declared any dividend or other distribution on its Common Stock or its other
securities or redeemed or repurchased any of its Common Stock or other
securities; and (v) the Company has not become a party to, and neither the
business nor the property of the Company has become the subject of, any
litigation whether or not in the ordinary course of business.
-1-
(n) Except as set forth in the Prospectus, (i) there is not now pending or, to
the best knowledge of the Company, threatened, any action, suit or proceeding to
which the Company or any of the officers, directors or securityholders thereof
is a party before or by any court or governmental agency or body; (ii) there are
no actions, suits or proceedings to which the Company is a party related to
environmental matters or related to discrimination on the basis of age, sex,
religion or race; and (iii) there are no labor disputes involving the employees
of the Company that exist or are imminent.
-1-
(o) There is no contract or other document which is required by the Act or by
the Rules and Regulations to be filed as an exhibit to the Registration
Statement which has not been so filed. Each contract which is filed as an
exhibit to the Registration Statement is and shall be in full force and effect
at each Closing Date (as defined in Section 4(c) below) or shall have been
terminated in accordance with its terms or as set forth in the Registration
Statement and Prospectus. No party to any such contract has given notice to the
Company of the cancellation of or shall have threatened to cancel any such
contract, and, except as set forth in the Prospectus, the Company is not or
shall not be in default thereunder.
-1- (p) Except as set forth in the Prospectus, the Company has filed all
necessary federal, state, local and foreign income and franchise tax returns and
has paid all taxes shown as due thereon; there is no tax deficiency which has
been, or to the best knowledge of the Company, might be asserted against the
Company; and the Company has established adequate reserves for such taxes which
are not yet due and payable.
-1-
(q) None of the activities or business of the Company are in violation of, or
cause the Company to violate, any law, rule, regulation 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.
-1-
(r) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts currently adequate for its business,
including but not limited to personal injury and product liability
insurance, insurance covering all personal property owned or leased by the
Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against. The Company has not (i) failed
to give notice or present any insurance claim with respect to any matter,
including but not limited to the Company's business, property or employees,
under any insurance policy or surety bond in a due and timely manner, (ii) had
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has failed
to pay any premiums due and payable thereunder, or (iii) failed to comply with
all conditions contained in such insurance policies and surety bonds. To the
best knowledge of the Company, there are no facts or circumstances under any
such insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in
full any valid claim of the Company.
-1-
(s) The Company has currently pending trademark applications with regard to
trademarks, service marks and trade names necessary for the conduct of its
business as described in the Prospectus and owns or possesses adequate rights to
domain names, copyrights, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
technology, trade secrets, designs, processes, works of authorship, computer
programs and technical data and information (collectively, "Intellectual
Property") necessary for the conduct of its business as described in the
Prospectus or that are material to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company,
and, except as set forth in Schedule 2(r), the Company has not received any
notice of infringement of or conflict with, and the Company, to the best of its
knowledge, is not infringing or in conflict with asserted rights of others with
respect to, any Intellectual Property.
-1-
(t) Except as set forth in the Prospectus, the Company is not obligated or under
any liability whatsoever to make any payment by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any Intellectual
Property, with respect to the use thereof or in connection with the conduct of
its business or otherwise. In addition, the Company owns and has the
unrestricted right to use all Intellectual Property free and clear of and
without violating any right, lien, or claim of others, including without
limitation, former employers of its employees. The Company has no knowledge of
any development by any other person or entity of trade secrets or items of
technical information similar to those of the Company. The Company has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of its Intellectual Property in all material aspects.
-1-
(u) Except as set forth in Schedule 2(u), the Company is not
obligated to pay and has not paid within the past twelve (12) months, and has
not obligated, and will not obligate, the Underwriters to pay, any
finder's fee in connection with the underwriting contemplated hereby or
any other fee (cash, securities or otherwise) in consideration of
financial, consulting or investment banking services.
-1-
(v) No officer or director of the Company or any "affiliate" or
"associate" (as such terms are defined in Rule 405 of the Rules and
Regulations) of the Company. No such officer or director has taken, and each
officer or director has agreed that he will not take, directly or indirectly,
any action designed to or
which might reasonably be expected to cause
or result in the stabilization or
manipulation of the price of any
security issued by the Company.
-1-
(w) Except as set forth in the Prospectus under "Certain
Relationships and Related Transactions," there are no existing agreements,
arrangements, or transactions, between or among the Company and any officer,
director or 5% stockholder of the Company, or any partner, affiliate or
associate of any of the foregoing persons or entities; no officer, director or
greater than 5% stockholder of the Company, and no affiliate or associate of
any of the foregoing persons or entities, has or has had, either directly or
indirectly, (i) an interest (other than ownership of an immaterial number of
shares of capital stock of an entity whose securities are publicly
traded) in any person or entity which (A) furnishes or sells products or
services which are furnished or sold or are proposed to be furnished or sold
by the Company, or (B) purchases from or sells or furnishes to the Company
any goods or services, or (ii) a beneficial
interest in any contract or agreement to
which the Company is a party or by which it
may be bound or affected.
-1-
(x) The minute books of the Company have been made available to
the Representative and contain a complete summary of all meetings and actions
of the directors and stockholders of the Company since the time of its date of
organization, and reflect all transactions referred to in such minutes
accurately in all respects.
-1-
(y) The Company is not aware of any bankruptcy, labor disturbance
or other event affecting any of its principal suppliers or customers which
is reasonably likely to result in a Material Adverse Effect.
-1-
(z) The Registered Securities and all the other
securities of the Company conform to all
statements in relation thereto in the
Registration Statement.
-1-
(aa) Except for the registration rights granted under the
Underwriters' Warrant Agreement, no holder of any securities of the Company
has the right to require that the Company include such securities in the
Registration Statement or any registration statement to be
filed by the Company.
-1-
(bb) The Company has filed an application for the quotation of the
Units, Shares and Redeemable Warrants on The Nasdaq SmallCap Market and has
used its best efforts to cause such application to be accepted. The Company
has filed a registration statement with the Commission pursuant to Section
12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and has used
its best efforts to have same declared effective by the
Commission on an accelerated basis on the Effective Date.
-1-
(cc) Neither the Company nor any officer, director or other agent thereof has,
acting on behalf of the Company, at any time (i) made any contributions to any
candidate for political office in violation of law, or failed to disclose fully
any such contributions in violation of law, (ii) made any payment to any state,
federal or foreign governmental officer or official, or any other person charged
with similar public or quasi-public duties, other than payments required or not
prohibited by law or (iii) made any payment of funds of the Company or received
or retained any funds in violation of any law, rule or regulation and under
circumstances requiring the disclosure of such payment, receipt or retention of
funds in the Prospectus. The Company's internal accounting controls and
procedures are sufficient to cause the Company to comply with the Foreign
Corrupt Practices Act of 1977, as amended.
-1-
(dd) On each Closing Date (as defined in Section 4(c) below) all
transfer or other taxes, (including franchise, capital stock or other tax,
other than income taxes, imposed by any jurisdiction) if any, which are
required to be paid in connection with the sale and transfer of the Units to
the Underwriters hereunder will have been fully paid or provided for by the
Company and all laws imposing such taxes will have been fully complied
with.
-1-
(ee) The Company has no subsidiaries.
-1-
(ff) Except as previously disclosed in writing by the Company to
the Representative, no officer, director or stockholder of the Company has
any affiliation or association with any member of the NASD.
-1-
(gg) The Company is not, and upon receipt of the proceeds from the
sale of the Units will not be, an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and
regulations thereunder.
-1-
(hh) Except for materials distributed by the representative in
connection with the Company's bridge financing, the Company has not distributed
and will not distribute prior to the First Closing Date (as defined in
Section 4(c) below) any offering material in connection with the offering and
sale of the Units other than the Preliminary Prospectus, Prospectus, the
Registration Statement or the other materials permitted by the Act, if
any.
-1-
(ii) The employment agreements between the Company and its
respective officers, as disclosed in the Registration Statement, are or will
be on or before the First Closing Date (as defined in Section 4(c) below)
binding and enforceable obligations upon the respective
parties thereto in accordance with their
respective terms, subject to the Enforceability
Exceptions.
-1-
(jj) Except as set forth in the Prospectus, the Company has no employee benefit
plans (including, without limitation, profit sharing and welfare benefit plans)
or deferred compensation arrangements that are subject to the provisions of the
Employee Retirement Income Security Act of 1974.
-1-
(kk) There are no voting or other shareholder agreements
between the Company and any stockholders of the Company
or between or among any stockholders of the Company.
-1-
(ll) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance with all federal, state,
local, and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours. There are no
pending investigations involving the Company by the U.S. Department of Labor or
any other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or, to the best knowledge of the Company, threatened against or
involving the Company, and none has ever occurred. No representation question
exists respecting the employees of the Company, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements to which the Company is or was a party. No
labor dispute with the employees of the Company exists, or is imminent.
-1-
(mm) The statements in the Prospectus under "Risk Factors,"
"Business," "Certain Relationships and Related Transactions," "Management" and
"Description of Capital Stock," insofar as they refer to statements of law,
descriptions of statutes, licenses, regulations or legal conclusions are
correct in all material respects.
-1-
(nn) The conditions for use of Form
SB-2, as set forth in the
General Instructions thereto,
have been satisfied.
-1- (oo) There are no business relationships or related-party transactions of
the nature described in Item 404 of Regulation S-B involving the Company and any
person described in such Item that are required to be disclosed in the
Prospectus and that have not been so disclosed.
-1-
(pp) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes.
-1-
(qq) Any certificate signed by an officer of the Company in his
capacity as such and delivered to the Underwriters or counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
-1-
3. REPRESENTATIONS AND WARRANTIES OF THE SELLING
SHAREHOLDERS. Each Selling Shareholder represents,
warrants and covenants to each Underwriter as follows:
-1-
(a) This Agreement has been duly and validly authorized by or on
behalf of such Selling Shareholder and when executed and delivered will
constitute a valid and binding agreement of such Selling Shareholder,
enforceable against such Selling Shareholder in
accordance with its terms, except as such
enforceability may be limited by the
Enforceability Exceptions.
-1-
(b) Each of the (i) Custody Agreement signed by such Selling
Shareholder and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., as custodian (the
"Custodian"), relating to the deposit of the Option Shares to be sold by such
Selling Shareholder (the "Custody Agreement") and (ii) Power of Attorney
appointing certain individuals named therein as such Selling Shareholder's
attorneys-in-fact (each, an "Attorney-in-Fact") to the extent set forth
therein relating to the transactions contemplated hereby and by the Prospectus
(the "Power of Attorney"), of such Selling Shareholder has been duly and
validly authorized, executed and delivered by such Selling Shareholder and
isa valid and binding agreement of such Selling Shareholder, enforceable
against such Selling Shareholder in accordance with its terms, except as
such enforceability may be limited by the Enforceability Exceptions.
-1-
(c) Such Selling Shareholder has, and on the Option Closing Date (as
defined in Section 4(c) below) will have, good and valid title to all of the
Option Shares that may be sold by such Selling Shareholder pursuant
to this Agreement on such date and the legal right and power, and all
authorizations and approvals required by law to enter into this Agreement and
such Selling Shareholder's Custody Agreement and Power of Attorney, to sell,
transfer and deliver all of the Option Shares that may be sold by such
Selling Shareholder pursuant to this Agreement and to comply
with its other obligations hereunder and thereunder.
-1-
(d) Delivery of the Option Shares that are sold by such Selling
Shareholder pursuant to this Agreement will pass good and valid title to
such Option Shares, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or other claim.
-1-
(e) The execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement and the Power of Attorney will not
contravene or conflict with, result in a breach of, or constitute a default
under, or require the consent of any other party to any agreement or
instrument to which such Selling Shareholder is a party or by which it is
bound or under which it is entitled to any right or benefit, any provision of
applicable law or any judgment, order,
decree or regulation applicable to such Selling Shareholder of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Selling Shareholder. No consent, approval,
authorization or other order of, or registration or filing with, any court or
other governmental authority or agency, is required for the consummation by
such Selling Shareholder of the transactions contemplated in this
Agreement, except as may be required and as
have been obtained under the Act,
applicable state securities or blue
sky laws and from the NASD.
-1-
(f) Such Selling Shareholder does not have any registration or
other similar rights to have any equity or debt securities registered for sale
by the Company under the Registration Statement or included in the
offering contemplated by this Agreement, except for such rights as
are being exercised in the offering contemplated by this
Agreement or such rights as have been duly waived.
-1-
(g) No consent, approval or waiver is required under any
instrument or agreement to which such Selling Shareholder is a party or by
which it is bound or under which it is entitled to any right or benefit, in
connection with the offering, sale or purchase by the Underwriters of any of
the Option Shares which may be sold
by such Selling Shareholder under this
Agreement or the consummation by such
Selling Shareholder of any of the other
transactions contemplated hereby.
-1-
(h) All information furnished by or on behalf of such Selling
Shareholder in writing expressly for use in the Registration Statement and
Prospectus is, and on each Closing Date (as defined in Section 4(c) below) will
be, true, correct, and complete in all material respects, and does not, and on
each Closing Date (as defined
in Section 4(c) below) will not, contain any untrue statement of a material
fact or omit to state any material fact necessary to make such information not
misleading. Such Selling Shareholder confirms as accurate the number of shares
of Common Stock set forth opposite such Selling Shareholder's name in the
Prospectus under the caption
"Selling Stockholders" (both prior to and after giving effect to the
sale of the Option Shares).
-1- (i) Such Selling Shareholder has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
-1-
(j) Such Selling Shareholder has no reason to believe that the representations
and warranties of the Company contained in Section 2 hereof are not true and
correct, is familiar with the Registration Statement and the Prospectus and has
no knowledge of any material fact, condition or information not disclosed in the
Registration Statement or the Prospectus, and is not prompted to sell shares of
Common Stock by any information concerning the Company that is not set forth in
the Registration Statement and the Prospectus.
-1-
(k) Such Selling Shareholder 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 contributions in violation of law, (ii)
made any payment to any state, federal or foreign governmental officer or
official, or any other person charged with similar public or quasi-public
duties, other than payments required or not prohibited by law or
(iii) made any payment of funds or received or retained any funds in violation
of any law, rule or regulation and under circumstances requiring the
disclosure of such payment, receipt or retention of funds in the Prospectus.
Any certificate signed by or on behalf of any Selling Shareholder and
delivered to the Underwriters or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Shareholder
to each Underwriter as to the matters covered thereby.
-1- 4. PURCHASE, DELIVERY AND SALE OF THE UNITS.
-1-
(a) Subject to the terms and conditions of this Agreement,
and upon the basis of the representations, warranties, and agreements
herein contained, the Company agrees to issue and sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to buy
from the Company at $7.65 per Unit after deduction of the Underwriters' 10%
selling commissions, at the place and time hereinafter specified, the
number of Firm Securities set forth opposite the name of such Underwriter in
Schedule A attached hereto plus any additional Firm Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 13 hereof. No value shall be
attributable to the
Redeemable Warrants
constituting a part of the
Firm Securities.
-1-
(b) In addition, subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties and agreements herein contained,
the Company, with respect to the Option Warrants and 120,000 Option Shares, and
the Selling Shareholders, with respect to 30,000 Option Shares, hereby grant an
option (the "Over-Allotment Option") to the Underwriters to purchase all or any
part of the Option Securities at $7.65 per Unit after deduction of the
Underwriters' 10% selling commissions. No value shall be attributable to the
Option Warrants constituting a part of the Option Securities. The Over-Allotment
Option may be exercised within forty-five (45) days after the Effective Date
upon notice by the Representative to the Company advising as to the amount of
Option Securities as to which the option is being exercised, the names and
denominations in which the certificates for such Option Securities are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Representative, but shall not be
earlier than two (2) nor later than ten (10) full business days after the
exercise of said option, nor in any event prior to the First Closing Date (as
defined in Section 4(c) below). The number of Option Securities to be purchased
by each Underwriter, if any, shall bear the same percentage to the total number
of Option Securities being purchased by the several Underwriters pursuant to
this Section 4(b) as the number of Firm Securities such Underwriter is
purchasing bears to the total number of the Firm Securities being purchased
pursuant to Section 4(a), as adjusted, in each case by the Representative in
such manner as the Representative may deem appropriate. The Over-Allotment
Option granted hereunder may be exercised only to cover over-allotments in the
sale by the Underwriters of Firm Securities referred to in Section 4(a), and the
Underwriters shall have no obligation to make any over-allotments. No Option
Securities shall be delivered and paid for unless the Firm Securities shall be
simultaneously delivered or shall theretofore have been delivered and paid for
as herein provided. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date (as defined
in Section 4(c) below), such dividend or distribution shall also be paid on the
Option Shares on such Option Closing Date (as defined in Section 4(c) below).
-1-
(c) The Offered Securities to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as the Representative may request upon forty-eight (48) hours prior notice
to the Company, shall be delivered by or on behalf of the Company or, in the
case of the Option Shares, the Selling Shareholders and the Company, to the
Representative through the facilities of the Depository Trust Company ("DTC"),
for the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by certified or official bank check
or checks drawn on or by a Dallas Clearinghouse Bank and payable in next day
funds to the order of the Company, or, with respect to the Option Shares, to the
order of the Company and the respective Selling Shareholders, or, at the sole
option of the Representative, by wire transfer of immediately available funds to
an account or accounts designated by the Company, or, with respect to the Option
Shares, the Company and the respective Selling Shareholders. The Company, and
with respect to the Option Securities, the Selling Shareholders and the Company,
will cause the certificates for the Offered Securities to be purchased by the
Underwriters hereunder to be made available for checking and packaging at least
twenty-four (24) hours prior to each Closing Date (as defined in Section 4(c)
below) with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Securities, 8:30 a.m., City of Dallas time, on
_____________, 1999, or such other time and date as the Representative and the
Company may agree upon in writing, and, with respect to the Option Securities,
8:30 a.m., City of Dallas time, on the date specified by the Representative in
the Underwriters' election to purchase such Option Securities, or such other
time and date as the Representative, the Company and the Selling Shareholders
may agree upon in writing. Such time and date for delivery of the Firm
Securities is herein called the "First Closing Date," such time and date for
delivery for the Option Securities, if not the First Closing Date, is herein
called the "Option Closing Date," and each such time and date for delivery is
herein called a "Closing Date." The documents to be delivered on each Closing
Date by or on behalf of the parties hereto pursuant to the terms and provisions
of this Agreement, including the cross receipt for the Offered Securities and
any additional documents requested by the Representative pursuant to the terms
and provisions hereof, will be delivered at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ P.C., 5400 Renaissance Tower, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the
"Closing Location"), and the Offered Securities will be delivered at the
Designated Office, all on each such Closing Date. A meeting will be held at the
Closing Location at 9:00 a.m., City of Dallas time, on the New York Business Day
next preceding such Closing Date, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4(c), "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close. Time shall
be of the essence and delivery at the time and place specified in this Agreement
is a further condition to the obligations of the Underwriters. It is understood
that the Representative, individually and not as representative of the several
Underwriters, may (but shall not be obligated to) make any and all payments
required pursuant to this Section 4 on behalf of any Underwriters whose check or
checks shall not have been received by the Representative at the time of
delivery of the Offered Securities to be purchased by such Underwriter or
Underwriters. Any such payment by the Representative shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder. It is
understood that the Underwriters propose to offer the Offered 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.
-1-
(d) On the First Closing Date, the Company shall issue and sell to the
Underwriters the Underwriters' Warrants. The total purchase price for the
Underwriters' Warrants shall be $100.00. The Underwriters' Warrants shall be
exercisable for a period of four (4) years commencing twelve (12) months from
the Effective Date, to purchase 100,000 Units at $10.20 per Unit. The
Underwriters' Warrant Agreement, including the forms of Underwriters' Warrant
Certificates, shall be substantially in the form filed as Exhibit 1.2 to the
Registration Statement. Payment for the Underwriters' Warrants shall be made to
the Company on the First Closing Date.
-1-
5. PUBLIC OFFERING BY THE UNDERWRITER. The Representative agrees to cause the
Firm Securities to be offered to the public initially at the prices and under
the terms set forth in the Prospectus as soon, on or after the effective date of
this Agreement, as the Representative deems advisable. The Representative may
allow such concessions and discounts upon sales to other dealers as set forth in
the Prospectus. Each of the Underwriters represents, severally and not jointly,
to the Company that it is currently a member in good standing of the National
Association of Securities Dealers, Inc. and duly authorized to perform its
obligations under this Agreement in all jurisdictions, states and countries
where such Underwriter is required to perform such obligations under the terms
and conditions of this Agreement, and that, during the period in which such
Underwriter is participating in the Offering, the Underwriter shall use its
reasonable best efforts to remain so authorized.
-1-
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the several Underwriters that:
-1-
(a) The Company will use its best efforts to cause the Registration Statement to
become effective as promptly as possible. If required, the Company will file the
Prospectus and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act. Upon notification from the Commission that the Registration Statement has
become effective, the Company will so advise the Representative. The Company
will not at any time, whether before or after the Effective Date, file the
Prospectus or any amendment to the Registration Statement or supplement to the
Prospectus of which the Representative shall not previously have been advised
and furnished with a copy or to which the Representative or counsel to the
Underwriters shall have objected in writing or which is not in compliance with
the Act and the Rules and Regulations. At any time prior to the later of (i) the
completion by all of the Underwriters of the distribution of the Units
contemplated hereby (but in no event more than nine (9) months after the
Effective Date) and (ii) twenty-five (25) days after the Effective Date, the
Company will prepare and file with the Commission, promptly upon the request of
the Representative, any amendments or supplements to the Registration Statement
or Prospectus which, in the opinion of the Representative, may be necessary or
advisable in connection with the distribution of the Units. As soon as the
Company is advised thereof, the Company will advise the Representative, and
confirm the advice in writing, of (i) the receipt of any comments of the
Commission, (ii) the effectiveness of any post-effective amendment to the
Registration Statement, (iii) the filing of any supplement to the Prospectus or
any amended Prospectus, (iv) any request made by the Commission for amendment of
the Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, or (v) the issuance by the
Commission or any state or regulatory body of any stop order or other order or
threat thereof suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of any of the Offered Securities for offering in
any jurisdiction, or of the institution of any proceedings for any of such
purposes, and will use its best efforts to prevent the issuance of any such
order, and, if issued, to obtain as soon as possible the lifting thereof. The
Company has caused to be delivered to the Representative copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriters and dealers to use the Prospectus in connection with the sale
of the Units for such period as in the opinion of counsel to the Underwriters
the use thereof is required to comply with the applicable provisions of the Act
and the Rules and Regulations. In case of the happening, at any time within such
period as a Prospectus is required under the Act to be delivered in connection
with sales by an underwriter or dealer, of any event of which the Company has
knowledge and which materially affects the Company or the securities of the
Company, or which in the opinion of counsel for the Company or counsel for the
Underwriters should be set forth in an amendment of the Registration Statement
or a supplement to the Prospectus in order to make the statements therein not
then misleading, in light of the circumstances existing at the time the
Prospectus is required to be delivered to a purchaser of the Units, or in case
it shall be necessary to amend or supplement the Prospectus to comply with law
or with the Rules and Regulations, the Company will notify the Representative
promptly and forthwith prepare and furnish to the Representative copies of such
amended Prospectus or of such supplement to be attached to the Prospectus, in
such quantities as the Representative may reasonably request, in order that the
Prospectus, as so amended or supplemented, will not contain any untrue statement
of a material fact or omit to state any material facts necessary in order to
make the statements in the Prospectus, in the light of the circumstances under
which they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters, except that in case any Underwriter is required, in connection
with the sale of the Units to deliver a Prospectus nine (9) months or more after
the Effective Date, the Company will upon request of and at the expense of the
applicable Underwriter, amend or supplement the Registration Statement and
Prospectus and furnish the applicable Underwriter with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act. The Company will comply
with the Act, the Rules and Regulations and the Exchange Act and the rules and
regulations thereunder in connection with the offering and issuance of the
Offered Securities. Within the time during which the Prospectus is required to
be delivered under the Act, or pursuant to the undertakings of the Company in
the Registration Statement, the Company will comply, at its own expense, with
allrequirements imposed upon it by the Act, the Rules and Regulations, the
Exchange Act and the rules and regulations of the Commission promulgated under
the Exchange Act, each as now or hereafter amended or supplemented, and by any
order of the Commission so far as necessary to permit the continuance of sales
of, or dealings in, the Registered Securities.
-1-
(b) The Company will use its best efforts to qualify to register the Offered
Securities for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent of service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Offered 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 a
period as the Representative may reasonably request.
-1-
(c) Prior to the completion of the offering contemplated hereby, the Company
will make all filings required to (i) cause a registration statement under the
Exchange Act to be declared effective concurrently with the completion of the
offering contemplated hereby and will notify the Representative in writing
immediately upon the effectiveness of such registration statement, (ii) obtain a
listing of the Units, Common Stock and Redeemable Warrants on The Nasdaq
SmallCap Market and will use its best efforts to maintain such listing for at
least five (5) years from the date of this Agreement, and (iii) if requested by
the Representative, to obtain and keep current a listing in a securities manual
published by Standard & Poors or ▇▇▇▇▇'▇, which manual shall be reasonably
satisfactory to the Representative.
-1-
(d) For so long as the Company is a reporting company under either Section 12(g)
or 15(d) of the Exchange Act, the Company, at its expense, will furnish to its
stockholders an annual report (including financial statements audited by
independent public accountants), in reasonable detail and at its expense, and
will furnish to the Representative during the period ending five (5) years from
the date hereof, (i) copies of each annual report of the Company; (ii) a copy of
any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4 received or filed by the Company
from time to time; (iii) a copy of any annual, quarterly or current report filed
by the Company pursuant to the Exchange Act; (iv) copies of all statements,
documents or other information which the Company shall mail or otherwise make
available to any class of its security holders, or shall file with the
Commission or with any exchange upon which the securities issued by the Company
shall then be listed or registered; and (v) such other publicly available
information as the Representative may from time to time request.
-1-
(e) The Company will deliver to the Representative at or before the First
Closing Date two (2) manually signed copies of the Registration Statement
including all financial statements and exhibits filed therewith, and of all
amendments thereto, and will deliver to the Underwriters such number of
conformed copies of the Registration Statement, including such financial
statements but without exhibits, and of all amendments thereto, as the
Underwriters may reasonably request. The copies of the Registration Statement
and each amendment thereto furnished to the Underwriters will be identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to ▇▇▇▇▇, except to the extent permitted by Regulation S-T. The signed copies of
the Registration Statement so furnished to the Representative will include
signed copies of any and all consents and reports of the independent public
auditors as to the financial statements included in the Registration Statement
and Prospectus, and signed copies of any and all consents and certificates of
any other person whose profession gives authority to statements made by them and
who are named in the Registration Statement or Prospectus as having prepared,
certified or reviewed any parts thereof. The Company will deliver to or upon the
order of the Underwriters, from time to time until the Effective Date, as many
copies of any Preliminary Prospectus filed with the Commission prior to the
Effective Date as the Underwriters may reasonably request. The Company will
deliver to the Underwriters on the Effective Date and thereafter for so long as
a Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriters may from time to time reasonably request. The
Company, not later than (i) 5:00 p.m., New York City time, on the date of
determination of the public offering price, if such determination occurred at or
prior to 12:00 noon, New York City time, on such date or (ii) 6:00 p.m., New
York City time, on the business day following the date of determination of the
public offering price, if such determination occurred after 12:00 noon, New York
City time, on such date, will deliver to the Underwriters, without charge, as
many copies of the Prospectus and any amendment or supplement thereto as the
Underwriters may reasonably request for purposes of confirming orders that are
expected to settle on the First Closing Date. The Prospectus and each
Preliminary Prospectus and any amendments or supplements thereto furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T.
-1-
(f) The Company will make generally available to its security
holders and to the registered holders of its Redeemable Warrants and deliver
to the Representatives as soon as it is practicable to do so but in no
event later than ninety (90) days after the end of twelve (12) months after
its current fiscal quarter, an earnings statement (which need not be
audited) covering a period of at least twelve (12) consecutive months
beginning after the Effective Date, which shall satisfy the requirements
of Section 11(a) of the Act.
-1-
(g) The Company will apply the net proceeds from the sale of the
Units for the purposes set forth under "Use of Proceeds" in the Prospectus,
and will file such reports with the Commission with respect to the
sale of the Units and the
application of the
proceeds therefrom as may
be required pursuant to
Rule 463 under the Act.
-1-
(h) The Company on the First Closing Date will sell to the
Underwriter the Underwriters' Warrants according to the terms specified in
Section 4(d) hereof. The Company has reserved and shall continue to reserve
a sufficient number of shares of Common Stock for
issuance upon exercise of the Underwriters' Warrants,
the Redeemable Warrants and the Underwriters'
Redeemable Warrants.
-1- (i) During the period from the First Closing Date until such time as all of
the Redeemable Warrants have been redeemed by the Company or earlier exercised
by the holders thereof, each in accordance with the terms of the Public Warrant
Agreement, the Company agrees that the Representative shall have the right to
designate for nomination, and the Company shall use its best efforts to cause
the election of, one member of the Company's Board of Directors (the "Board"),
who shall be reasonably acceptable to the Company; alternatively, the
Representative may designate an observer, who shall be entitled to attend all
meetings of the Board and to receive all copies of all notices and other
documents distributed to the members of the Board (including, but not limited
to, any unanimous consents prepared and advance notices of all proposed Board
actions or consents), as if such observer were a member of the Board. Such
designee shall be entitled to receive from the Company the same cash
compensation, grants of stock options and reimbursement of expenses as the
Company affords to the directors who are not also officers or employees of the
Company, and the Company shall, in any event, reimburse such designee for all
reasonable costs incurred by such person in attending Board meetings, including
but not limited to food, lodging and transportation. To the extent permitted by
law, the Company agrees to indemnify and hold the designee and the
Representative harmless against any and all claims, actions, awards and
judgments arising out of such designee's service. The Company shall immediately
after the First Closing Date use its best efforts to obtain directors' and
officers' liability insurance in amounts reasonable and customary for similarly
situated companies, at a premium that the Company can reasonably afford. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its officers and directors, it will, if possible, include the
designee (as a director) as an insured under such policy. The rights and
benefits of such indemnification and the benefits of such insurance shall, to
the extent possible, extend to the Representative insofar as it may be, or be
alleged to be, responsible for such designee. The Company will deliver, on or
before the date hereof, the agreements of each of its officers, directors and
holders of 5% or more of its Common Stock to vote, during the period set forth
in the first sentence of this Section 6(i), for the election of the
Representative's designee for director, if any.
-1-
(j) The Company will maintain insurance in full force and effect
of the types and in the amounts adequate for its business and in line with
insurance maintained by similar companies and businesses, including
but not limited to, personal injury and product liability insurance and
insurance covering all personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against.
-1-
(k) During the course of the distribution of the Offered Securities, the Company
will not 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 prices of the Units, Common Stock and/or Redeemable
Warrants. During the so-called "quiet period" in which delivery of a prospectus
is required, if applicable, the Company will not issue press releases or engage
in any other publicity regarding the Company, its business or any terms of the
offering contemplated hereby, without the prior written consent of the
Representative. During such period, copies of all documents which the Company or
its agents intent to distribute will be provided to the Representative for
review prior to such distribution.
-1-
(l) The Company will promptly upon the Representative's
request, prepare and file with the Commission any amendments or supplements to
the Registration Statement, Preliminary Prospectus or Prospectus and take any
other action, which in the reasonable opinion of counsel to the Underwriters,
may be reasonably necessary or advisable in connection with the distribution of
the Offered Securities, and will use its best efforts to cause the same to
become effective as promptly as possible.
-1-
(m) On each Closing Date, all transfer or other taxes (other than
income taxes) which are required to be paid in connection with the sale and
transfer of the Registered Securities will have been fully paid by the
Company and all laws imposing such taxes will have been fully
complied with by the Company.
-1-
(n) Without the prior written consent of the Representative, the
Company will not, (i) during the two (2) year period commencing on the date
of this Agreement, grant any options (other than employee stock
options) to purchase shares of Common Stock at an exercise price less than the
greater of (A) the initial public offering price of the Units (without
allocating any value to the Redeemable Warrants), or (B) the fair market
value of the Common Stock on the date of grant, or (ii) issue any additional
securities which have per share
voting rights greater than the
voting rights of the Shares
(or take any corporate
action which would have
this effect).
-1-
(o) Subsequent to the dates as of which information is given in
the Registration Statement and Prospectus and prior to each Closing Date,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not have incurred any liabilities or
obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business; (ii) there shall not have
been any change in the capital stock, funded debt (other than regular
repayments of principal and interest on existing indebtedness) or other
securities of the Company, any adverse change in the condition (financial or
otherwise), business, operations, income, net worth or properties, including
any loss or damage to the properties of the Company (whether or not such loss
is insured against), which would or could be reasonably expected to result
in a Material Adverse Effect; and (iii) the Company shall not have paid or
declared any dividend or other distribution on its Common Stock or its other
securities or redeemed or repurchased any of its Common Stock or other
securities. The Company shall furnish to the Underwriter as early as practicable
prior to each of the date hereof, the First 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 sixty (60) days prior to the
date of the Registration Statement) which have been reviewed by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Section 8(g) hereof
-1-
(p) On each Closing Date, ▇▇▇▇▇ ▇. ▇▇▇▇ shall be President and
Chief Executive Officer of the Company, ▇▇▇▇▇ ▇▇▇▇▇▇ shall be Vice President of
the Company and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be Chief Financial Officer of the Company.
The Company will obtain key person life insurance on the lives of Messrs. ▇▇▇▇,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ in an amount of not less than One Million Dollars ($1,000,000)
for each of them and will use its best efforts to maintain such insurance during
the five (5) year period commencing with the First Closing Date unless his
employment with the Company is earlier terminated. In such event, the Company
will obtain a comparable policy on the life of his successor for the balance of
the five (5) year period. For a period of twelve (12) months from the First
Closing Date, the compensation of the executive officers of the Company shall
not be increased from the compensation levels disclosed in the Prospectus.
-1-
(q) So long as any Redeemable Warrants are outstanding, the Company
shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then amended,
to be delivered to each holder of record of a Redeemable Warrant and to furnish
to each Underwriter and dealer as many copies of each such Prospectus as such
Underwriter or dealer may reasonably request. The Company shall not call for
redemption any of the Redeemable Warrants unless a registration statement
covering the securities underlying the Redeemable Warrants has been declared
effective by the Commission and remains current at least until the date fixed
for redemption. In addition, for so long as any Redeemable Warrant is
outstanding, the Company will promptly notify the Representative of any material
change in the business, financial condition or prospects of the Company.
-1-
(r) Upon the exercise of any Redeemable Warrants after twelve
months from the Effective Date, the Company will pay the Representative,
individually and not as representative of the Underwriters, a fee of 5% of the
aggregate exercise price of the Redeemable Warrants, of which a portion may be
reallowed to the dealer who
solicited the exercise (which may also be the Representative) if (i) the
market price of the Common Stock is greater than or equal to the exercise price
of the Redeemable Warrants on the date of exercise; (ii) the exercise of the
Redeemable Warrants was solicited by a member of the NASD, (iii) the holder of
the Redeemable Warrants so exercised designates in writing that the exercise of
the Redeemable Warrant was solicited by a member of the NASD
and designates in writing the Representative or other broker-dealer to receive
compensation for such exercise; (iv) the Redeemable Warrants are not held in a
discretionary account (except where prior specific approval for exercise is
received from the customer exercising the Redeemable Warrants); (v) the
disclosure of compensation arrangements has been made in documents provided to
customers, both as part of the original offering and at the time of exercise,
and (vi) the solicitation of exercise of the Redeemable Warrants was not in
violation of Regulation M promulgated under the Exchange Act. The Company agrees
not to solicit the exercise of any Redeemable Warrants other than through the
Representative and will not authorize any other dealer to engage in such
solicitation without the prior written consent of the Representative.
-1-
(s) For a period of five (5) years from the Effective Date, the
Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's
financial statements for each of the first three (3) fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q quarterly report and the mailing of quarterly financial
information to stockholders.
-1-
(t) The Company maintains and will continue to maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance 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.
-1-
(u) The Company agrees that for so long as the Common Stock is
registered under the Exchange Act, the Company will hold an annual meeting of
shareholders for the election of directors within 180 days after the
end of each of the Company's fiscal years and, within 150 days after the end
of each of the Company's fiscal years, will provide the Company's shareholders
with the audited financial statements of the Company as of the end of the
fiscal year just completed prior thereto. Such financial statements shall be
those required by applicable
rules under the Exchange Act and shall be included in an annual report
pursuant to the requirements thereof.
-1-
(v) The Company shall cause each director and officer of the Company
and certain other stockholders listed on Schedule C attached hereto, to enter
into an agreement with the Underwriters pursuant to which he, she
or it will agree not to sell or otherwise transfer any
securities of the Company for a period of one (1) year
following the Effective Date without the prior consent of the
Representative.
-1-
(w) As promptly as practicable after the First Closing Date, the Company will
prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute at least five (5) of such volumes to the
individuals designated by the Representative or counsel to the Underwriters.
-1-
(x) The Company shall, for a period of six (6) years after date
of this Agreement, submit such reports to the Secretary of the Treasury and to
its stockholders, as the Secretary of the Treasury may require,
pursuant to Section 1202 of the Internal Revenue Code, as amended, or
regulations promulgated thereunder, in order for the Company to qualify as a
"small business" so that stockholders may realize special tax treatment
with respect to their investment in the Company.
-1-
7. COVENANTS OF THE SELLING
SHAREHOLDERS. Each Selling
Shareholder further covenants and
agrees with each Underwriter:
-1-
(a) Such Selling Shareholder will not, without the prior written
consent of the Representative (which consent may be withheld in their sole
discretion), directly or indirectly, sell, offer, contract or grant
any option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" within the meaning of
Rule 16a-1(h) under the Exchange Act, or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or
securities exchangeable or
exercisable for or convertible into shares of Common Stock currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3
under the Exchange Act) by such Selling Shareholder, or publicly announce
suchSelling Shareholder's intention to do any of the foregoing, for a period
commencing on the date hereof and continuing through the close of trading
on the date ninety (90) days after the date of the Prospectus.
-1-
(b) Such Selling Shareholder will deliver to the Representative prior to the
First Closing Date a properly completed and executed United States Treasury
Department Form W-8 (if the Selling Shareholder is a non-United States person)
or Form W-9 (if the Selling Shareholder is a United States Person).
-1-
8. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of the
Underwriters to purchase and pay for the Units which it has agreed to purchase
hereunder are subject to the accuracy (as of the date hereof, and as of each
Closing Date) of and compliance with the representations and warranties of the
Company and the Selling Shareholders herein, to the performance by the Company
and the Selling Shareholders of their obligations hereunder, and to the
following conditions:
-1-
(i) (a) The Registration Statement, including any 462(b) Registration
Statement, shall have become effective and the Representative shall
have received notice thereof not later than 10:00 A.M., Dallas time, on
the date on which the amendment to the registration statement
originally filed with respect to the Offered Securities or to the
Registration Statement, as the case may be, containing information
regarding the initial public offering price of the Units has been filed
with the Commission, or such later time and date as shall have been
agreed to by the Representative;
(ii) If required, the Prospectus and any amendment or
supplement thereto shall have been filed with the Commission in the
manner and within the time period required by Rule 434 and 424(b) under
the Act;
(iii) On or prior to each Closing Date no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that or a similar purpose shall have
been instituted or shall be pending or, to the best knowledge of the
Representative and the Company, shall be contemplated by the
Commission;
(iv) Qualification under the securities laws of such
states as the Representative may designate of the issue and sale of the
Offered Securities upon the terms and conditions herein set forth or
contemplated and containing no provision unacceptable to the
Representative shall have been secured;
(v) No stop order shall be in effect denying or
suspending effectiveness of such qualifications, nor shall any stop
order proceedings with respect thereto be instituted or pending or, to
the best knowledge of the Company and the Representative, threatened
under such laws;
(vi) If the Company has elected to rely upon Rule
430A of the Rules and Regulations, the price of the Units 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 First Closing Date the Company shall have provided evidence
satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations; and
(vii) 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.
-1-
(b) No amendments to the Registration Statement, any Preliminary Prospectus or
the Prospectus to which the Representative or counsel for the Underwriters shall
have objected, after having received reasonable notice of a proposal to file the
same, shall have been filed.
-1-
(c) The Representative shall not have discovered and disclosed to the Company
prior to the respective Closing Dates that the Registration Statement or the
Prospectus, or any amendment or supplement thereto, contains an untrue statement
of fact which, in the reasonable opinion of counsel for the Underwriters, is
material, or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
-1-
(d) At the First Closing Date, the Representative shall have
received the opinion, together with copies of such opinion for each of the
other Underwriters, dated as of the First Closing Date, of ▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.C., counsel for the Company, in
form and substance
satisfactory to counsel for
the Underwriters, to the
effect that:
-1-
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with full
corporate power and authority to own its properties and conduct its business as
described in the Registration Statement and Prospectus and is duly qualified to
do business as a foreign corporation and is in good standing in all other
jurisdictions in which the nature of its business or the character or location
of its properties requires such qualification, except where the failure to so
qualify will not have a Material Adverse Effect;
-1- (ii) the authorized, issued and outstanding capital stock of the Company as
of March 31, 1999 is as set forth in the Prospectus under "Capitalization"; all
shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued, and are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; to the best of such counsel's knowledge, the outstanding shares of
capital stock of the Company have not been issued in violation of the preemptive
rights of any securityholder of the Company, and the securityholders of the
Company do not have any statutory preemptive rights to subscribe for or to
purchase, nor are there any restrictions upon the voting or transfer of, any of
the capital stock of the Company; the Registered Securities, the Public Warrant
Agreement and the Underwriters' Warrant Agreement conform as to legal matters in
all material respects to the respective descriptions thereof contained in the
Prospectus; the Shares have been, and the Public Warrant Shares and
Underwriters' Warrant Shares upon issuance in accordance with the terms of the
Redeemable Warrants and the Public Warrant Agreement and the Underwriters'
Warrants and the Underwriters' Warrant Agreement, respectively, have been duly
authorized and, when issued and delivered, will be duly and validly issued,
fully paid, non-assessable, free of preemptive rights and no personal liability
will attach to the ownership thereof; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the Redeemable Warrants,
Underwriters' Warrants and Underwriters' Redeemable Warrants, and to the best of
such counsel's knowledge, neither the filing of the Registration Statement nor
the offering or sale of the Registered Securities as contemplated by this
Agreement gives rise to, any registration rights or other rights, other than
those which have been waived or satisfied, for or relating to the registration
of any shares of Common Stock;
-1-
(iii) this Agreement, the Public Warrant Agreement and the
Underwriters' Warrant Agreement have been duly and validly authorized, executed
and delivered by the Company and, assuming due execution by each other party
hereto or thereto, each constitutes a legal, valid and binding obligation of
the Company enforceable
against the Company in accordance with its respective 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;
-1-
(iv) the certificates evidencing the shares of Common Stock are in valid and
proper legal form; the Redeemable Warrants, the Underwriters' Warrants and the
Underwriters' Redeemable Warrants will be exercisable for shares of Common Stock
in accordance with their terms and at the prices therein provided for;
-1-
(v) delivery of certificates for the Shares and Redeemable Warrants underlying
the Units, upon payment therefor by the Underwriters as provided in this
Agreement, will transfer valid title to such securities to the Underwriters;
and, upon payment for such securities, the Underwriters will acquire such
securities free and clear of any liens;
-1-
(vi) such counsel knows of no pending or threatened legal or governmental
proceedings to which the Company is a party which could have a material adverse
effect on the business, property, financial condition or operations of the
Company; or which question the validity of the Registered Securities, this
Agreement, the Public Warrant Agreement or the Underwriters' Warrant Agreement,
or of any action taken or to be taken by the Company pursuant to such
agreements; and no such proceedings are known to such counsel to be contemplated
against the Company;
-1-
(vii) to the best of such counsel's knowledge there are no governmental
proceedings or regulations required to be described or referred to in the
Registration Statement which are not so described or referred to;
-1- (viii) the execution and delivery of this Agreement, the Public Warrant
Agreement and the Underwriters' Warrant Agreement, and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a breach or
violation of, or constitute a default under, the Certificate of Incorporation or
Bylaws, any bond, debenture, note or other evidence of indebtedness or in any
contract, indenture, mortgage, loan agreement, lease, joint venture or other
agreement or instrument which is filed as an exhibit to the Registration
Statement, or of any material order, writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign
applicable to the Company;
-1-
(ix) the Registration Statement has become effective under the Act, and to the
best of such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement is in effect, and no proceedings for that purpose
have been instituted or are pending before, or threatened by, the Commission;
the Registration Statement and the Prospectus (except for the financial
statements and other financial data contained therein, or omitted therefrom, as
to which such counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the Rules and
Regulations;
-1- (x) such counsel has participated in the preparation of the Registration
Statement and the Prospectus and, although such counsel did not independently
verify and is not passing upon and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus, based upon such participation,
nothing has come to the attention of such counsel to cause such counsel to have
reason to believe that the Registration Statement or any amendment thereto at
the time it became effective contained any untrue statement of a material fact
required to be stated therein or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Prospectus or any supplement thereto contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
statements therein, in light of the circumstances under which they were made,
not misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial information and
schedules contained therein as to which such counsel need express no opinion);
-1-
(xi) all descriptions in the Registration Statement and
the Prospectus, and any amendment or supplement thereto, of contracts and
other documents are accurate and fairly summarize in all material
respects the information required to be disclosed, and such counsel is
familiar with all contracts and other documents referred to in the
Registration Statement and the Prospectus and any such amendment or supplement
or
filed as exhibits to the Registration Statement, and such counsel does not know
of any contracts or documents of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
-1-
(xii) no authorization, approval, consent, or license of any governmental or
regulatory authority or agency is necessary in connection with the
authorization, issuance, transfer, sale or delivery of the Registered Securities
by the Company, in connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking of any action
contemplated herein, other than registrations or qualifications of the
Registered Securities under applicable state or foreign securities or blue sky
laws and registration under the Act, all of which have been obtained;
-1-
(xiii) the statements in the Registration Statement
under the captions "Business,'
"Management," "Shares Eligible for Future Sale," "Certain Relationships and
Related Transactions," "Description of Capital Stock" and in Part II, Item
26, have been reviewed by such counsel and, insofar as they refer to
descriptions of agreements, statements of law, descriptions
of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material
respects;
-1-
(xiv) the offers and sales of the Common Stock referred
to under the caption "Prior
Offerings" and in Part II, Item 26 of the Registration Statement were exempt
from the registration requirements of the Securities Act and were exempt from
the registration or qualification requirements of the securities laws
of each state in which such offers and sales were made, and such offers
and sales do not have to be integrated with the offer and sale of the
Registered Securities pursuant to the Registration Statement; and
-1-
(xv) based solely upon advice of representatives of Nasdaq,
the Units, the Common Stock and the Redeemable Warrants have been duly
authorized for quotation on The Nasdaq SmallCap Market.
Such counsel need express no opinion with respect to the financial
statements and other financial data included in or omitted from the
Registration Statement or Prospectus. Such opinion shall also cover such
matters
incident to the transactions contemplated hereby as the Representative or
counsel for the Underwriters shall reasonably request. In rendering such
opinion, such counsel may rely upon certificates of any officer of the Company
or public officials as to matters of fact, original copies of which shall be
delivered to the Representative on the First Closing Date and the Option Closing
Date as the case may be; and may rely as to all matters of law other than the
law of the United States or of the State of Delaware upon opinions of counsel
satisfactory to you, in which case the opinion shall state that they have no
reason to believe that you and they
are not entitled to so rely.
-1-
(e) All corporate proceedings and other legal matters relating to
this Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by counsel to the
Underwriters.
-1-
(f) The Representative shall have received a letter from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
independent public accounts for the Company, prior to the execution and delivery
of this Agreement, and dated the date of this Agreement, in a form satisfactory
to the Representative, together with signed or reproduced copies of such letter
for each of the other Underwriters, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
-1-
(g) At the First Closing Date, the Representative shall have received from ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP a letter, dated as of the First Closing Date, to the effect that
they reaffirm the statements made in the letter furnished pursuant to paragraph
(f) of this Section, except that the specified date referred to shall be a date
not more than five (5) days prior to the First Closing Date.
-1-
(h) The Representative shall have received a certificate, dated and
delivered as of the date of the First Closing Date, of the Chief
Executive Officer and Secretary of the Company stating that:
-1-
(i) The Company has complied with all the agreements and
satisfied all the conditions on
their respective part to be performed or satisfied hereunder at or
prior to such date, including but not limited to the
agreements and covenants of the Company set forth in Section
6 hereof.
(ii) No stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for that purpose have been instituted or are
pending, contemplated or threatened under the Act.
-1-
(iii) Such officers have carefully examined the
Registration Statement and the Prospectus
and any supplement or amendment thereto, each contains all statements required
to be stated therein or necessary to make the statements therein not
misleading and does not contain any untrue statement of a material fact, and
since the Effective Date there has occurred no
event required to be set forth in the
amended or supplemented prospectus which
has not been set forth.
-1-
(iv) As of the date of such certificate, the
representations and warranties contained in Section 2 hereof are true and
correct as if such representations and warranties were made in their entirety
on
the date of such certificate, and
the Company has complied with
all its agreements herein
contained as of the date
hereof.
-1-
(v) Subsequent to the respective dates as of which
information is given in the
Registration Statement and Prospectus, and except as contemplated in the
Prospectus, the Company has not incurred any liabilities or obligations, direct
or contingent, or entered into any material transactions and there has not
been any change in the Common Stock or funded debt of the Company or any
adverse change in the condition (financial or otherwise), business,
operations, income, net worth, properties or prospects of the Company.
-1-
(vi) Subsequent to the respective dates as of which
information is given in the
Registration Statement and the Prospectus, the Company has not sustained any
material loss of or damage to its properties, whether or not insured, and since
such respective dates, no dividends or distributions whatever shall have been
declared or paid, or both, on or with respect to any security (except interest
in respect of loans) of
the Company.
(vii) Neither the Company nor any of its officers or affiliates has taken any
action designed to, or which might reasonably be expected to, cause or result in
the stabilization or manipulation of the price of the Company's securities to
facilitate the sale or resale of the Offered Securities.
(viii) No action, suit or proceeding, at law or in equity, is pending or, to the
knowledge of such officers, threatened against the Company which would
materially affect the business of the Company, or materially affect any of its
properties, before or by any commission, board or other administrative agency,
except as otherwise set forth in the Registration Statement.
(i) All of the Units shall have been tendered for delivery in accordance with
the terms and provisions of this Agreement.
(j) On the date hereof, but prior to the execution and delivery hereof, the
Company and the Selling Shareholders shall have furnished for review by the
Representative copies of the Powers of Attorney and Custody Agreements executed
by each of the Selling Shareholders and such further information, certificates
and documents as the Representative may reasonably request.
(k) The Underwriter shall have received each of the lock-up agreements referred
to in Section 6(v) hereof.
(l) At each Closing Date, (i) the representations and warranties of the Company
(and the Selling Shareholders at the Option Closing Date) contained in this
Agreement shall be true and correct with the same effect as if made on and as
each Closing Date and the Company shall have performed all its obligations due
to be performed prior thereto; (ii) the Registration Statement and the
Prospectus and any amendment or supplement thereto shall contain all statements
which are required to be stated therein in accordance with the Act and the Rules
and Regulations and conform in all material respects to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall 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; (iii) there shall have
been, since the date as of which information is given, no material adverse
change in the condition, business, operations, properties, business prospects,
securities, long-term or short-term debt or general affairs of the Company from
that set forth in the Registration Statement or the Prospectus, except changes
which the Registration Statement and the Prospectus indicate will occur after
the Effective Date and prior to such Closing Date, and the Company shall not
have incurred any material liabilities or obligations, direct or contingent, or
entered into any material transaction, contract or agreement not in the ordinary
course of business other than as referred to in the Registration Statement and
the Prospectus; and (iv) except as set forth in the Prospectus, no action, suit
or proceeding, at law or in equity, shall be pending or threatened against the
Company which might be required to be set forth in the Registration Statement,
and no proceedings shall be pending or threatened against the Company before or
by any commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, ruling or finding might adversely
affect the condition, business, operations, properties, prospects or general
affairs of the Company.
(m) Upon exercise of the Over-Allotment Option provided for in Section 4(b)
hereof, the obligations of the Underwriter to purchase and pay for the Option
Securities will be subject to the following additional conditions:
(i) The Registration Statement shall remain effective at the Option Closing
Date, and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending, or, to the best knowledge of the Underwriter or the Company, shall
be contemplated by the Commission, and any request on the part of the Commission
for additional information shall have been complied with to the satisfaction of
counsel for the Underwriters.
(ii) At the Option Closing Date there shall have been delivered to the
Representative the signed opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C., counsel for the
Company, in form and substance reasonably satisfactory to counsel for the
Underwriters, which opinion shall be substantially the same in scope and
substance as the opinions furnished to the Representatives by such counsel at
the First Closing Date pursuant to Section 8(d).
(iii) At the Option Closing Date the Representative shall have received the
opinion, together with copies of such opinion for each of the other
Underwriters, dated as of the Option Closing Date, of ▇▇▇▇▇ & Taubman, L.L.C.,
counsel for the Selling Shareholders, in form and substance satisfactory to the
counsel for the Underwriters.
(iv) At the Option Closing Date there shall have been delivered to the
Representative a certificate of the Chief Executive Officer and the Secretary of
the Company dated the Option Closing Date, in formand substance satisfactory to
counsel for the Underwriters, substantially the same in scope and substance as
the certificates furnished to the Representative at the First Closing Date
pursuant to Section 8(h).
(v) At the Option Closing Date there shall have been delivered to the
Representative a letter, in form and substance satisfactory to the
Representative, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, dated the Option Closing Date and
addressed to the Representative, substantially in the same form and substance as
the letter furnished to the Representative pursuant to Section 8(h) hereof,
except that the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five (5) days prior to the Option
Closing Date.
(vi) At the Option Closing Date there shall have been delivered to the
Representative a certificate executed by the Attorney-in-Fact of each Selling
Shareholder, dated as of the Option Closing Date, to the effect that:
(A) the representations, warranties and covenants of
such Selling Shareholder set forth in Section 3 of this Agreement are
true and correct with the same force and effect as though expressly
made by such Selling Shareholder on and as of the Option Closing Date;
and
(B) such Selling Shareholder has complied with all
the agreements and satisfied all the conditions on its part to be
performed or satisfied under this Agreement at or prior to the Option
Closing Date.
(vii) All proceedings taken at or prior to the Option Closing Date in connection
with the sale and transfer of the Option Securities shall be satisfactory in
form and substance to the Representative, and the Representative and counsel for
the Underwriters, shall have been furnished with all such documents,
certificates, affidavits and opinions as the Representative and counsel for the
Underwriters may reasonably request in connection with this transaction in order
to evidence the accuracy and completeness of any of the representations,
warranties or statements of the Company or the Selling Shareholders or
compliance by the Company or the Selling Shareholders with any of the covenants
or conditions contained herein.
(n) The Company shall have executed and delivered the Public Warrant Agreement
and the Underwriters' Warrant Agreement, and shall have issued the Underwriters'
Warrants.
(o) The Company and the Selling Shareholders shall have furnished
to the Representative such other certificates, documents, and opinions as the
Representative may have reasonably requested (including certificates from
officers of the Company and from the Selling Shareholders) as to the accuracy,
at each Closing Date, of the representations and warranties of the Company and
the Selling Shareholders herein, as to the performance by the Company and the
Selling Shareholders of their respective obligations hereunder and as to other
conditions concurrent and precedent to the obligations of the Underwriters
hereunder. The opinions and certificates mentioned above or elsewhere in this
Agreement will be deemed to be in compliance with the provisions hereof only if
they are reasonably satisfactory to the Representative and to counsel for the
Underwriters. Any certificate signed by an officer of the Company delivered to
the Representative or to counsel for the Underwriters, will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.
(p) No action shall have been taken by the Commission or the NASD the effect of
which would make it improper, at any time prior to each Closing Date, for
members of the NASD to execute transactions (as principal or agent) in the
Registered Securities and no proceedings for the taking of such action shall
have been instituted or shall be pending, or, to the knowledge of the
Underwriters or the Company, shall be contemplated by the Commission or the
NASD. The Company represents that at the date hereof it has no knowledge that
any such action is in fact contemplated by the Commission or the NASD. The
Company shall have advised the Representative of any NASD affiliation of any of
its officers, directors, stockholders or their affiliates.
(q) If any of the conditions herein provided for in this Section 8 shall not
have been fulfilled as of the date indicated, this Agreement and all obligations
of the Underwriters under this Agreement may be canceled at, or at any time
prior to, each Closing Date by the Representative. Any such cancellation shall
be without liability of the Underwriters to the Company.
9. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation of the Company
to sell and deliver the Firm Securities, Option Securities and Underwriters'
Warrants, is subject to the condition that at each Closing Date, no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or any proceedings therefor initiated or threatened by the
Commission. If the condition to the obligations of the Company provided for in
this Section 9 have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Option
Securities on exercise of the Over-Allotment Option shall be affected.
-1-
10. INDEMNIFICATION.
-1-
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all attorneys' fees), to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, and will reimburse, as incurred, such Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages or liabilities, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Units under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
or supplement thereto, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Underwriters
specifically for use in the preparation of the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or any such Blue Sky Application. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter, severally, but not jointly, will indemnify and hold
harmless the Company, each of its directors, each nominee (if any) for director
named in the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, anyPreliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (i) in reliance upon and in conformity with written
information furnished to the Company by any Underwriter specifically for use in
the preparation thereof and (ii) relates to the transactions effected by the
Underwriters in connection with the offer and sale of the Offered Securities
contemplated hereby. This indemnity agreement will be in addition to any
liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 10 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 10, notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section 10. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 10 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party ifthe indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that if the indemnified party is an Underwriter
or a person who controls an Underwriter within the meaning of the Act, the fees
and expenses of such counsel shall be at the expense of the indemnifying party
if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party or (ii) the named parties to any such action
(including any impleaded parties) include both the Underwriter or such
controlling person and the indemnifying party and in the judgment of the
applicable Underwriter, it is advisable for the applicable Underwriter or
controlling persons to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the applicable Underwriter or such controlling person, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the applicable Underwriter and controlling
persons, which firm shall be designated in writing by the applicable
Underwriter). No settlement of any action against an indemnified party shall be
made without the consent of the indemnifying party, which shall not be
unreasonably withheld in light of all factors of importance to such indemnifying
party.
11. CONTRIBUTION. In order to provide for just and equitable contribution under
the Act in any case in which (i) an Underwriter makes claim for indemnification
pursuant to Section 10 hereof 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 Section 10 provide for indemnification in such case,
or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in either
such case (after contribution from others) in such proportions that all such
Underwriters are only responsible for that portion of such losses, claims,
damages or liabilities represented by the percentage that the underwriting
discount per Unit appearing on the cover page of the Prospectus bears to the
public offering price appearing thereon, and the Company shall be responsible
for the remaining portion, provided, however, that (a) if such allocation is not
permitted by applicable law then the relative fault of the Company and the
applicable Underwriter and controlling persons, in the aggregate, in connection
with the statements or omissions which resulted in such damages and other
relevant equitable considerations shall also be considered. The relative fault
shall be determined by reference to, among other things, whether in the case of
an untrue statement of a material fact or the omission to state a material fact,
such statement or omission relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Underwriters agree (a) that it would not be just and equitable
if the respective obligations of the Company and the Underwriters to contribute
pursuant to this Section 11 were to be determined by pro rata or per capita
allocation of the aggregate damages or by any other method of allocation that
does not take account of the equitable considerations referred to in the first
sentence of this Section 11 and (b) that the contribution of each contributing
Underwriter shall not be in excess of its proportionate share (based on the
ratio of the number of Units purchased by such Underwriter to the number of
Units purchased by all contributing Underwriters) of the portion of such losses,
claims, damages or liabilities for which the Underwriters are responsible. No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. As used in this Section 11, the
word "Company" includes any officer, director, or person who controls the
Company within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this Section 11 is not permitted by law, then the
applicable Underwriter and each person who controls the applicable Underwriter
shall be entitled to contribution from the Company, its officers, directors and
controlling persons to the full extent permitted by law. The foregoing
contribution agreement shall in no way affect the contribution liabilities of
any persons having liability under Section 11 of the Act other than the Company
and the Underwriters. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the settlement;
provided, however, that such consent shall not be unreasonably withheld in light
of all factors of importance to such party.
-1-
12. COSTS AND EXPENSES.
-1-
(a) Whether or not this Agreement becomes effective or the sale of the
Units to the Underwriters is consummated, the Company will pay all costs and
expenses incident to the performance of this Agreement by the Company,
including, but not limited to, the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented; the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Offered Securities; all expenses, including
the reasonable fees and disbursements of counsel to the Underwriters, in
connection with the qualification of the Units under the state securities or
blue sky laws which the Representative shall designate; the out-of-pocket travel
expenses of the Underwriters and counsel to the Underwriters or other
professionals designated by the Underwriters to visit the Company's facilities
for purposes of discharging due diligence responsibilities; the cost of printing
and furnishing to the Underwriters copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus, this Agreement, the Public Warrant
Agreement, the Underwriters' Warrant Agreement, the Agreement Among
Underwriters, Selling Agreement, Underwriters' Questionnaire, and the Blue Sky
Memorandum and any supplements thereto; any fees relating to the listing of the
Units, Common Stock and Redeemable Warrants on The Nasdaq SmallCap Market or any
other securities exchange; the cost of printing the certificates representing
the securities comprising the Units; the fees of the transfer agent and warrant
agent the cost of publication of at least three (3) "tombstones" of the offering
(at least one of which shall be in national business newspaper and one of which
shall be in a major New York newspaper); and the cost of preparing at least four
(4) hard cover "bound volumes" relating to the offering, in accordance with the
Representative's request. The Company shall pay any and all taxes (including any
transfer, franchise, capital stock or other tax imposed by any jurisdiction) on
sales to the Underwriters hereunder. The Company will also pay all costs and
expenses incident to the furnishing of any amended Prospectus or of any
supplement to be attached to the Prospectus as called for in Section 6(a) of
this Agreement except as otherwise set forth in said Section 6(a).
(b) In addition to the foregoing expenses, the Company shall at the First
Closing Date pay to the Representative, individually and not as a representative
of the Underwriters, a non-accountable expense allowance equal to two percent
(2%) of the gross proceeds derived from the sale of Units offered hereby, of
which $150,000 has been paid. In the event the Over-Allotment Option is
exercised, the Company shall pay to the Representative, individually and not as
a representative of the Underwriters, at the Option Closing Date an additional
amount non-accountable expense allowance equal to two percent (2%) of the gross
proceeds received upon exercise of the Over-Allotment Option. The Company shall
not be obligated to pay any further non-accountable expense allowance to any of
the Underwriters set forth on Schedule A, other than the Representative, on the
First Closing Date, the Option Closing Date or otherwise.
(c) In the event the transactions contemplated hereby are not consummated for
any reason, the Company shall be liable for the out-of-pocket accountable
expenses actually incurred by the Underwriters. In the event the out-of-pocket
accountable expenses actually incurred by the Underwriters are less than the
amounts paid pursuant to Section 12(b) hereof, the Representative, individually
and not as a representative of the Underwriters, shall refund the difference to
the Company.
(d)If the Over-Allotment Option is exercised, the Selling Shareholders shall pay
a pro rata portion of all expenses incurred by the Company pursuant to this
Section 12.
13. SUBSTITUTION OF UNDERWRITERS. If any Underwriters shall for any reason not
permitted hereunder cancel their obligations to purchase the Firm Securities
hereunder, or shall fail to take up and pay for the number of Firm Securities
set forth opposite their respective names in Schedule A hereto upon tender of
such Firm Securities in accordance with the terms hereof, then:
(a) If the aggregate number of Firm Securities which such Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent (10%) of
the total number of Firm Securities, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the Firm Securities which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(b) If any Underwriter or Underwriters so default and the agreed number of Firm
Securities with respect to which such default or defaults occurs is more than
ten percent (10%) of the total number of Firm Securities, the remaining
Underwriters shall have the right to take up and pay for (in such proportion as
may be agreed upon among them) the Firm Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase. If such remaining
Underwriters do not, at the First Closing Date, take up and pay for the Firm
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase, the time for delivery of the Firm Securities shall be extended to the
next business day to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters satisfactory to the Company. If no such
underwriter or underwriters shall have been substituted as aforesaid, within
such twenty-four (24) hour period, the time of delivery of the Firm Securities
may, at the option of the Company, be again extended to the next following
business day, if necessary, to allow the Company the privilege of finding within
twenty-four (24) hours (including non-business hours) another underwriter or
underwriters to purchase the Firm Securities which the defaulting Underwriter or
Underwriters agreed but failed to purchase. If it shall be arranged for the
remaining Underwriters or substituted Underwriters to take up the Firm
Securities of the defaulting Underwriter or Underwriters as provided in this
Section 13, (i) the Company or the Representative shall have the right to
postpone the time of delivery for the period of not more than seven (7) business
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary, and (ii) the respective numbers of Firm Securities to be
purchased by the remaining Underwriters or substituted Underwriters shall be
taken at the basis of the underwriting obligation for all purposes of this
Agreement. If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the Firm Securities
agreed to be purchased by the defaulting Underwriters or substitute another
underwriter or underwriters as aforesaid, and the Company shall not find or
shall not elect to seek another underwriter or underwriters for such Firm
Securities as aforesaid,
then this Agreement shall terminate.
If, following exercise of the Over-Allotment Option, any Underwriter or
Underwriters shall for any reason not permitted hereunder cancel their
obligations to purchase Option Securities at the Option Closing Date, or shall
fail to take up and pay for the number of Option Securities, which they become
obligated to purchase at the Option Closing Date upon tender of such Option
Securities in accordance with the terms hereof, then the remaining Underwriters
or substituted Underwriters may take up and pay for the Option Securities of the
defaulting Underwriters in the manner provided in Section 13(b) hereof. If the
remaining Underwriters or substituted Underwriters shall not take up and pay for
all such Option Securities, the Underwriters shall be entitled to purchase the
number of Option Securities for which there is no default or, at their election,
the option shall terminate and the exercise thereof shall be of no effect. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 13. In the event of termination, there
shall be no liability on the part of any nondefaulting Underwriter to the
Company, provided that the provisions of this Section 13 shall to in any event
affect the liability of any defaulting Underwriter to the Company arising out of
such default.
-1-
14. TERMINATION.
-1-
(a) This Agreement, except for Sections 10, 11, 12, 15, 16, 17 and 18,
may be terminated at any time prior to the First Closing Date, and the
Over-Allotment Option, if exercised, may be canceled at any time prior to the
Option Closing Date, by the Representative if in its sole judgment it is
impracticable to offer for sale or to enforce contracts made by the Underwriters
for the resale of the Offered Securities agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree; (ii)
trading in securities on the New York Stock Exchange, the American Stock
Exchange, The Nasdaq SmallCap Market or The Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could materially adversely affect the Company; (vii)
except as contemplated by the Prospectus, the Company is merged or consolidated
into or acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the passage by the Congress of the United States or by
any state legislative body or federal or state agency or other authority of any
act, rule or regulation, measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Representative to have a material impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered pursuant to the Prospectus; (ix) any adverse change in the
financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement, or (x) any material adverse change
having occurred, since the respective dates of which information is given in the
Registration Statement and Prospectus, in the earnings, business prospects or
general condition of the Company, financial or otherwise, whether or not arising
in the ordinary course of business.
(b) If the Representative elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 14 or in
Section 13 hereof, the Company shall be promptly notified by the Representative,
by telephone or telegram, confirmed by letter, in accordance with Section 16
hereof.
15. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company or its officers, directors, stockholders and the
Selling Shareholders and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters, the Company or any of its officers or
directors or any controlling person or any of the Selling Shareholders and will
survive delivery of and payment of the Offered Securities and the termination of
this Agreement.
16. NOTICE. Any communications specifically required hereunder to be in writing,
if sent to the Underwriters, will be mailed, delivered and confirmed to Redstone
Securities, Inc. at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, with a
copy sent to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., 5400 Renaissance Tower, ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇; or if sent to the Company, will be mailed,
delivered and confirmed to it at Streamedia Communications, Inc., ▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, with a copy sent to ▇▇▇▇▇ & Taubman, L.L.C.,
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; or if sent to a Selling
Shareholder, will be mailed, delivered and confirmed to such Selling
Shareholder, c/o Streamedia Communications, Inc., ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, with a copy sent to ▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C., ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
17. PARTIES IN INTEREST. This Agreement is made solely for the benefit of
the Underwriters, the Representative, on an individual basis, the Company, the
Selling Shareholders, any person controlling the Company or the Underwriters,
directors of the Company, nominees for directors of the Company (if any) named
in the Prospectus, officers of the Company who have signed the Registration
Statement and each of their respective executors, administrators, successors and
assigns and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such purchaser, from the Underwriters of the Units. All of the
obligations of the Underwriters hereunder are several and not joint.
-1-
18. APPLICABLE LAW. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Texas
applicable to agreements made and to be entirely performed within
Texas.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding agreement among the Company, the Selling Shareholders and the
Underwriters in accordance with its terms.
Very truly yours,
STREAMEDIA COMMUNICATIONS, INC.
-1-
By:
▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
Selling Shareholders, solely as to Sections 3, 7, 16 and 17
Hereof
Name:
Name:
Name:
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
-1-
REDSTONE SECURITIES, INC.
By:
Name:
Title:
-1-
C:\WINDOWS\TEMP\1vs_703!.WPD
349:21352-2
SCHEDULE A
UNDERWRITERS
Number of
Underwriters Firm Securities
to be Purchased
Redstone Securities, Inc. ______
------
1,000,000
SCHEDULE B
SELLING SHAREHOLDERS
Selling Shareholder
Number
of
Option
Shares
30,000
SCHEDULE C
STOCKHOLDERS ENTERING INTO LOCK-UP AGREEMENTS
