EXHIBIT 1.1
3,000,000 UNITS, EACH UNIT CONSISTING OF
ONE SHARE OF COMMON STOCK AND ONE REDEEMABLE WARRANT
▇▇▇▇▇▇.▇▇▇, INC.
UNDERWRITING AGREEMENT
New York, New York
_____________, 2000
▇▇▇▇▇ & Company, Inc.
As Representative of the
Several Underwriters listed
on Schedule A hereto
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "Company")
confirms its agreement with ▇▇▇▇▇ & Company, Inc. ("▇▇▇▇▇") and each of the
several underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 11) for whom ▇▇▇▇▇ is acting as representative
(in such capacity, ▇▇▇▇▇ shall hereinafter be referred to as "you" or the
"Representative"), with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective number of
units ("Units"), which shall aggregate 3,000,000, set forth in Schedule A
hereto, each Unit consisting of one share of the Company's Common Stock,
$0.00001 par value ("Common Stock") and one warrant to acquire one additional
share of Common Stock ("Redeemable Warrants"). The shares of Common Stock and
Redeemable Warrants comprising the Units will be separately tradable immediately
after issuance. The 3,000,000 Units and the Common Stock and the Redeemable
Warrants underlying the Units are hereinafter referred to as the "Firm
Securities." Each Redeemable Warrant is exercisable commencing on [____________]
[twelve months after the date of the Prospectus] until [______________] [five
years after the date of the Prospectus], unless previously redeemed by the
Company, at an initial exercise price of $[____________] per share [120% of the
initial public offering price of the Common Stock]. The Redeemable Warrants may
be redeemed by the Company, in whole but not in part, at a redemption price of
$.10 per warrant at any time after [__________] [eighteen months after the date
of the
Prospectus] on thirty (30) days' prior written notice, provided that the average
closing sale price of the Common Stock as reported on the Nasdaq National Market
equals or exceeds $_____ per share [250% of the initial public offering price],
for any twenty (20) days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the date of the notice of redemption,
all in accordance with the terms and conditions of that certain warrant
agreement by and between the Company and Continental Stock Transfer & Trust
Company, Inc., dated the date hereof (the "Warrant Agreement").
Upon the Representative's request, as provided in Section 2(b)
of this Agreement, the Company shall also sell to the Underwriters up to an
additional 450,000 Units consisting of shares of Common Stock and 450,000
Redeemable Warrants for the purpose of covering over-allotments, if any (the
"Option Securities"). The Company also proposes to issue and sell warrants to
the Representative (the "Representative's Warrants") pursuant to the
Representative's Warrant Agreement (the "Representative's Warrant Agreement")
for the purchase of an additional 300,000 Units. The shares of Common Stock and
Redeemable Warrants issuable upon exercise of the Representative's Warrants are
hereinafter referred to as the "Representative's Securities." The Firm
Securities, the Option Securities, the Representative's Warrants and the
Representative's Securities (collectively, hereinafter referred to as the
"Securities") are more fully described in the Registration Statement and the
Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with,
the Representative as of the date hereof, and as of the Closing Date
(hereinafter defined) and the Option Closing Date (hereinafter defined), if any,
as follows:
(i) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration
statement, and an amendment or amendments thereto, on Form SB-2 (No.
333-34730), for the registration of the Securities under the Securities
Act of 1933, as amended (the "Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity
with the requirements of the Act, and the rules and regulations (the
"Regulations") of the Commission under the Act. The Company will
promptly file a further amendment to said registration statement in the
form heretofore delivered to the Representative and will not, file any
other amendment thereto to which the Representative shall have objected
in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part
thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all
information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Regulations), is hereinafter called
the "Registration Statement", and the form of prospectus in the form
first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." "Preliminary
Prospectus" means each prospectus included in the Registration
Statement or any amendments thereof, before the
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Registration Statement becomes effective under the Act, and any
prospectus filed with the Commission by the Company with the Consent of
the Representative pursuant to Rule 424(a) of the Rules and
Regulations. For purposes hereof, "Rules and Regulations" mean the
rules and regulations adopted by the Commission under either the Act or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as applicable. For purposes hereof, "Material Adverse Effect" means a
material adverse effect on the business, condition (financial or
otherwise), earnings, management, properties, assets, results of
operations, stockholders' equity or prospects of the Company.
(ii) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Preliminary Prospectus, the Registration Statement or the Prospectus or
any part of any thereof and no proceedings for a stop order suspending
the effectiveness of the Registration Statement or any of the Company's
securities have been instituted or are pending or to the Company's
knowledge, threatened. Each of the Registration Statement and
Prospectus at the time of filing thereof conformed with the
requirements of the Act and the Rules and Regulations, and neither of
the Registration Statement or Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does
not apply to statements made in reliance upon and in conformity with
written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in
such Registration Statement or Prospectus.
(iii) When the Registration Statement becomes
effective and at all times subsequent thereto up to the Closing Date
and each Option Closing Date, if any, and during such longer period as
the Prospectus may be required to be delivered in connection with sales
by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all statements which are required to be stated
therein in accordance with the Act and the Rules and Regulations, and
will conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto at the time of effectiveness or
filing as the case may be, up to the Closing Date and Option Closing
Date, will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of any Underwriters
expressly for use in the Preliminary Prospectus, Registration Statement
or Prospectus or any amendment thereof or supplement thereto.
(iv) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of
the state of its incorporation. The Company does not own an interest in
any corporation, partnership, trust, joint venture or other business
entity. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or
leasing of any
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properties or the character of its operations requires such
qualification or licensing. The Company has all requisite corporate
power and authority, and the Company has obtained any and all necessary
authorizations, approvals, orders, licenses, including, but not limited
to liquor licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business
in compliance with all such authorizations, approvals, orders,
licenses, including, but not limited to liquor licenses, certificates,
franchises and permits and all federal, state and local laws, rules and
regulations; and the Company has not received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, including, but not limited to liquor
licenses, certificate, franchise, or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially and adversely affect the condition, financial
or otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company. The
disclosures in the Registration Statement concerning the effects of
federal, state and local laws, rules and regulations, including, but no
limited to liquor laws and regulations, on the Company's business as
currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made.
(v) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization" and "Description of Securities" and will have the
adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth
therein, and the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement, the Representative's Warrant Agreement and as described in
the Prospectus. The Securities and all other securities issued or
issuable by the Company conform or, when issued and paid for, will
conform, in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable and the holders
thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of
any holders of any security of the Company or similar contractual
rights granted by the Company. The Securities are not and will not be
subject to any preemptive or other similar rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid
and non-assessable and will conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject to
any liability solely as such holders; all corporate action required to
be taken for the authorization, issue and sale of the Securities has
been duly and validly taken; and the certificates representing the
Securities will be in due and proper form. Upon the issuance and
delivery pursuant to the terms hereof of the Securities to be sold by
the Company hereunder, the Underwriters will acquire good and
4
marketable title to such Securities free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(vi) The financial statements, including the related
notes and schedules thereto, included in the Registration Statement and
the Prospectus fairly present the financial position, income, changes
in cash flow, changes in stockholders' equity, and the results of
operations of the Company at the respective dates and for the
respective periods to which they apply and the pro forma financial
information included in the Registration Statement and Prospectus
presents fairly the information shown therein and to the extent based
upon or derived from the financial statements, have been compiled on a
basis consistent with the financial statements presented therein. Such
financial statements have been prepared in conformity with generally
accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved. There has been no
adverse change or development involving a material prospective change
in the condition, financial or otherwise, or in the earnings, position,
prospects, value, operation, properties, business, or results of
operations of the Company whether or not arising in the ordinary course
of business, since the date of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company
conform in all material respects to the descriptions thereof contained
in the Registration Statement and the Prospectus. Financial information
set forth in the Prospectus under the headings "Summary Financial
Data," "Selected Financial Data," "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein, have been derived from or compiled on a
basis consistent with that of the audited financial statements included
in the Prospectus.
(vii) The Company (i) has paid all federal, state,
local, and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21
through 24 of the Internal Revenue Code of 1986 (the "Code"), and has
furnished all information returns it is required to furnish pursuant to
the Code, (ii) has established adequate reserves for such taxes which
are not due and payable, and (iii) does not have any tax deficiency or
claims outstanding, proposed or assessed against it, which if
determined adversely to the Company may have a Material Adverse Effect.
(viii) No transfer tax, stamp duty or other similar
tax is payable by or on behalf of the Underwriters in connection with
(i) the issuance by the Company of the Securities, (ii) the purchase by
the Underwriters of the Firm Securities and Option Securities from the
Company, and the purchase by the Representative of the Representative's
Warrants from the Company, (iii) the consummation by the Company of any
of its obligations under this Agreement or the Representative's Warrant
Agreement, or (iv) resales of the Firm Securities and the Option
Securities in connection with the distribution contemplated hereby.
(ix) The Company maintains insurance policies,
including, but not limited to, general liability and property
insurance, which insures the Company and its
5
employees, against such losses and risks as is customary in the case of
entities engaged in the same or similar business and similarly
situated. The Company (A) has not failed to give notice or present any
insurance claim with respect to any matter, including but not limited
to the Company's business, property or employees, under the insurance
policy or surety bond in a due and timely manner, (B) does not have any
disputes or claims against any underwriter of such insurance policies
or surety bonds or has not failed to pay any premiums due and payable
thereunder, or (C) has not failed to comply with all conditions
contained in such insurance policies and surety bonds. There are no
facts or circumstances under any such insurance policy or surety bond
which would relieve any insurer of its obligation to satisfy in full
any valid claim of the Company. The Company has obtained key-man life
insurance in an amount not less than one million dollars ($1,000,000)
on such individuals as the Representative has previously requested, and
the Company shall be the sole beneficiary of such insurance.
(x) Except as described in the Registration
Statement, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or to the Company's
knowledge threatened against (or circumstances that may give rise to
the same), or involving the properties or business of, the Company
which (i) questions the validity of the capital stock of the Company,
this Agreement or the Representative's Warrant Agreement or of any
action taken or to be taken by the Company pursuant to or in connection
with this Agreement or the Representative's Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects), or (iii)
would reasonably be expected to have a Material Adverse Effect.
(xi) The Company has full legal right, power and
authority to authorize, issue, deliver and sell the Securities, enter
into this Agreement and the Representative's Warrant Agreement and to
consummate the transactions provided for in such agreements; and this
Agreement and the Representative's Warrant Agreement have each been
duly and properly authorized, executed and delivered by the Company.
Each of this Agreement and the Representative's Warrant Agreement
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except
(i) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification or contribution provisions may be
limited under applicable laws or the public policies underlying such
laws and (iii) that the remedies of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceedings may be brought. None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the
Representative's Warrant Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein
and therein, the Prospectus, and any amendments or supplements thereto,
conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the
creation or imposition of any lien, charge, claim,
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encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the
certificate of incorporation or by-laws of the Company, (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or
any other agreement or instrument to which the Company is a party or by
which it is or may be bound or to which any of its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or
(iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the
Company or any of its activities or properties.
(xii) Except as described in the Prospectus, no
consent, approval, authorization or order of, and no filing with, any
court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Firm Securities and the
Option Securities pursuant to the Prospectus and the Registration
Statement, the issuance of the Representative's Warrants, the
performance of this Agreement and the Representative's Warrant
Agreement and the transactions contemplated hereby and thereby,
including without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the
issue and/or sale of any of the Firm Securities and the Option
Securities, or the Representative's Warrants, except such as have been
or may be obtained under the Act or may be required under state
securities or Blue Sky laws in connection with the Underwriters'
purchase and distribution of the Firm Securities and the Option
Securities, and the Representative's Warrants to be sold by the Company
hereunder.
(xiii) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other
documents filed as exhibits to the Registration Statement to which the
Company is a party or by which it may be bound or to which any of its
assets, properties or business may be subject have been duly and
validly authorized, executed and delivered by the Company, and
constitute the legal, valid and binding agreements of the Company,
enforceable against the Company, in accordance with their respective
terms. The descriptions in the Registration Statement of agreements,
contracts and other documents are accurate in all material respects and
fairly present the information required to be shown with respect
thereto by Form SB-2, and there are no contracts or other documents
which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are
not described or filed as required, and the exhibits which have been
filed are in all material respects complete and correct copies of the
documents of which they purport to be copies.
(xiv) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and Prospectus,
and except as may otherwise be indicated or contemplated herein or
therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, (ii)
entered into any transaction other than in the ordinary course of
business, or (iii) declared
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or paid any dividend or made any other distribution on or in respect of
its capital stock of any class, and there has not been any change in
the capital stock, or any material change in the debt (long or short
term) or liabilities or material adverse change in or affecting the
business, condition (financial or otherwise), earnings, management,
properties, assets, results of operations, stockholders' equity or
prospects of the Company.
(xv) No default exists in the due performance and
observance of any term, covenant or condition of any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust,
voting trust agreement, stockholders agreement, partnership agreement,
note, loan or credit agreement, purchase order, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
material agreement or instrument to which the Company is a party or by
which the Company may be bound or to which the property or assets
(tangible or intangible) of the Company is subject or affected.
(xvi) The Company is in compliance with all federal,
state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages
and hours. There are no pending investigations involving the Company by
the U.S. Department of Labor, or any other governmental agency
responsible for the enforcement of such federal, state, local, or
foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company or any
predecessor entity, and none has ever occurred. No collective
bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is
pending under any expired or existing collective bargaining agreements
to which the Company is a party.
(xvii) Except as described in the Prospectus, the
Company does not maintain, sponsor or contribute to any program or
arrangement that is an "employee pension benefit plan," an "employee
welfare benefit plan," or a "multiemployer plan" as such terms are
defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). The Company does not maintain or contribute, now or at any
time previously, to a defined benefit plan, as defined in Section 3(35)
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged
in a "prohibited transaction" within the meaning of Section 406 of
ERISA or Section 4975 of the Code, which could subject the Company to
any tax penalty on prohibited transactions and which has not adequately
been corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they relate
to any such ERISA Plan. Determination letters have been received from
the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has
never completely or partially withdrawn from a "multiemployer plan."
(xviii) Neither the Company nor any of its employees,
directors, stockholders, partners, or affiliates (within the meaning of
the Rules and Regulations) of
8
any of the foregoing has taken or will take, directly or indirectly,
any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or
otherwise.
(xix) Except as otherwise disclosed in the
Prospectus, none of the patents, patent applications, trademarks,
service marks, service names, domain names, trade names and copyrights
and none of the licenses and rights to the foregoing presently owned or
held by the Company are in dispute or to the Company's knowledge are in
any conflict with the right of any other person or entity. The Company
(i) owns or has the right to use, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, all patents, patent
applications, trademarks, service marks, service names, domain names,
trade names and copyrights, technology and licenses and rights with
respect to the foregoing, used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon or
otherwise acting adversely to the right or claimed right of any person,
corporation or other entity under or with respect to any of the
foregoing and (ii) is not obligated or under any liability whatsoever
to make any payment by way of royalties, fees or otherwise to any owner
or licensee of, or other claimant to, any patent, patent application,
trademark, service ▇▇▇▇, service names, domain names, trade name,
copyright, know-how, technology or other intangible asset, with respect
to the use thereof or in connection with the conduct of its business or
otherwise. There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding, domestic
or foreign, pending or threatened (or circumstances that may give rise
to the same) against the Company which challenges the exclusive rights
of the Company with respect to any trademarks, trade names, service
marks, service names, domain names, copyrights, patents, patent
applications or licenses or rights to the foregoing used in the conduct
of its business, or which challenge the right of the Company to use any
technology presently used or contemplated to be used in the conduct of
its business.
(xx) The Company owns and has the unrestricted right
to use all trade secrets, know-how (including all other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), inventions, technology, designs, processes, works of
authorship, computer programs and technical data and information
(collectively herein "intellectual property") that are material to the
development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear of
and without violating any right, lien, or claim of others, including
without limitation, former employers of its employees; provided,
however, that the possibility exists that other persons or entities,
completely independently of the Company, or its employees or agents,
could have developed trade secrets or items of technical information
similar or identical to those of the Company. The Company is not aware
of any such development of similar or identical trade secrets or
technical information by others.
(xxi) The Company has good and marketable title to,
or valid and enforceable leasehold estates in, all items of real and
personal property stated in the
9
Prospectus, to be owned or leased by it free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects, or
other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and
payable.
(xxii) ▇▇▇▇▇▇▇▇ Kallick Bartelstein, LLP
("▇▇▇▇▇▇▇▇"), whose report is filed with the Commission as a part of
the Registration Statement, are independent certified public
accountants as required by the Act and the Rules and Regulations.
(xxiii) The Company has caused to be duly executed
legally binding and enforceable agreements pursuant to which all of the
officers and directors of the Company, all holders of shares of Common
Stock and holders of securities exchangeable or exercisable for or
convertible into shares of Common Stock have agreed not to, directly or
indirectly, offer, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate, distribute or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144
of the Rules and Regulations or otherwise) or dispose of any beneficial
interest therein for a period of not less than six (6) months following
the effective date of the Registration Statement without the prior
written consent of the Representative and the Company. In addition, the
Company shall not sell or offer for sale any of its securities for a
period of thirteen (13) months from the effective date of the
Registration Statement without the consent of the Representative except
pursuant to options and warrants issued on the effective date of the
Registration Statement, and except that the Company may conduct a
secondary offering of its securities in an amount not less than thirty
million dollars ($30,000,000) if the Representative is given the
opportunity to participate in the secondary offering. The Company will
cause the Transfer Agent, as defined below, to ▇▇▇▇ an appropriate
legend on the face of stock certificates representing all of such
securities and to place "stop transfer" orders on the Company's stock
ledgers.
(xxiv) Except as described in the Prospectus under
"Underwriting," there are no claims, payments, issuances, arrangements
or understandings, whether oral or written, for services in the nature
of a finder's or origination fee with respect to the sale of the
Securities hereunder or any other arrangements, agreements,
understandings, payments or issuance with respect to the Company or any
of its officers, directors, stockholders, partners, employees or
affiliates that may affect the Underwriters' compensation, as
determined by the National Association of Securities Dealers, Inc.
("NASD").
(xxv) The Common Stock and Redeemable Warrants have
been approved for quotation on the Nasdaq National Market ("Nasdaq").
(xxvi) Neither the Company nor any of its officers,
directors employees, agents, or any other person associated with or
acting on behalf of the Company has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect
10
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(xxvii) Except as set forth in the Prospectus, no
officer, director or stockholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under
the Rules and Regulations) of any of the foregoing persons or entities
has, either directly or indirectly, (i) an interest in any person or
entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the
Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound
or affected. Except as set forth in the Prospectus under "Certain
Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company and any
officer, director, or Principal Stockholder (as such term is defined in
the Prospectus) of the Company or any partner, affiliate or associate
of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the
Company, and delivered to the Representative or to Underwriters'
Counsel (as defined herein) shall be deemed a representation and
warranty by the Company to the Representative as to the matters covered
thereby.
(xxix) The Company: (i) has made and kept accurate
books and records; (ii) has maintained internal and accounting controls
which provide reasonable assurance that: (A) transactions are executed
in accordance with management's authorization; (B) transactions are
recorded as necessary to permit preparation of the financial statements
and to maintain accountability for its assets; (C) access to its assets
have been permitted only in accordance with management's authorization;
and (D) the reported accountability for its assets is compared with
existing assets at reasonable intervals.
(xxx) Except and to the extent described in the
Prospectus, no holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of
the Company have the right to include any securities issued by the
Company in the Registration Statement or any registration statement to
be filed by the Company or to require the Company to file a
registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(xxxi) The Company has as of the effective date of
the Registration Statement entered into employment agreements with
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ in the
forms filed as Exhibits to the Registration Statements.
11
(xxxii) The properties and business of the Company
conform in all material respects to the description thereof contained
in the Registration Statement and the Prospectus; and the Company has
good and marketable title to, or valid and enforceable leasehold
estates in, all items of real and personal property stated in the
Prospectus to be owned or leased by it, in each case free and clear of
all liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever, other
than those referred to in the Prospectus and liens for taxes not yet
due and payable.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND REPRESENTATIVE'S
WARRANTS.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter
agrees to purchase from the Company at a price of $____ per Unit, consisting of
$_____ per share of Common Stock and $_____ per Redeemable Warrant, that number
of Firm Securities set forth in Schedule A opposite the name of such
Underwriter, subject to adjustment as the Representative in its sole discretion
shall make to eliminate any sales or purchases of fractional shares, plus any
additional number of Firm Securities which such Underwriter may become obligated
to purchase pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of an additional 450,000 shares of
Common Stock and/or 225,000 Redeemable Warrants at a price of $___ per share of
Common Stock and $____ per Redeemable Warrant. The option granted hereby will
expire 45 days after (i) the date the Registration Statement becomes effective,
if the Company has elected not to rely on Rule 430A under the Rules and
Regulations, or (ii) the date of this Agreement if the Company has elected to
rely upon Rule 430A under the Rules and Regulations, and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which Representative
is then exercising the option and the time and date of payment and delivery for
any such Option Securities. Any such time and date of delivery (an "Option
Closing Date") shall be determined by the Representative, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Date, as hereinafter defined, unless otherwise agreed
upon by the Representative and the Company. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of ▇▇▇▇▇ at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, or at such other
place as shall be agreed upon by the Representative and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
__________, 2000 or at such other time and date as shall be agreed upon by the
Representative and the Company, but not less than three (3) nor more than seven
(7) full business days after the
12
effective date of the Registration Statement (such time and date of payment and
delivery being herein called "Closing Date"). In addition, in the event that any
or all of the Option Securities are purchased by the Underwriters, payment of
the purchase price for, and delivery of certificates for, such Option Securities
shall be made at the above-mentioned office of the Representative or at such
other place as shall be agreed upon by the Representative and the Company on
each Option Closing Date as specified in the notice from the Representative to
the Company. Delivery of the certificates for the Firm Securities and the Option
Securities, if any, shall be made to the Underwriters against payment by the
Underwriters of the purchase price for the Firm Securities and the Option
Securities, if any, to the order of the Company for the Firm Securities and the
Option Securities, if any, by New York Clearing House funds. Certificates for
the Firm Securities and the Option Securities, if any, shall be in definitive,
fully registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Representative may request in
writing at least two (2) business days prior to the Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Firm
Securities and the Option Securities, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and sell
the Representative's Warrants to the Representative at a purchase price in
the aggregate of $15.00, which warrants shall entitle the holders thereof to
purchase an aggregate of 300,000 shares of Common Stock and/or 150,000
Redeemable Warrants. The Representative's Warrants shall be exercisable for a
period of four years commencing one year from the effective date of the
Registration Statement at a price equaling one hundred twenty percent (120%)
of the initial public offering price of the Units. The Representative's
Warrant Agreement and form of Warrant Certificate shall be substantially in
the form filed as Exhibit 1.2 to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Units (other than to residents
of or in any jurisdiction in which qualification of the Units is required and
has not become effective) at the price and upon the other terms set forth in the
Prospectus. The Representative may from time to time increase or decrease the
public offering price after distribution of the Units has been completed to such
extent as the Representative, in its discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Units by
the Underwriters of which the
13
Representative shall not previously have been advised and furnished with a copy,
or to which the Representative shall have objected or which is not in compliance
with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission authority shall enter a
stop order or suspend such qualification at any time, the Company use its best
efforts to obtain prompt the withdrawal of the order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Representative,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifteenth business day after the effective date
of the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Representative in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP ("Underwriters'
Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such
14
documents and furnish such information as may be required for such purpose;
provided, however, the Company shall not be required to qualify as a foreign
corporation or file a general or limited consent to service of process in any
such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Representative copies
of such amendment or supplement as soon as available and in such quantities as
the Representative may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the effective date of
the Registration Statement.
(h) During a period of seven years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company for
each quarter in the form furnished to the Company's stockholders and
certified by the Company's principal financial or accounting officer;
15
(ii) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the certificate thereon of independent
certified public accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the
Commission, the NASD or any securities exchange;
(v) every press release and every material news item
or article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on behalf
of the Company; and
(vi) any additional information of a public nature
concerning the Company (and any future subsidiary) or its businesses
which the Representative may request.
(vii) During such seven-year period, if the Company
has an active subsidiary, the foregoing financial statements will be on
a consolidated basis to the extent that the accounts of the Company and
its subsidiary are consolidated, and will be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
(i) The Company will maintain a Transfer Agent and Warrant
Agent ("Transfer Agent") and, if necessary under the jurisdiction of
incorporation of the Company, a Registrar (which may be the same entity as the
Transfer Agent) for its Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Representative or on
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such reasonable quantities as the Representative may
request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of duly
executed, legally binding and enforceable agreements pursuant to which, for a
period of six (6) months from the effective date of the Registration Statement,
the officers and directors of the Company, all holders of shares of Common Stock
and holders of securities exchangeable or exercisable for or convertible into
shares of Common Stock, agree that it or he or she will not directly or
indirectly, issue, offer to sell, sell, grant an option for the sale of, assign,
transfer, pledge, hypothecate, distribute or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into,
16
exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) or dispose of any beneficial interest
therein without the prior written consent of the Representative and the
Company (the "Lock-up Agreements"). During the thirteen (13) month period
commencing with the effective date of the Registration Statement, the Company
shall not, without the prior written consent of the Representative, sell,
contract or offer to sell, issue, transfer, assign, pledge, hypothecate,
distribute, or otherwise dispose of, directly or indirectly, any shares of
Common Stock or any options, rights or warrants with respect to any shares of
Common Stock, except that the Company may conduct a secondary offering of its
securities in an amount of not less than thirty million dollars ($30,000,000)
if the Representative is given the opportunity to participate in the
secondary offering. On or before the Closing Date, the Company shall deliver
instructions to the Transfer Agent authorizing it to place appropriate
legends on the certificates representing the securities subject to the
Lock-up Agreements and to place appropriate stop transfer orders on the
Company's ledgers.
(l) Neither the Company, nor any of its officers, directors,
stockholders, nor any of their respective affiliates (within the meaning of the
Rules and Regulations) will take, directly or indirectly, any action designed
to, or which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. Except as described in the Prospectus, no
portion of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Representative as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in its letter to be
furnished pursuant to Section 6(j) hereof.
(p) The Company shall cause the Common Stock and the
Redeemable Warrants to be quoted on Nasdaq and for a period of seven (7) years
from the date hereof, use its best efforts to maintain the Nasdaq quotation of
the Common Stock and the Redeemable Warrants to the extent outstanding.
17
(q) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Representative at the Representative's request and
at the Company's sole expense, (i) daily consolidated transfer sheets relating
to the Common Stock and the Redeemable Warrants (ii) the list of holders of all
of the Company's securities and (iii) a Blue Sky "Trading Survey" for secondary
sales of the Company's securities prepared by counsel to the Company.
(r) As soon as practicable, (i) but in no event more than five
(5) business days before the effective date of the Registration Statement, file
a Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than 30 days from the
effective date of the Registration Statement, take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
▇▇▇▇▇'▇ OTC Manual and to continue such inclusion for a period of not less than
seven (7) years.
(s) Until the completion of the distribution of the Firm
Securities and the Option Securities, the Company shall not without the prior
written consent of the Representative and Underwriters' Counsel, issue, directly
or indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations.
(t) For a period equal to the lesser of (i) three (3) years
from the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form SB-2 or Form S-1 (or other appropriate
form) for the registration under the Act of the Representative's Securities.
(u) For a period of one (1) year after the effective date of
the Registration Statement, the Representative shall have the right to designate
one (1) individual to attend all meetings of the Company's Board of Directors
(the "Board"). The Company shall notify the Representative of each meeting of
the Board and the Company shall send to such individual all notices and other
correspondence and communications sent by the Company to members of the Board.
Such individual shall be reimbursed for all out-of-pocket expenses incurred in
connection with his attendance of meetings of the Board.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement and the Representative's Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments
18
thereof or supplements thereto supplied to the Underwriters and such dealers as
the Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the Securities including, but not
limited to, (x) the purchase by the Underwriters of the Firm Securities and the
Option Securities and the purchase by the Representative of the Representative's
Warrants from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement and the Representative's Warrant Agreement, and
(z) resale of the Firm Securities and the Option Securities by the Underwriters
in connection with the distribution contemplated hereby, (iv) the qualification
of the Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of Underwriter's Counsel in
connection therewith, provided that such Blue Sky counsel fees shall not exceed
$20,000 if the Securities are listed on a national securities exchange or the
Nasdaq National Market or $40,000 if the Securities are listed on the Nasdaq
SmallCap Market, (v) advertising costs and expenses, including but not limited
to costs and expenses in connection with the "road show", information meetings
and presentations, bound volumes and prospectus memorabilia and "tomb-stone"
advertisement expenses, provided that the Representative's road show expenses
shall not exceed $50,000, (vi) costs and expenses in connection with due
diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vii) fees and expenses of the
transfer agent and registrar, (viii) applications for assignments of a rating of
the Securities by qualified rating agencies, (ix) the fees payable to the
Commission and the NASD, and (x) the fees and expenses incurred in connection
with the quotation of the Securities on Nasdaq and any other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 11, (i) the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to two
and one-half percent (2 1/2%) of the gross proceeds received by the Company from
the sale of the Firm Securities, $25,000 of which has been paid to date. In the
event the Representative elects to exercise the over-allotment option described
in Section 2(b) hereof, the Company agrees to pay to the Representative on the
Option Closing Date (by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the Option
Securities) a non-accountable expense allowance equal to two and one-half
percent (2 1/2%) of the gross proceeds received by the Company from the sale of
the Option Securities.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if it had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
19
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than on the date of this Agreement or such later date and time as shall be
consented to in writing by the Representative, and, at Closing Date and each
Option Closing Date, if any, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or threatened by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Underwriters' Counsel. If the Company has elected to rely upon Rule 430A of the
Rules and Regulations, the price of the Shares and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) of the Rules and Regulations within the prescribed time period, and
prior to Closing Date the Company shall have provided evidence satisfactory to
the Representative of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared effective
in accordance with the requirements of Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to such matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the
favorable opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd., counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the laws of
its jurisdiction and (B) is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its
operations requires such qualification or licensing,;
20
(ii) to the best of such counsel's knowledge, the
Company does not own an interest in any other corporation, partnership,
joint venture, trust or other business entity;
(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization" and
"Description of Securities," and the Company is not a party to or bound
by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities,
except for this Agreement, the Representative's Warrant Agreement and
as described in the Prospectus. The Securities, and all other
securities issued or issuable by the Company conform in all material
respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued
and are fully paid and non-assessable; the holders thereof have no
rights of rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any
holders of any security of the Company. The Firm Securities, the Option
Securities, the Representative's Warrants and the Representative's
Securities to be sold by the Company hereunder and under the
Representative's Warrant Agreement are not and will not be subject to
any preemptive or other similar rights of any stockholder, have been
duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to be taken for
the authorization, issue and sale of the Firm Securities, the Option
Securities, the Representative's Warrants and the Representative's
Securities has been duly and validly taken; and the certificates
representing the Firm Securities, the Option Securities and the
Representative's Warrants are in due and proper form. The
Representative's Warrants constitute valid and binding obligations of
the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for
thereby. The Securities have been duly authorized for issuance and sale
to the Underwriters pursuant to this Agreement, and when issued and
delivered by the Company pursuant to this Agreement against payment of
the consideration set forth herein, will be validly issued, fully paid
and non-assessable free and clear of any pledge, lien, charge, claim,
encumbrance, pledge, security interest, or other restriction or equity
of any kind whatsoever. There are no restrictions upon the voting or
transfer of, any of the Securities pursuant to the Company's
certificate of incorporation or bylaws. No transfer tax is payable by
or on behalf of the Underwriters in connection with (A) the issuance by
the Company of the Firm Securities, the Option Securities, (B) the
purchase by the Underwriters of the Firm Securities, the Option
Securities and the Representative's Warrants, respectively, from the
Company, (C) the consummation by the Company of any of its obligations
under this Agreement or the Representative's Warrant Agreement, or (D)
resales of the Firm Securities and the Option Securities in connection
with the distribution contemplated hereby;
(iv) the Registration Statement is effective under
the Act, and, if applicable, filing of all pricing information has been
timely made in the appropriate form
21
under Rule 430A, and no stop order suspending the use of the
Preliminary Prospectus, the Registration Statement or Prospectus or any
part of any thereof or suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such counsel's knowledge,
threatened by the Commission;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any amendments or
supplements thereto (other than the financial statements and other
financial and statistical data included therein, as to which no opinion
need be rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
(vi) to the best of such counsel's knowledge: (i) the
descriptions in the Registration Statement and Prospectus of statutes,
legal and governmental proceedings, contracts and other documents are
accurate in all material respects; (ii) there are no statutes, legal or
governmental proceedings, contracts or documents that are required to
be described in the Prospectus, or documents that are required to be
filed as exhibits to the Registration Statement that are not discussed
or filed as required and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (iii) there
is no action, suit, proceeding, inquiry or investigation before or by
any court or governmental body or agency, domestic or foreign, now
pending or threatened against the Company or its property or assets,
which is required to be disclosed in the Registration Statement which
is not so disclosed therein, or which, if determined adversely,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect or which would adversely affect the present
or prospective ability to perform its obligations under this Agreement.
(vii) the Company has full legal right, power and
authority to enter into each of this Agreement and the Representative's
Warrant Agreement and to consummate the transactions provided for
herein and therein; and each of this Agreement and the Representative's
Warrant Agreement has been duly authorized, executed and delivered by
the Company. Each of this Agreement and the Representative's Warrant
Agreement, assuming due authorization, execution and delivery by each
other party thereto constitutes a legal, valid and binding agreement of
the Company enforceable against the Company in accordance with its
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal
or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's execution or
delivery of this Agreement and the Representative's Warrant Agreement,
its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its
business as described in the Registration Statement, the Prospectus,
and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or
assets (tangible
22
or intangible) of the Company pursuant to the terms of, (A) the
certificate of incorporation or by-laws of the Company, (B) any
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or
any other agreement or instrument to which the Company is a party or by
which it is or may be bound or to which any of its respective
properties or assets (tangible or intangible) is or may be subject, or
(C) any statute, judgment, decree, order, rule or regulation applicable
to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the
Company or any of its activities or properties;
(viii) except as described in the Prospectus, no
consent, approval, authorization or order of, and no filing with, any
court, regulatory body, government agency or other body (other than
such as may be required under Blue Sky laws, as to which no opinion
need be rendered) is required in connection with the issuance or sale
of the Shares pursuant to the Prospectus, the issuance of the
Representative's Warrants, and the Registration Statement, the
performance of this Agreement and the Representative's Warrant
Agreement, and the transactions contemplated hereby and thereby except
as have been obtained;
(ix) to the best knowledge of such counsel, the
Company is not in breach of, or in default under, any term or provision
of any contract, indenture, mortgage, installment sale agreement, deed
of trust, lease, voting trust agreement, stockholders' agreement,
partnership agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by
which the Company may be bound or to which the property or assets
(tangible or intangible) of the Company is subject or affected; and the
Company is not in violation of any term or provision of its certificate
of incorporation by-laws, or in violation of any franchise, permit,
judgment, decree, order, statute, rule or regulation;
(x) the statements in the Prospectus under
"BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES," "RESALES BY SELLING
STOCKHOLDERS" and "SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed
by such counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
(xi) the Firm Securities and Option Securities have
been accepted for quotation on Nasdaq;
(xii) except as described in the Prospectus, no
person, corporation, trust, partnership, association or other entity
has the right to include and/or register any securities of the Company
in the Registration Statement, require the Company to file any
registration statement or, if filed, to include any security in such
registration statement;
23
(xiii) To the best of counsel's knowledge, except as
described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's
or origination fee with respect to the sale of the Securities hereunder
or financial consulting arrangement or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Underwriters' compensation, as determined by the NASD;
(xiv) assuming due execution and delivery by the
parties thereto other than the Company, the Lock-up Agreements are
legal, valid and binding obligations of parties thereto, enforceable
against the party and any subsequent holder of the securities subject
thereto in accordance with its terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable law);
and
(xv) except as described in the Prospectus, the
Company does not (A) maintain, sponsor or contribute to any ERISA
Plans, (B) maintain or contribute, now or at any time previously, to a
defined benefit plan, as defined in Section 3(35) of ERISA, and (C) has
never completely or partially withdrawn from a "multiemployer plan".
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
conferences such officers, representatives and accountants discussed the
contents of the Preliminary Prospectus, the Registration Statement, the
Prospectus, and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus, on the basis of the foregoing, no facts have come to
the attention of such counsel which lead them to believe that either the
Registration Statement or any amendment thereto, at the time such Registration
Statement or amendment became effective or the Prospectus or amendment or
supplement thereto as of the date of such opinion contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement or
Prospectus).
Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991), or any
comparable State bar accord.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to
24
matters of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company, and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested. The opinion shall also state
that the Underwriters' Counsel is entitled to rely thereon. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and that the Underwriters and they are
justified in relying thereon.
(e) At the Closing Date, the Underwriters shall have received
the favorable opinion, satisfactory in form and substance to Underwriters'
Counsel, from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, regulatory counsel to the Company, that the
Company has all requisite corporate power and authority; and the Company has
obtained any and all necessary authorizations, approvals, orders, licenses,
including, but not limited to liquor licenses, certificates, franchises and
permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
material compliance with all such authorizations, approvals, orders, licenses,
including, but not limited to liquor licenses, certificates, franchises and
permits and all federal, state and local laws, rules and regulations; the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, including, but
not limited to liquor licenses, certificate, franchise, or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect. The disclosures in the
Registration Statement concerning the effects of federal, state and local laws,
rules and regulations on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
fact necessary to make the statements contained therein not misleading in light
of the circumstances in which they were made. The opinion shall also state that
to the best knowledge of such counsel, the Company is not in breach of, or in
default under, any term or provision of any license, or in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation.
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd., counsel to the
Company, and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, regulatory counsel to the Company, each dated
the Option Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, confirming as of Option Closing Date the
statements made by each of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, Ltd. and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ in
their respective opinions delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
(g) On or prior to each of the Closing Date and each Option
Closing Date, if any, (i) there shall have been no material adverse change nor
development involving a
25
prospective change in the condition, financial or otherwise, prospects,
stockholders' equity or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness;
(iv) the Company shall not have issued any securities (other than the
Securities); the Company shall not have declared or paid any dividend or made
any distribution in respect of its capital stock of any class; and there shall
not have been any change in the capital stock of the Company, or any material
change in the debt (long or short term) or liabilities or obligations of the
Company (contingent or otherwise); (v) no material amount of the assets of the
Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (vi) no action, suit or proceeding, at
law or in equity, shall have been pending or threatened (or circumstances giving
rise to same) against the Company, or affecting any of its properties or
business before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding could reasonably be expected to have a Material Adverse Effect; and
(vii) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated or threatened by the Commission.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and satisfied
all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to such Closing Date or Option Closing Date,
as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to
the best of each of such person's knowledge, threatened under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all
statements and information required to be included therein, and none of
the Registration Statement, the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and neither the
Preliminary Prospectus or any supplement thereto included any untrue
statement of a material fact or omitted to state
26
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(a) the Company has not incurred up to and including the Closing Date
or the Option Closing Date, as the case may be, other than in the
ordinary course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has not paid or
declared any dividends or other distributions on its capital stock; (c)
the Company has not entered into any transactions not in the ordinary
course of business; (d) there has not been any change in the capital
stock of the Company or any material change in the debt (long or
short-term) of the Company; (e) the Company has not sustained any
material loss or damage to its property or assets, whether or not
insured; (g) there is no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company, or any
affiliated party of any of the foregoing which is required to be set
forth in an amended or supplemented Prospectus which has not been set
forth; and (h) there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from ▇▇▇▇▇▇▇▇;
(i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of
the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations thereunder and that the Underwriters may rely
upon the opinion of ▇▇▇▇▇▇▇▇ with respect to such financial statements
and supporting schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim
financial statements of the Company, a reading of the latest available
minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations
with officers and other employees of the Company responsible for
financial and accounting matters
27
and other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the pro forma
financial information contained in the Registration Statement and
Prospectus does not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or is not fairly presented in conformity with generally
accepted accounting principles applied on a basis consistent with that
of the audited financial statements of the Company or the unaudited pro
forma financial information included in the Registration Statement, (B)
the unaudited financial statements and supporting schedules of the
Company included in the Registration Statement do not comply as to form
in all material respects with the applicable accounting requirements of
the Act and the Rules and Regulations or are not fairly presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements of the Company included in the Registration Statement, or
(C) at a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there has been any change
in the capital stock of the Company, any change in the long-term debt
of the Company, or any decrease in the stockholders' equity of the
Company or any decrease in the net current assets or net assets of the
Company as compared with amounts shown in the _____, 1999 balance
sheets included in the Registration Statement, other than as set forth
in or contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease, and (D) during the period from ______, 1999 to a specified
date not more than five (5) days prior to the effective date of the
Registration Statement, there was any decrease in net revenues or net
earnings of the Company or increase in net earnings per common share of
the Company, in each case as compared with the corresponding period
beginning _____, 1998 other than as set forth in or contemplated by the
Registration Statement, or, if there was any such decrease, setting
forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the amount of
liabilities of the Company (including a break-down of commercial paper
and notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company
set forth in the Prospectus in each case to the extent that such
amounts, numbers, percentages, statements and information may be
derived from the general accounting records, including work sheets, of
the Company and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and
found them to be in agreement; and
(vi) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriters may request.
(k) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from ▇▇▇▇▇▇▇▇ a letter, dated as of the
Closing Date or the
28
Option Closing Date, as the case may be, to the effect that they reaffirm the
statements made in the letter furnished pursuant to SUBSECTION (j) of this
Section hereof except that the specified date referred to shall be a date not
more than five days prior to the Closing Date or the Option Closing Date, as the
case may be, and, if the Company has elected to rely on Rule 430A of the Rules
and Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of SUBSECTION (j) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriters and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(l) The Company shall have delivered to the Representative a
letter from ▇▇▇▇▇▇▇▇ addressed to the Company stating that they have not during
the immediately preceding two year period brought to the attention of the
Company's management any "weakness" as defined in Statement of Auditing
Standards No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's internal controls.
(m) On each of the Closing Date and Option Closing Date, if
any, there shall be duly tendered to the Representative the appropriate number
of Securities.
(n) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or threatened.
(o) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement substantially in the form filed as Exhibit 1.2 to the Registration
Statement in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(p) On or before the Closing Date, the Common Stock and the
Redeemable Warrants shall have been duly approved for quotation on Nasdaq,
subject to official notice of issuance.
(q) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Representative's Counsel.
If any condition to the Representative's obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may terminate
this Agreement or, if the Representative so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. INDEMNIFICATION.
(a) The Company, agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7, "Underwriters" shall include
the officers, directors,
29
partners, employees, agents and counsel of the Underwriters, including
specifically each person who may be substituted for an Underwriter as provided
in Section 11 hereof), and each person, if any, who controls the Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions, proceedings,
investigations, inquiries, and suits in respect thereof), whatsoever (including
but not limited to any and all costs and expenses whatsoever reasonably incurred
in investigating, preparing or defending against such action, proceeding,
investigation, inquiry or suit, commenced or threatened, or any claim
whatsoever), as such are incurred, to which the Underwriter or such controlling
person may become subject under the Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon (A) any untrue statement or alleged untrue statement of a
material fact contained (i) in the Registration Statement or the Prospectus (as
from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise of
the Securities; or (iii) in any application or other document or written
communication (in this Section 7 collectively called "application") executed by
the Company or based upon written information furnished by the Company filed,
delivered or used in any jurisdiction in order to qualify the Securities under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, Nasdaq or any other securities exchange, (B) the omission
or alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made), or
(C) any breach of any representation, warranty, covenant or agreement of the
Company contained herein or in any certificate by or on behalf of the Company or
any of its officers delivered pursuant hereto unless, in the case of clause (A)
or (B) above, such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriters expressly for use in the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors,
officers employees, agents and counsel, and each other person, if any, who
controls the Company within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company to the Underwriter but only with respect to
statements or omissions, if any, made in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any application
made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to any Underwriter by such Underwriter
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto or in any such application, provided that such
written information or omissions only pertain to disclosures in the Registration
Statement or Prospectus directly relating to the transactions effected by the
Underwriters in connection with this Offering. The Company acknowledges that the
statements with respect to the public offering of the Securities set forth under
the heading "Underwriting" and the stabilization legend in the Prospectus have
been furnished by the Underwriter expressly for use therein and constitute
30
the only information furnished in writing by or on behalf of the Underwriters
for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in
addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action, investigation, inquiry, suit or proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action, investigation,
inquiry, suit or proceeding or separate but similar or related actions,
investigations, inquiries, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party form all
liability arising out of such claim, action, suit or proceeding and (ii) doe
snot include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
31
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions, investigations, inquiries,
suits or proceedings in respect thereof) referred to above in this subdivision
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set
32
forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. EFFECTIVE DATE.
(a) This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. TERMINATION.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representative's opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Commission or any other government authority having
jurisdiction; or (iv) if trading of any of the securities of the Company shall
have been suspended, or any of the securities of the Company shall have been
delisted, on any exchange or in any over-the-counter market; or (v) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (vi) if a
banking moratorium has been declared by a state or federal authority; or (vii)
if a moratorium in foreign exchange trading has been declared; or (viii) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Securities; or (viii) if there shall have occurred any outbreak
or escalation of hostilities or any
33
calamity or crisis or there shall have been such a material adverse change in
the conditions or prospects of the Company, or such material adverse change in
the general market, political or economic conditions, in the United States or
elsewhere as in the Representative's judgment would make it inadvisable to
proceed with the offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
indemnify the Underwriter for all of their actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriter (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and expenses and
filing fees. Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 6, 10 and 12 hereof), and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 and Section 7
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail otherwise than for a reason sufficient to justify the
termination of this Agreement (under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
34
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at their option, by notice from the Underwriters or the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
13. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Representative shall be directed to the
Representative at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇▇, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Notices to the Company
shall be directed to the Company at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
Ltd., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from the Underwriters shall be deemed to
be a successor by reason merely of such purchase.
15. CONSTRUCTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
35
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
▇▇▇▇▇▇.▇▇▇, INC.
By:
---------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇ & COMPANY, INC.
By:
-----------------------------------
Name:
Title:
SCHEDULE A
UNDERWRITER NUMBER OF UNITS
▇▇▇▇▇ & Company, Inc.
---------
TOTAL 3,000,000