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EXHIBIT 1
2,000,000 SHARES OF COMMON STOCK
SKYMALL, INC.
UNDERWRITING AGREEMENT
New York, New York
, 1996
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇ INCORPORATED
CRUTTENDEN ▇▇▇▇ INCORPORATED
As Representatives of the Several
Underwriters listed on Schedule A hereto
c/o ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
SkyMall, Inc., a Nevada corporation (the "Company") confirms
its agreement with ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇ Incorporated ("Josephthal"),
Cruttenden ▇▇▇▇ Incorporated ("Cruttenden") and each of the underwriters named
in Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 12), for
whom Josephthal and Cruttenden are acting as representatives (in such capacity,
Josephthal and Cruttenden each shall hereinafter sometimes be referred to as a
Representative and collectively as "you" or the "Representatives"), with respect
to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of the Company's
common stock, $.001 par value per share ("Common Stock"), set forth in Schedule
A hereto. Such shares of Common Stock are hereinafter referred to as the "Firm
Shares."
Upon your request, as provided in Section 3(b) of this
Agreement, ▇▇▇▇ ▇. and ▇▇▇▇▇ ▇▇▇▇▇▇ (the "Ashtons") and ▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇")
(each of the Ashtons and ▇▇▇▇ a "Selling Shareholder" and collectively the
"Selling Shareholders") shall sell to the Underwriters, acting severally and not
jointly, an aggregate of up to 300,000 shares of Common Stock (collectively, the
"Option Shares"). Each of the Selling Shareholders shall sell one-half of the
aggregate number of Option Shares purchased by the Underwriters, acting
severally and not jointly, on each Option Closing Date (hereinafter defined), if
any. The Firm Shares and the Option Shares are sometimes hereinafter referred to
as the "Shares". The Company also proposes to issue and sell to Josephthal
warrants (the "Representative's Warrants") pursuant to the Representative's
Warrant Agreement (the "Representative's Warrant Agreement") for the purchase of
up to an additional 200,000 shares of Common Stock. The shares of Common Stock
issuable upon exercise of the Representative's Warrants are hereinafter referred
to as the "Representative's Shares." The Firm Shares, the Option Shares, the
Representative's Warrants and the Representative's Shares (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
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1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form S-1 (No. 333-_______), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Firm Shares and the Option Shares 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 Underwriters and
will not, file any other amendment thereto to which the Underwriters 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." 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.
(b) 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 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
Preliminary Prospectus, the Registration Statement and Prospectus at the time of
filing thereof conformed with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus, the Registration Statement
or Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, 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
Preliminary Prospectus, Registration Statement or Prospectus, 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 Underwriter expressly for use
in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto, provided that such written information
or omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the
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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 Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
(c) 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, 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 with respect to the Underwriters by or on behalf of
any Underwriter expressly for use in the Preliminary Prospectus, Registration
Statement or Prospectus or any amendment thereof or supplement thereto, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, 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
Underwriters expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriters for inclusion in the
Prospectus.
(d) 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 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,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company is and has been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state and local
laws, rules and regulations; and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially 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 on the
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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.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization" and "Description of Capital Stock" 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 the holders thereof 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 by
reason of being such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities to be sold by the Company
hereunder 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 or the Representatives, as the case may be, will
acquire good and marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements, including the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus 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 on a basis consistent
with that of the audited financial statements included therein, what the
Company's pro forma capitalization would have been for the respective periods
and as of the respective dates to which they apply after giving effect to the
adjustments described therein. Such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved. 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
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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 and Operating Data,"
"Selected Financial and Operating 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.
(g) 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.
(h) No transfer tax, stamp duty or other similar tax
is payable by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Securities, (ii) the purchase by the Underwriters
of the Securities to be sold by the Company hereunder and the purchase by
Josephthal 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 Shares in
connection with the distribution contemplated hereby.
(i) The Company maintains insurance policies,
including, but not limited to, general liability, product liability and property
insurance, which insures the Company and its employees, against such losses and
risks generally insured against by comparable businesses. 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.
(j) 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 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) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company.
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(k) The Company has full legal right, power and
authority to authorize, issue, deliver and sell the Firm Shares, the
Representative's Warrants and the Representative's Shares, 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 to be sold by the Company, 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, 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 or
intangible) of the Company pursuant to the terms of, (i) the articles 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.
(l) 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 Shares 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 Shares 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 Shares, and the
Representative's Warrants to be sold by the Company hereunder and under the
Representative's Warrant Agreement.
(m) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement
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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 on Form S-1, 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.
(n) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and Prospectus, and
except as may otherwise be indicated or contemplated herein or therein, the
Company has not (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or 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 general affairs, management, financial
operations, stockholders' equity or results of operations of the Company.
(o) 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.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance with all
federal, state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours. There are no pending investigations involving the Company by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any predecessor entity, and none has ever occurred. No
representation question exists respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists, or, to the knowledge
of the Company, is imminent.
(q) 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,"
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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."
(r) Neither the Company nor any of its employees,
directors, stockholders, partners, or affiliates (within the meaning of the
Rules and Regulations) of any of the foregoing has taken or will take, directly
or indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus,
none of the patents, patent applications, trademarks, service marks, trade names
and copyrights, and licenses and rights to the foregoing presently owned or held
by the Company are in dispute so far as known by the Company or 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, trademarks, service marks, trade
names and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person, corporation or other entity under or with
respect to any of the foregoing and (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, trademark, service ▇▇▇▇,
trade name, copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business or
otherwise.
(t) 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, 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.
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(u) 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 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.
(v) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 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.
(w) The Company has caused to be duly executed
legally binding and enforceable agreements pursuant to which all officers and
directors and all of the holders of Common Stock and securities exchangeable for
or convertible into shares of Common Stock including, but not limited to each
holder of shares of 6% Dividend Paying Convertible Preferred Stock (the
"Convertible Preferred Stock") or Warrants (as defined in the Registration
Statement) have executed an agreement (individually, a "Lock-up Agreement,"
collectively, the "Lock-up Agreements") pursuant to which such each person has
agreed not to, directly or indirectly, offer to sell, 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 twelve (12) months following the effective
date of the Registration Statement without the prior written consent of the
Representatives except as expressly set forth in the respective Lock-up
Agreement. 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.
(x) 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").
(y) The Common Stock has been approved for quotation
on the Nasdaq National Market ("Nasdaq").
(z) Neither the Company nor any of its officers,
employees, agents, or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or
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proposed transaction) which (a) might subject the Company, or any other such
person to any damage or penalty in any civil, criminal or governmental
litigation or proceeding (domestic or foreign), (b) if not given in the past,
might have had a materially adverse effect on the assets, business or operations
of the Company, or (c) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(aa) 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 or has had,
either directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficial interest
in any contract or agreement to which the Company is a party or by which it may
be bound or affected. Except as set forth in 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 Shareholder (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.
(bb) Any certificate signed by any officer of the
Company, and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein) shall be deemed a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
(cc) The minute books of the Company, and its
predecessor, have been made available to the Underwriters and contains a
complete summary of all meetings and actions of the directors, stockholders,
audit committee, compensation committee and any other committee of the Board of
Directors of the Company, respectively, since the time of its incorporation, and
reflects all transactions referred to in such minutes accurately in all material
respects.
(dd) 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.
(ee) The Company has as of the effective date of the
Registration Statement (i) entered into an employment agreement with ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in the form filed as Exhibit 10.1 to the Registration Statement and
(ii) obtained term key-man insurance on the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, in the
amount of $1,000,000, which policy names the Company as the sole beneficiary of
at least $1,000,000 thereof.
- 10 -
11
(ff) The Company confirms as of the date hereof that
it is in compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of Doing Business with Cuba, and the
Company further agrees that if it or any affiliate commences engaging in
business with the government of Cuba or with any person or affiliate located in
Cuba after the date the Registration Statement becomes or has become effective
with the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(gg) The conversion of all the outstanding shares of
Convertible Preferred Stock of the Company as set forth in the Prospectus has
been duly authorized by the Company and the shareholders of the Company in
accordance with all agreements, documents, understandings and instruments
affecting the rights, duties, responsibilities, obligations and/or privileges of
holders of Convertible Preferred Stock or to which the Company is bound,
including without limitation, the Certificate of the Designations, Powers,
Preferences and Rights of the Convertible Preferred Stock, the Company's
articles of incorporation and the Company's by-laws; and upon the consummation
of the Offering, without any further action of any shareholders of the Company
or the Company, every share of Convertible Preferred Stock of the Company will
simultaneously convert into 180 validly issued, fully paid and nonassessable
shares of Common Stock.
2. Representations and Warranties of the Selling
Shareholders.
Each of the Selling Shareholders represents and warrants to,
and agrees with, the Underwriters as of the date hereof, and as of the Option
Closing Date, if any, with respect to such Selling Shareholders respective
Option Shares as follows:
(a) Such Selling Shareholder has now and will
have on each Option Closing Date, if any, good and valid title to the Option
Shares free and clear of any lien, charge, claim, encumbrance, pledge, security
interest, stockholders' agreement, voting trust, community property right,
defect in title, equitable interest or other equities or restrictions of any
kind whatsoever (including any liability for estate or inheritance taxes and
claims of any creditor, devisee, legatee or beneficiary); other than as
described in this Agreement or disclosed in the Registration Statement or
Prospectus, there are no outstanding options, warrants, rights or other
agreements or arrangements with respect to any of the Option Shares; the Selling
Shareholder has and will have on each Option Closing Date, if any, full right,
power and authority to sell, transfer and deliver the Option Shares hereunder;
and upon delivery of the Option Shares against payment of the purchase price
therefor as contemplated in this Agreement, each of the Underwriters, who has
purchased in good faith and without notice of any adverse claim, will receive
good and marketable title to the Option Shares purchased by it, free and clear
of any lien, charge, claim, encumbrance, pledge, security interest,
stockholders' agreement, voting trust, community property right, defect in
title, equitable interests or other equities or restrictions of any kind
whatsoever (including any liability for estate or inheritance taxes and claims
of any creditor, devisee, legatee or beneficiary).
- 11 -
12
(b) Such Selling Shareholder has duly authorized
(if applicable), executed and delivered, in the forms theretofore furnished to
the Representative, a Lock-up Agreement (the "Seller Lock-Up Agreement"), a
Stock Power (the "Stock Power"), a Power of Attorney (the "Power of Attorney")
and a Letter of Transmittal and Custody Agreement (the "Custody Agreement");
each of the Custody Agreement, the Stock Power, the Power of Attorney and the
Seller Lock-Up Agreement constitutes a legal, valid and binding agreement of the
Selling Shareholder, enforceable in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles.
(c) All authorizations, approvals, consents and
orders necessary for the execution and delivery by such Selling Shareholder of
this Agreement, the Custody Agreement, the Stock Power, the Power of Attorney
and the Seller Lock-Up Agreement and the sale and delivery of the Option Shares
hereunder (other than such authorizations, approvals, orders or consents as may
be necessary under state securities laws) have been obtained and are in full
force and effect; and such Selling Shareholder has full right, power and
authority to enter into and perform its obligations under this Agreement, the
Custody Agreement, the Stock Power and the Power of Attorney and the Seller
Lock-Up Agreement.
(d) Such Selling Shareholder has not distributed
and will not distribute any prospectus or other offering material in connection
with the distribution of the Securities.
(e) This Agreement has been duly authorized (if
applicable), executed and delivered by such Selling Shareholder and is a legal,
valid and binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except insofar as indemnity and contribution
provisions may be limited by applicable laws (including, without limitation,
federal laws) or equitable principles and except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles. The execution, delivery and performance of this
Agreement, the Custody Agreement, the Stock Power, the Power of Attorney and the
Seller Lock-Up Agreement and the consummation of the transactions contemplated
hereby and thereby by such Selling Shareholder has not conflicted and will not
conflict with and has not resulted and will not result in a breach of or default
under (i) any will, license, contract, indenture, mortgage, lease, deed of
trust, voting trust agreement, bond, debenture, stockholders' agreement, note,
loan or credit agreement or other agreement or instrument to which such Selling
Shareholder is a party or by which such Selling Shareholder is or may be bound
or to which any of its properties (including the Option Shares) is or may be
subject, or any indebtedness, or (ii) any statute, judgment, decree, order, rule
or regulation applicable to such Selling Shareholder of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body,
domestic or foreign, having jurisdiction over such Selling Shareholder or any of
such Selling Shareholder's activities or properties (including the Option
Shares), except for conflicts, breaches and defaults which will not adversely
affect the consummation by such Selling Shareholder of the transactions
contemplated hereby.
(f) The sale of the Option Shares hereunder is
not prompted by any information concerning the Company which is material and
adverse to the Company taken as a whole and which is not set forth in the
Prospectus; the information relating to such Selling
- 12 -
13
Shareholder, the transactions between such Selling Shareholder or its employees,
agents or affiliates, if any, and the Company and all securities of the Company
or any of the subsidiaries owned by such Selling Shareholder (collectively,
"Seller Information") set forth in the Registration Statement and the
Prospectus, as so amended or supplemented, does not and at the Closing Date and
each Option Closing Date, if any, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; all information
furnished by or on behalf of such Selling Shareholder in writing for use in each
Preliminary Prospectus, the Registration Statement and the Prospectus, or any
amendment or supplement thereto, is and at the Closing Date and each Option
Closing Date, if any, will be true, correct and complete in all material
respects; and there are not now and will not be at the Closing Date or any
Option Closing Date, if any, any agreements, contracts or other documents or
instruments providing for indemnification, contribution or reimbursement to such
Selling Shareholder or its employees, agents, or affiliates, if any, (as defined
in Section 8) by the Company with respect to the offer or sale of the Option
Shares or the distribution contemplated hereby (other than those provisions of
the by-laws or the articles of incorporation, as amended, of the Company
relating to the indemnification of directors of the Company in their capacity as
such).
(g) Nothing material has come to the attention
of such Selling Shareholder to cause such Selling Shareholder to believe that
the Company's representations and warranties contained in this Agreement are not
accurate in any material respect.
(h) There is not pending or, to the knowledge of
such Selling Shareholder, threatened against such Selling Shareholder or
involving its properties or activities any material action, inquiry,
investigation, suit or proceeding (and, to the knowledge of such Selling
Shareholder, there are no circumstances that would be expected to give rise to
the same) which (i) questions the validity of this Agreement, the Custody
Agreement, the Stock Power, the Power of Attorney, the Seller Lock-Up Agreement
or any action taken or to be taken by such Selling Shareholder in connection
herewith or therewith, (ii) has or reasonably would be expected to materially
adversely affect the Company which is not disclosed in the Prospectus or (iii)
reasonably would be expected to adversely affect the consummation by such
Selling Shareholder of the transactions contemplated hereby or thereby.
(i) Except as and to the extent disclosed in the
Registration Statement or the Prospectus, such Selling Shareholder does not have
any registration rights, rights of first refusal, co-sale rights, preemptive
rights or other similar rights with respect to any securities of the Company;
such Selling Shareholder has waived all of those rights which it may have with
respect to the Option Shares and the transactions contemplated hereby; and such
Selling Shareholder does not have any warrants, options or similar rights to
acquire, and does not have any right or arrangement to acquire, any capital
stock, rights, warrants, options or other securities from the Company, other
than those disclosed in the Registration Statement or the Prospectus.
(j) Such Selling Shareholder has not since the
initial filing of the Registration Statement with the Commission (i) sold, bid
for, purchased, attempted to induce any person to purchase or paid anyone any
compensation for soliciting purchases of any securities of the Company or (ii)
paid or agreed to pay to any person any compensation for soliciting
- 13 -
14
another person or entity to purchase any securities of the Company (in each
case, except for the sale of the Option Shares to the Underwriters hereunder and
except as permitted by federal and state securities laws).
(k) Such Selling Shareholder has not taken and
will not take, directly or indirectly, any action which is designed to or which
has constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the distribution of the Securities.
(l) Any certificate signed by or on behalf of
such Selling Shareholder and delivered to the Underwriters or Underwriters'
Counsel shall be deemed a representation and warranty by such Selling
Shareholder to the Underwriters or Underwriters' Counsel as to the matters
covered thereby.
3. 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, severally and not jointly, agrees to purchase from the Company
at a price of $__________ [93% of the initial public offering price] per share
of Common Stock, that number of Firm Shares set forth in Schedule A opposite the
name of such Underwriter, plus any additional number of Firm Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 12 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 Selling Shareholders hereby grant an option
to the Underwriters, severally and not jointly, to purchase all or any part of
an additional 300,000 shares of Common Stock at a price of $__________ [93% of
the initial public offering price] per share of Common Stock. Each of the
Selling Shareholders shall sell one-half of the aggregate number of Option
Shares purchased by the Underwriters, acting severally and not jointly, on each
Option Closing Date, if any. 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 Shares upon notice by
the Representatives to the Company and the Selling Shareholders setting forth
the number of Option Shares as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for any such
Option Shares. Any such time and date of delivery (an "Option Closing Date")
shall be determined by the Representatives, 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
Representatives and the Company and the Selling Shareholders. Nothing herein
contained shall obligate the Underwriters to make any over-allotments. No Option
Shares shall be delivered unless the Firm
- 14 -
15
Shares 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 Shares shall be made at the offices of ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇ Incorporated at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, or at such other place as shall be agreed upon by the Representatives and
the Company. Such delivery and payment shall be made at 10:00 a.m. (New York
City time) on __________, 1996 or at such other time and date as shall be agreed
upon by the Representatives and the Company, but not less than three (3) nor
more than seven (7) full business days after the 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
Shares are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Shares shall be made at the above
mentioned office of the Representatives or at such other place as shall be
agreed upon by the Representatives, the Company and the Selling Shareholders on
each Option Closing Date as specified in the notice from the Representatives to
the Company. Delivery of the certificates for the Firm Shares and the Option
Shares, if any, shall be made to the Underwriters against payment by the
Underwriters, severally and not jointly, of the purchase price for the Firm
Shares and the Option Shares, if any, to the order of the Company for the Firm
Shares and the Option Shares, if any, by New York Clearing House funds. In the
event such option is exercised, each of the Underwriters, acting severally and
not jointly, shall purchase that proportion of the total number of Option Shares
then being purchased which the number of Firm Shares set forth in Schedule A
hereto opposite the name of such Underwriter bears to the total number of Firm
Shares, subject in each case to such adjustments as the Representatives in their
discretion shall make to eliminate any sales or purchases of fractional shares.
Certificates for the Firm Shares and the Option Shares, 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 Underwriters 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 Shares and the Option Shares, if any, shall be made available to the
Representatives at such office or such other place as the Representatives 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 to Josephthal, Representative's Warrants at a purchase price of $.001 per
warrant, which warrants shall entitle the holders thereof to purchase (i) an
aggregate of 200,000 shares of Common Stock. The Representative's Warrants shall
be exercisable for a period of forty-eight (48) months commencing twelve (12)
months 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
shares of Common Stock. The Representative's Warrant Agreement and form of
Warrant Certificate shall be substantially in the form filed as Exhibit 4.2 to
the Registration Statement. Payment for the Representative's Warrants shall be
made on the Closing Date.
4. Public Offering of the Shares. As soon after the
Registration Statement becomes effective as the Representatives deem advisable,
the Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of
-15-
16
the Shares is required and has not become effective) at the price and upon the
other terms set forth in the Prospectus. The Representatives may from time to
time increase or decrease the public offering price after distribution of the
Shares has been completed to such extent as the Representatives, in their
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.
5. Covenants and Agreements of the Company.
(a) The Company covenants and agrees with each of the
Underwriters as follows:
i) 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 Shares by the Underwriters of which the
Representatives shall not previously have been advised and
furnished with a copy, or to which the Representatives shall
have objected or which is not in compliance with the Act, the
Exchange Act or the Rules and Regulations.
ii) As soon as the Company is advised or
obtains knowledge thereof, the Company will advise the
Representatives 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 will make
every effort to obtain promptly the lifting of such order.
iii) The Company shall file the Prospectus
(in form and substance satisfactory to the Representatives) or
transmit the Prospectus by a means reasonably calculated to
result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the
Representatives, pursuant
- 16 -
17
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.
iv) The Company will give the
Representatives 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 Underwriters 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 Representatives 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 Representatives or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
& Sutcliffe LLP ("Underwriters' Counsel"), shall object.
v) The Company shall endeavor in good faith,
in cooperation with the Representatives, 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 Representatives 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 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 Representatives 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.
vi) 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
- 17 -
18
is necessary at any time to amend the Prospectus to comply
with the Act, the Company will notify the Representatives
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 Underwriters copies of such amendment or
supplement as soon as available and in such quantities as the
Underwriters may request.
vii) 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 Representatives, 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.
viii) During a period of five 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 Representatives:
(a) 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;
(b) 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;
(c) as soon as they are available,
copies of all reports (financial or other) mailed to
stockholders;
(d) 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;
(e) every press release and every
material news item or article of interest to the
financial community in respect of the Company,
- 18 -
19
or its affairs which was released or prepared by or
on behalf of the Company; and
(f) any additional information of a
public nature concerning the Company (and any future
subsidiary) or its businesses which the
Representatives may request.
During such five (5)-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.
ix) The Company will maintain a Transfer
Agent and, if necessary under the jurisdiction of
incorporation of the Company, a Registrar (which may be the
same entity as the Transfer Agent) for its Common Stock.
x) The Company will furnish to the
Representatives or on the Representatives' order, without
charge, at such place as the Representatives may designate,
copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include
all financial statements and exhibits), the Prospectus, and
all amendments and supplements thereto, including any
prospectus prepared after the effective date of the
Registration Statement, in each case as soon as available and
in such quantities as the Representatives may request.
xi) On or before the effective date of the
Registration Statement, the Company shall provide the
Representatives with true copies of duly executed, legally
binding and enforceable agreements pursuant to which for a
period of twelve (12) months from the effective date of the
Registration Statement, officers and directors and all of the
holders of Common Stock and securities exchangeable or
exercisable for or convertible into shares of Common Stock and
each holder of shares of Convertible Preferred Stock or the
Warrants agree that each 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, 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 Representatives (collectively, the "Lock-up
Agreements"). 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.
During the twelve (12) month period commencing with the
effective date of the Registration Statement (the "Lock-up
Period"), the Company shall not, without the prior written
consent of the Representatives, sell, contract or offer to
sell, issue, transfer, assign, pledge,
- 19 -
20
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. During
the Lock-up Period, the Company (i) shall not amend the
employment agreement of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, which is in effect
on the date hereof and has been filed as an exhibit to the
Registration Statement, (ii) shall not amend any option
agreement or other agreement providing compensation to any
officer, director or principal stockholder and (iii) shall not
file any registration statement with the Securities and
Exchange Commission without the prior written consent of the
Representatives.
xii) 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.
xiii) 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.
xiv) 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.
xv) The Company shall furnish to the
Representatives 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 7(k) hereof.
xvi) The Company shall cause the Common
Stock to be quoted on Nasdaq and for a period of seven (7)
years from the date hereof, and use its best efforts to
maintain the Nasdaq quotation of the Common Stock to the
extent outstanding.
xvii) For a period of five (5) years from
the Closing Date, the Company shall furnish to the
Representatives at either Representative's request and at the
Company's sole expense, (i) daily consolidated transfer sheets
relating
- ▇▇ -
▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, (▇▇) 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.
xviii) As soon as practicable, (i) but in no
event more than 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 five (5) years.
xix) The Company hereby agrees that it will
not for a period of twelve (12) months from the effective date
of the Registration Statement, adopt, propose to adopt or
otherwise permit to exist any employee, officer, director,
consultant or compensation plan or arrangement permitting the
grant, issue or sale of any shares of Common Stock or other
securities of the Company (i) in an amount greater than an
aggregate of 750,000 shares of Common stock, (ii) at an
exercise or sale price per share less than the greater of (a)
the initial public offering price of the Shares set forth
herein and (b) the fair market value of the Common Stock on
the date of grant or sale, (iii) to any direct or indirect
beneficial holder on the date hereof of more than 5% of the
issued and outstanding shares of Common Stock, (iv) with the
payment for such securities with any form of consideration
other than cash, (v) upon payment of less than the full
purchase or exercise price for such shares of Common Stock or
other securities of the Company on or before the date of
issuance, or (vi) the existence of stock appreciation rights,
phantom options or similar arrangements.
xx) Until the completion of the distribution
of the Securities, and for 25 days thereafter, the Company
shall not without the prior written consent of the
Representatives 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.
xxi) For a period equal to the lesser of (i)
seven (7) years from the date hereof, and (ii) the sale to the
public of the Representative's Shares, the Company will not
take any action or actions which may prevent or disqualify the
Company's use of Form S-1 (or other appropriate form) for the
registration under the Act of the Representative's Shares.
xxii) For a period of five (5) years after
the effective date of the Registration Statement, Josephthal
shall have the right to designate one (1) individual, for
election to the Company's Board of Directors (the "Board"). If
Josephthal does not designate a person for election to the
Board Josephthal may designate one (1) person to attend any
and all meetings of the Board. The Company shall notify
Josephthal of every meeting of the Board and the Company shall
send to such individual all notices and other correspondence
and
- 21 -
22
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.
(b) Each Selling Shareholder severally covenants and
agrees as to himself, herself or itself with the Underwriters that:
i) Such Selling Shareholder will not, directly or
indirectly, without the prior written consent of the
Representatives, offer, sell, grant any option to
purchase or otherwise dispose (or announce any offer,
sale, grant of any option to purchase or other
disposition) of any shares of Common Stock or any
securities convertible into, or exchangeable or
exercisable for, shares of Common Stock for a period
of twelve (12) months after the date hereof except
pursuant to this Agreement, the respective option
agreement as in effect on the date hereof by and
among the Selling Shareholder and ▇▇▇▇▇▇ ▇. and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the respective Lock-up
Agreement and will not take, directly or indirectly,
any action designed to, or which might in the
foreseeable future reasonably be expected to cause or
result in, stabilization or manipulation of the price
of any securities of the Company.
ii) Such Selling Shareholder consents to the use of
the Prospectus and any amendment or supplement
thereto by the Underwriters and all dealers to whom
the Option Shares may be sold, both in connection
with the offering or sale of the Option Shares and
for such period of time thereafter as such Prospectus
is required by law to be delivered in connection
therewith.
iii) Such Selling Shareholder has reviewed the
Registration Statement and the Prospectus and will
comply with all agreements and satisfy all conditions
on his, her or its part to be complied with or
satisfied pursuant to this Agreement, the Stock
Power, the Custody Agreement, and the Power of
Attorney at or prior to the Closing Date, and will
advise his, her or its Attorney-in-Fact prior to the
Closing Date or Option Closing Date, if any, as
applicable, if any statement to be made on behalf of
such Selling Shareholder in the certificates
contemplated by Sections 7(g) and 7(j) hereof would
be inaccurate if made as of such Closing Date or
Option Closing Date, if any, as applicable.
6. 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,
- 22 -
23
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 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
Shares, if any, and the purchase by Josephthal 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 Shares, if any, 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 counsel in connection therewith, (v) costs and expenses in connection with
due diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vi) fees and expenses of the
transfer agent and registrar, (vii) applications for assignments of a rating of
the Securities by qualified rating agencies, (viii) the fees payable to the
Commission and the NASD, and (ix) 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 7 or Section 13, the
Company shall reimburse and indemnify the Representatives for all of their
actual out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less any amounts already paid pursuant to Section 6(c)
hereof.
(c) The Company further agrees that, in addition
to the expenses payable pursuant to subsection (a) of this Section 6, it will
pay to the Representatives on the Closing Date by certified or bank cashier's
check or, at the election of the Representatives, by deduction from the proceeds
of the offering contemplated herein a non-accountable expense allowance equal to
$75,000.
7. 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 and the Selling Shareholders
herein as of the date hereof and as of the Closing Date and each Option Closing
Date, if any, with respect to the and the Selling Shareholders, as the case may
be, 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 and of
the Selling Shareholders made pursuant to the provisions hereof; and the
performance by the Company and the Selling Shareholders on and as of the Closing
Date and each Option Closing Date, if any, of their respective covenants and
obligations hereunder and to the following further conditions:
- 23 -
24
(a) The Registration Statement shall have become
effective not later than 12:00 Noon, New York time, on the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representatives, 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 contemplated by the Commission and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of Underwriters' Counsel. If the Company has elected
to rely upon Rule 430A of the Rules and Regulations, the price of the 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 Representatives of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representatives shall not have advised
the Company that the Registration Statement, or any amendment thereto, contains
an untrue statement of fact which, in the Representatives' opinion, is material,
or omits to state a fact which, in the Representatives' opinion, is material and
is required to be stated therein or is necessary to make the statements therein
not misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representatives' opinion, is material, or
omits to state a fact which, in the Representatives' opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the
Representatives shall have received from Underwriters' Counsel, such opinion or
opinions with respect to the organization of the Company, the validity of the
Securities, the Representative's Warrants, the Registration Statement, the
Prospectus and other related matters as the Representatives 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 Underwriters shall have
received the favorable opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., 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, (B) is duly qualified and licensed
and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite
corporate power and authority; and the Company has obtained
any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over
environmental or
- 24 -
25
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,
certificates, franchises and permits and all federal, state
and local laws, rules and regulations; the Company has not
received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in
the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially adversely affect the
business, operations, condition, financial or otherwise, or
the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of
the Company. 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.
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 Capital Stock," and the Company is not a
party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this
Agreement and the 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
Shares, the Representative's Warrants and the Representative's
Shares 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 Securities has been
duly and validly taken, and the certificates representing the
Securities 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
- 25 -
26
number and type of securities of the Company called for
thereby. Upon the issuance and delivery pursuant to this
Agreement and the Representative's Warrant Agreement of the
Securities to be sold by the Company, the Underwriters and the
Representatives, respectively, will acquire good and
marketable title to such Securities free and clear of any
pledge, lien, charge, claim, encumbrance, pledge, security
interest, or other restriction or equity of any kind
whatsoever. No transfer tax is payable by or on behalf of the
Underwriters in connection with (A) the issuance by the
Company of the Securities, (B) the purchase by the
Underwriters and Josephthal of the Securities and the
Representative's Shares, 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 Securities and the
Representative's Shares 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 under Rule 430A, and
no stop order suspending the use of the Preliminary
Prospectus, the Registration Statement or Prospectus or any
part of any thereof or suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the
best of such counsel's knowledge, threatened or contemplated
under the Act;
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, (A)
there are no agreements, contracts or other documents required
by the Act to be described in the Registration Statement and
the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration
Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in
part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are
correct copies of the documents of which they purport to be
copies; (B) the descriptions in the Registration Statement and
the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a party
or by which it is bound, including any document to which the
Company is a party or by which it is bound, incorporated by
reference into the Prospectus and any supplement or amendment
thereto, are accurate in all material respects and fairly
represent the information required to be shown by Form S-1;
(C) to such counsel's knowledge, there is not pending or
threatened against the Company any action, arbitration, suit,
proceeding, inquiry, investigation, litigation, governmental
or other proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters),
domestic or foreign, pending
- 26 -
27
or threatened against (or circumstances that may give rise to
the same), or involving the properties or business of the
Company which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement
are accurately summarized in all material respects), (y)
questions the validity of the capital stock of the Company or
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 any of the foregoing; (D) no statute or
regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and
(E) there is no action, suit or proceeding pending, or
threatened, against or affecting the Company before any court
or arbitrator or governmental body, agency or official (or any
basis thereof known to such counsel) in which there is a
reasonable possibility of an adverse decision which may result
in a material adverse change in the condition, financial or
otherwise, or the earnings, position, prospects, stockholders'
equity, value, operation, properties, business or results of
operations of the Company, which could adversely affect the
present or prospective ability of the Company to perform its
obligations under this Agreement or the Representative's
Warrant Agreement or which in any manner draws into question
the validity or enforceability of this Agreement or the
Representative's Warrant 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 therein; and this Agreement and the
Representative's Warrant Agreement have 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 or
intangible) of the Company pursuant to the terms of, (A) the
articles 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
- 27 -
28
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 any indebtedness, or (C)
any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory
body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company or any of its 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 of the Shares 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;
ix) the properties and business of the Company
conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus;
and the Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or
leased by it, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind
whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable;
x) 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, 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 articles of incorporation by-laws, or in
violation of any franchise, license, permit, judgment, decree,
order, statute, rule or regulation;
xi) the statements in the Prospectus under
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS," "BUSINESS," "MANAGEMENT,"
"PRINCIPAL SHAREHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION
OF CAPITAL STOCK," and "SHARES ELIGIBLE FOR FUTURE SALE" have
been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules
or regulations or legal conclusions, are correct in all
material respects;
- 28 -
29
xii) the Shares have been accepted for quotation on
Nasdaq;
xiii) the persons listed under the caption "PRINCIPAL
SHAREHOLDERS" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in regulation 13d-3 under
the Exchange Act) of the securities set forth opposite their
respective names thereunder as and to the extent set forth
therein;
xiv) except as described in the Prospectus, no
person, corporation, trust, partnership, association or other
entity has the right to include and/or register any securities
of the Company in the Registration Statement, require the
Company to file any registration statement or, if filed, to
include any security in such registration statement;
xv) 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;
xvi) assuming due execution by the parties thereto
other than the Company, the Lock-up Agreements hereof 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
xvii) 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 counsel made inquiries of such officers, representatives and
accountants and 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
Preliminary Prospectus, 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
- 29 -
30
the Preliminary Prospectus or 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 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 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
Representatives and they are justified in relying thereon. Such opinion shall
also state that Underwriters' Counsel is entitled to rely thereon.
(e) On the Closing Date, the Underwriters shall
have received the favorable opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., in its
capacity as counsel for the Selling Shareholders, dated the Closing Date,
addressed to the Underwriters, in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
i) Each Selling Shareholder has full legal right,
power and authority to enter into this Agreement and to sell,
assign, transfer and deliver in the manner provided herein the
Selling Shareholders' Option Shares sold by such Selling
Shareholder; this Agreement has been duly authorized, executed
and delivered by such Selling Shareholder; and this Agreement,
assuming due authorization, execution and delivery by each
other party hereto and further assuming it is a valid and
binding agreement of the Underwriters, is a valid and legally
binding agreement of such Selling Shareholder, enforceable
against such Selling Shareholder in accordance with its terms
(except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and by
general principles of equity relating to the availability of
remedies and except its rights to indemnity and contribution
may be limited by applicable law);
ii) None of the execution, delivery or performance of
this Agreement, the Stock Power, the Power of Attorney, and
the Custody Agreement
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31
by such Selling Shareholder and the consummation by such
Selling Shareholder of the transactions herein and therein
contemplated, to the best of such counsel's knowledge,
conflict with or result in a breach of, or default under, any
indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note agreement or other agreement or
other instrument to which such Selling Shareholder is a party
or by which such Selling Shareholder is bound or to which any
of the property of any of the Selling Shareholders is subject,
or the charter or by-laws of any of the Selling Shareholders
that are corporations, and nothing has come to such counsel's
attention which causes such counsel to believe that such
actions will result in any violation of any law, rule,
administrative regulation or court decree applicable to such
Selling Shareholder (other than state securities or blue sky
laws or regulations, as to which counsel need not express any
opinion);
iii) A Stock Power, Power of Attorney, and the
Custody Agreement have been duly authorized, executed and
delivered by each Selling Shareholder and, assuming the due
authorization, execution and delivery of the Custody Agreement
by the other parties thereto, each constitutes the valid and
binding agreement of each Selling Shareholder enforceable in
accordance with its terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally and by general
principles of equity relating to availability of remedies and
except as rights to indemnity or contribution may be limited
by applicable law); and
iv) Upon the delivery of the Selling Shareholders'
Option Shares sold hereunder by the Selling Shareholders and
payment therefor in accordance with the terms of this
Agreement, the Underwriters will have acquired all rights of
such Selling Shareholder to the Selling Shareholders' Shares
sold by such Selling Shareholder hereunder, and in addition
will have acquired good and marketable title to such Selling
Shareholders' Shares free and clear of any adverse claim.
(f) At each Option Closing Date, if any, the
Underwriters shall have received (i) the favorable opinion of Squire, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P. in its role as counsel for the Company, and (ii) the favorable
opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. in its role as counsel for each
Selling Shareholder, 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 respective statements made by Squire,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. in its respective opinions delivered on the Closing
Date.
(g) 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
subsections (d) and (e) of this Section 7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
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32
(h) 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 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 has not 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 may adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement and Prospectus; and (vii) no
stop order shall have been issued under the Act and no proceedings therefor
shall have been initiated, threatened or contemplated by the Commission.
(i) 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, after due inquiry are contemplated or threatened
under the Act;
iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto,
contain all statements and information required to be included
therein, and none of the Registration Statement, the
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33
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 nor any supplement thereto included any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
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 to the best of each such person's
knowledge 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
(i) are to such documents as amended and supplemented at the date of such
certificate.
(j) On the Closing Date, the Underwriters shall
have received a certificate dated the Closing Date, from each Selling
Shareholder (which may be signed by the Attorney-in-Fact) to the effect that
each such Selling Shareholder has carefully examined the Registration Statement
and the Prospectuses and this Agreement, and that:
i) The representations and warranties of such Selling
Shareholder in this Agreement are true and correct, as if made
at and as of the Closing Date, and such Selling Shareholder
has complied with all the agreements and satisfied all the
conditions to be performed or satisfied by such Selling
Shareholder at or prior to the Closing Date; and
ii) The Registration Statement and Prospectuses and,
if any, each amendment and each supplement thereto, contain
all statements required to such Selling Shareholder's
knowledge to be included therein regarding such Selling
Shareholder, and none of the Registration Statement nor any
amendment thereto includes any untrue statement of a material
fact regarding such Selling Shareholder or omits to state any
material fact regarding such Selling Shareholder required to
such Selling Shareholder's knowledge to be stated therein or
necessary to make the statements therein regarding such
Selling Shareholder not misleading,
- 33 -
34
and no Prospectus (an any supplements thereto) or any
Preliminary Prospectus includes or included any untrue
statement of a material fact regarding such Selling
Shareholder or omits or omitted to state a material fact
regarding such Selling Shareholder required to such Selling
Shareholder's knowledge to be stated therein or necessary in
order to make the statements therein regarding such Selling
Shareholder, in light of the circumstances under which they
are made, not misleading.
(k) 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.
(l) 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
as of September 30, 1996 and December 31, 1996 and for the
years then ended, and for the period from inception through
________________ 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 Representatives 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 board of directors
of the Company, consultations with officers and other
employees of the Company responsible for financial and
accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would
lead them to believe that (A) the 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
- 34 -
35
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 September 30, 1996 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 September
30, 1996 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
September 30, 1995 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 Representatives may
request.
(m) 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 Option Closing Date, as the case may be, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (l) 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 (l) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Representatives and deemed to be a
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36
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).
(n) The Company shall have delivered to the
Representatives 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.
(o) On each of the Closing Date and Option
Closing Date, if any, there shall have been duly tendered to the Representatives
for the several Underwriters' accounts the appropriate number of Securities.
(p) No order suspending the sale of the
Securities in any jurisdiction designated by the Representatives pursuant to
Section 5(a)(v) 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 shall be contemplated.
(q) On or before the Closing Date, the Company
shall have executed and delivered to Josephthal, (i) the Representative's
Warrant Agreement substantially in the form filed as Exhibit 4.2 to the
Registration Statement in final form and substance satisfactory to Josephthal,
and (ii) the Representative's Warrants in such denominations and to such
designees as shall have been provided to the Company by Josephthal.
(r) On or before the Closing Date, the
Securities shall have been duly approved for quotation on Nasdaq, subject to
official notice of issuance.
(s) On or before the Closing Date, there shall
have been delivered to the Representatives all of the Lock-up Agreements and in
the Seller Lock-up Agreements, in form and substance satisfactory to
Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representatives may terminate
this Agreement or, if the Representatives so elect, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
8. Indemnification.
(a) The Company and the Selling Shareholders,
jointly and severally, agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 8 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 12 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)
- 36 -
37
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 any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Securities; or (iii) in any application or
other document or written communication (in this Section 8 collectively called
"application") executed by the Company or based upon written information
furnished by the Company or any Selling Shareholder 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 Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be. The liability of each
Selling Shareholder under this paragraph shall be limited to the proportion
thereof which the number of shares of Common Stock sold by such Selling
Shareholder bears to all shares of Common Stock purchased by the Underwriters,
but in no event shall such Selling Shareholder be liable under this paragraph
for an amount exceeding the aggregate purchase price received by such Selling
Shareholder from the Underwriters for the shares of Common Stock sold by such
Selling Shareholder hereunder. Neither Selling Shareholder will be liable to the
Underwriters or any person controlling the Underwriters with respect to any
untrue statement or omission or alleged untrue statement or omission made by the
Company or by any other Selling Shareholder.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company or the Selling Shareholders may have
at common law or otherwise.
(b) Each of the Underwriters agrees severally,
but not jointly, to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the Registration Statement, and
each other person, if any, who controls the Company within the meaning of the
Act, and each Selling Shareholder to the same extent as the foregoing indemnity
from the Company to the Underwriters but only with respect to statements or
omissions, if any, made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to any
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38
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company and the Selling Shareholders acknowledge 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 Underwriters expressly for use therein and constitute 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 8 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 8, 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 8 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 8 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,
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39
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) does not include a statement
as to or an admission of fault, culpability or a failure to act by or on behalf
of any indemnified party.
(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 8, 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 8 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 a contributing party
and the Underwriters are the indemnified party, the relative benefits received
by the Company and/or the Selling Shareholders 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 the Selling Shareholders 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 8, 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
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40
director and each Selling Shareholder 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
forth above shall be in addition to any liabilities which any indemnifying party
may have at common law or otherwise.
9. Representations and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company or of any Selling
Shareholder 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 Selling Shareholders, as the case may be, and the respective
indemnity agreements contained in Section 8 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 Selling Shareholder any controlling person of
any Underwriter, the Company or any Selling Shareholder, and shall survive
termination of this Agreement or the issuance, sale and delivery of the
Securities to the Underwriters and the Representatives, as the case may be.
10. 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 Representatives, in their discretion, shall release the
Securities for sale to the public; provided, however, that the provisions of
Sections 6, 8 and 11 of this Agreement shall at all times be effective. For
purposes of this Section 10, the Securities to be purchased hereunder shall be
deemed to have been so released upon the earlier of dispatch by the
Representatives of telegrams to securities dealers releasing such shares for
offering or the release by the Representatives for publication of the first
newspaper advertisement which is subsequently published relating to the
Securities.
11. Termination.
(a) Subject to subsection (b) of this Section 11, the
Representatives 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 Representatives' 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
Commission or any other government authority having jurisdiction; or (iv) if
trading of any of the securities of the Company shall have
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41
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 Representatives' 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 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 Representatives'
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities or (ix) if ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall no longer serve
the Company in his present capacity.
(b) If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 11(a) the Company
shall promptly reimburse and indemnify the Representatives 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 6(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 Representatives, 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 7 or Section 13) then, the Company shall
promptly reimburse and indemnify the Representatives for all of their actual
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriters (less amounts previously paid pursuant to Section 6(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 7, 11, 12 and 13 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 6 and Section 8 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.
12. 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 7,
Section 11 or Section 13 hereof) to purchase the Securities which it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representatives 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 Representatives shall not have
completed such arrangements within such 24-hour period, then:
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42
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Firm Shares 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 Shares, 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.
In the event of any such default which does not result in a
termination of this Agreement, the Representatives 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.
13. Default by the Company or Selling Shareholders. If
the Company or any Selling Shareholder 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 Shares to
be purchased on an Option Closing Date, the Underwriters may at the
Representatives' option, by notice from the Representatives to the Company,
terminate the Underwriters' obligation to purchase Option Shares from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 6, Section 8 and Section 11 hereof. No
action taken pursuant to this Section shall relieve the Company or any Selling
Shareholder, as the case may be, from liability, if any, in respect of such
default.
14. Notices. All notices and communications hereunder,
except as herein otherwise specifically provided, shall be in writing and shall
be deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Underwriters shall be directed to the
Representatives c/o ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇ Incorporated at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, with a copy to
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to
the Company at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, President and Chief Executive Officer, with a copy to Squire,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. Notices to the Selling Shareholders
shall be directed to [___________________________].
15. Parties. This Agreement shall inure solely to the
benefit of and shall be binding upon, the Underwriters, the Company, the Selling
Shareholders and the controlling persons, directors and officers referred to in
Section 8 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
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43
or any provisions herein contained. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
16. 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.
17. 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.
18. 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 Representatives,
the Company and the Selling Shareholders.
If the foregoing correctly sets forth the understanding among
the Underwriters, the Company and the Selling Shareholders, please so indicate
in the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
SKYMALL, INC.
By:__________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman of the Board, President and Chief
Executive Officer
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇ INCORPORATED
For itself and as Representatives
of the several Underwriters named
in Schedule A hereto.
By:____________________________________
Name:
Title:
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44
CRUTTENDEN ▇▇▇▇ INCORPORATED
For itself and as Representatives
of the several Underwriters named
in Schedule A hereto.
By:________________________________
Name:
Title:
SELLING SHAREHOLDERS
By:________________________________________
As Attorney-in-Fact for the Selling
Shareholders Named in Schedule B hereto
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