Exhibit 1.1
DRAFT
6/04/98
▇▇▇▇▇▇ INTERNATIONAL LTD.
1,650,000 Shares
of Common Stock, $_____ par value per share
Underwriting Agreement
As of ______________, ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ Vice President
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇ International Ltd., an Ontario corporation (the "Company"),
and Ranch Limited, an Ontario corporation (the "Selling Stockholder"),
propose to sell to ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated, a Florida corporation (the
"Representative"), and the several other underwriters named on Schedule 1
attached hereto (collectively, the "Underwriters"), and the Underwriters
severally propose to purchase from the Company and the Selling Stockholder,
an aggregate of 1,650,000 shares (the "Firm Shares") of the Company's common
stock, no par value per share (the "Common Stock"), 1,498,000 of which shall
be issued by the Company and 152,000 of which shall be transferred by the
Selling Stockholder, as more fully described in Section 1 hereinbelow.
In addition, the Company shall grant to the Underwriters the option
to purchase up to an additional 247,500 shares of Common Stock (the "Optional
Shares"), solely for the purpose of covering over-allotments (the
"Over-Allotment Option"), if any, in connection with the sale of the Firm
Shares and the Optional Shares (collectively, the "Securities").
1. Purchase, Sale, and Delivery of the Securities and Underwriters'
Warrants.
(a) Purchase and Sale of the Firm Shares. On the basis of the
representations, warranties, covenants, and agreements of the Company and
the Selling Stockholder herein contained, and subject to the terms and
conditions herein set forth, the Company agrees to sell to the several
Underwriters, and the Underwriters, severally and not jointly, agree to
purchase from the Company, the Firm Shares at a purchase price of $5.00 per
share.
The Underwriters plan to offer the Firm Shares for sale to the public at
the price (the "Public Offering Price") and upon the terms set forth in the
Prospectus (as defined below) (the "Public Offering") as soon as practicable
after the date the Registration Statement (as defined
below) is declared effective (the "Effective Date") by the U.S. Securities and
Exchange Commission (the "Commission"). The Company and the Selling Stockholder
acknowledge that the Representative shall have the right to select and form a
syndicate of selected dealers and other Underwriters, reasonably acceptable to
the Company, to assist the Representative in the Public Offering.
(b) Purchase and Sale of the Optional Shares. The Company hereby
grants to the Underwriters an option to purchase from the Company solely
for the purpose of covering over-allotments in connection with the sale of
the Securities, all or any portion of the Optional Shares for a period of
45 days from the Effective Date at the same purchase price per security
payable by the Underwriters for each security as provided in Subsection
1(a) above.
The option to purchase Optional Shares granted in Subsection 1(b) hereof
may be exercised on such number of occasions as is determined by the
Representative during the term thereof by written notice to the Company from
the Representative. Such notice shall set forth the aggregate number of
Optional Shares as to which the option is being exercised and the time and
date of payment and delivery therefor. Such time and date of delivery shall
not be later than either the Closing Date (as defined below) or the second
business day after the day on which the option shall have been exercised (the
"Option Closing Date"). The Option Closing Date shall also refer to any
subsequent Option Closing Date in the event such option is exercised in part
on more than one occasion. Delivery and payment for such Optional Shares
shall be at the offices set forth below for delivery and payment for the Firm
Shares.
The obligation of the Underwriters to purchase and pay for any of the
Optional Shares is subject (as of the date hereof and as of the Closing Date
and/or the Option Closing Date) to the accuracy and completeness of and
compliance in all material respects with the representations and warranties
of the Company and the Selling Stockholder herein, to the accuracy and
completeness of the statements of the Company or its officers made in any
certificate or other documents to be delivered by the Company and/or the
Selling Stockholder pursuant to this Agreement, to the performance in all
material respects by the Company and/or the Selling Stockholder of their
respective obligations hereunder, to the satisfaction by the Company and/or
the Selling Stockholder of the conditions as of the date hereof and as of the
Closing Date and/or Option Closing Date, set forth in Subsection 1(c) hereof,
and to the delivery to the Representative of opinions, certificates and
letters dated the Closing Date and/or Option Closing Date substantially
similar in scope to those specified in Section 7, but with each reference to
the "Firm Shares" and the "Closing Date" being deemed to be the "Optional
Shares" and "Option Closing Date."
(c) Delivery of and Payment for the Securities. Delivery of the
certificates representing the Firm Shares shall be made to the Underwriters
at the offices of the Representative, or such other location as the
Representative shall determine and advise the Company upon at least two
full business days' notice in writing, against payment therefor by federal
wire transfer to the Company as appropriate at _______ A.M., Eastern Time,
on ________, 1998, or at such other time and business day (Saturdays,
Sundays,
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and legal holidays in Miami, Florida, not being considered business days
for the purposes of this Agreement), not later than the third business day
following the date the Underwriters began trading the Firm Shares, as shall
be agreed upon by the Representative and the Company, which time and date
are herein called the "Closing Date." If the Underwriters purchase any
Optional Shares pursuant to the Over-Allotment Option, delivery and payment
for the certificates representing the Optional Shares shall be made in the
same manner described herein on the Option Closing Date.
Delivery of the certificates representing the Securities shall be made
in registered form in such name or names and in such denominations as the
Representative shall specify to the Company upon at least two full business
days' notice in writing prior to the Closing Date or the Option Closing Date,
as the case may be. The Company will make the certificates available to the
Representative for examination at the offices of the Representative or at
such other location as the Representative shall specify to the Company, not
later than 2:00 P.M., Eastern Time, on the business day immediately preceding
the Closing Date or the Option Closing Date, as the case may be.
(d) Delivery and Payment of the Underwriters' Warrants. On the Closing
Date, the Company will sell to the Representative or its designee, and the
Representative or its designee shall purchase, the Underwriters' Warrants,
as more fully described in Section 6(a) herein. The Underwriters' Warrants
will be in the form of, and in accordance with, the provisions of the
Underwriters' Warrants attached as an exhibit to the amendment to the
Registration Statement (as defined below). Payment for the Underwriters'
Warrants will be made to the Company by check or checks payable to its
order on the Closing Date against delivery of the certificates representing
the Underwriters' Warrants. The certificates representing the Underwriters'
Warrants will be in such denominations and in such names as the
Representative may request at least two business days prior to the Closing
Date.
(e) Use of Prospectus. The Company and the Selling Stockholder hereby
confirm their authorization to the Underwriters to use, and to make
available for use by dealers, the Preliminary Prospectus and Prospectus (as
defined below), and the Company and the Selling Stockholder hereby
authorize the Underwriters, all selected dealers, and all other dealers to
whom any of the Securities may be sold by the Underwriters or selected
dealers, to use the Preliminary Prospectus and Prospectus, as from time to
time amended or supplemented, in connection with the sale of the Securities
in accordance with the applicable provisions of the Securities Act of 1933,
as amended (the "Securities Act"), the rules and regulations of the
Commission thereunder (the "Regulations"), and applicable state law until
completion of the Public Offering and for such longer period as the
Underwriters may request if the Prospectus is required to be delivered in
connection with sales of the Securities by the Underwriters or a dealer.
2. Representations and Warranties of the Company and the Selling
Stockholder.
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(a) Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with the Underwriters, that:
(1) Registration Statement on Form SB-2. The Company has
prepared in conformity with the requirements under the Securities Act
and the Regulations, and has filed with the Commission under the
Securities Act, a registration statement on Form SB-2, File No.
_________ (the "Registration Statement"), including the related
Prospectus, for the registration of the sale of the Securities and the
Underwriters' Warrants and the shares of Common Stock underlying the
Underwriters' Warrants (the "Warrant Shares"). The conditions for the
use of a registration statement on Form SB-2 set forth in the General
Instructions thereto have been satisfied with respect to the Company,
the transactions contemplated herein, and the Registration Statement.
As used in this Agreement, the term "Registration Statement" means such
registration statement of the Company, as amended (pre- or
post-effectiveness), on file with the Commission at the time the
registration statement or any post-effective amendment thereto becomes
effective under the Securities Act (including all financial statements
and financial schedules, exhibits, all other documents filed as a part
thereof or incorporated by reference therein, and all the information
contained in any final Prospectus filed with the Commission pursuant to
Rule 424(b) under the Securities Act or deemed by virtue of Rule 430A
under the Securities Act to be part of the Registration Statement). The
term "Prospectus" as used herein means the final Prospectus included as
part of the Registration Statement, including, if applicable, the
information contained in any final Prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act or deemed by virtue of
Rule 430A under the Securities Act to be part of the Registration
Statement. The term "Preliminary Prospectus" refers to and means any
prospectus included in the Registration Statement or any amendment
thereto prior to the Registration Statement becoming effective under
the Securities Act.
(2) Use and Accuracy of Prospectus. Neither the Commission nor
any state regulatory authority has issued any order preventing or
suspending the use of any Prospectus or any part thereof, and no
proceedings for that purpose have been instituted or, to the Company's
knowledge, are pending, threatened or contemplated. Each Prospectus
delivered to the Underwriters for dissemination in connection with the
Public Offering, at the time of filing thereof and delivery to the
Underwriters for such dissemination, did not contain any untrue
statement of a material fact, or omit to state a 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; the foregoing shall not apply, however, to statements in,
or omissions from, any Prospectus that are based upon and conform to
written information furnished to the Company with respect to any
Underwriter (or any affiliate or associate thereof) by or on behalf of
the Underwriters or such Underwriter specifically for use in the
preparation thereof.
(3) Effectiveness and Accuracy of Registration Statement. The
Registration Statement has or will become effective under the
Securities Act as of the Effective Date. The Registration Statement and
the Prospectus, from the Effective Date through the Closing Date and,
if Optional Shares are purchased, up to and including the Option
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Closing Date (and if there are multiple Option Closing Dates, up to and
including the last Option Closing Date), will comply in all respects
with the applicable requirements of the Securities Act and the
Regulations, and neither the Registration Statement nor the Prospectus
will, on such dates, 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, and, on such dates, no
event will have occurred that should have been set forth in an
amendment or supplement to the Registration Statement or the Prospectus
that has not then been set forth in such an amendment or supplement;
the foregoing shall not apply, however, to statements in, or omissions
from, the Registration Statement or the Prospectus that are based upon
and conform to written information furnished to the Company with
respect to any Underwriter (or any affiliate or associate thereof) by
or on behalf of the Underwriters or such Underwriter specifically for
use in the preparation thereof. The descriptions in the Registration
Statement and the Prospectus of contracts and other documents of the
Company are accurate and present fairly the information required to be
disclosed, and there are no contracts or other documents required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement under the Securities
Act or the Regulations which have not been so described or filed as
required. The Company has complied with all requests of the Commission
and any state securities commission in a state designated by the
Representative pursuant to Subsection 3(e) hereof for additional
information to be included in the Registration Statement and Prospectus
or otherwise.
(4) Independent Public Accountants. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
the accountants whose reports on the financial statements of the
Company are filed with the Commission as a part of the Registration
Statement, are, and were during the periods covered by their respective
reports, independent public accountants as required by the Securities
Act and the Regulations.
(5) Organization, Qualification, Etc. The Company does not
have any subsidiaries and the Company does not own, and at the Closing
Date and any Option Closing Date will not own, directly or indirectly,
any stock or other equity interest in, or control, directly or
indirectly, any other corporation, partnership or other entity. The
Company is (i) a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation,
with full power and authority to own or lease all of the assets owned
or leased by it and to conduct its business as described in the
Registration Statement and the Prospectus and (ii) duly qualified to do
business and in good standing as a foreign corporation in all
jurisdictions in which the nature of the activities conducted by it or
the character of the assets owned or leased by it makes such
qualification necessary, except where the failure to so qualify would
not have a material adverse effect on the condition (financial or
otherwise), earnings, business, assets, properties, results of
operations or prospects (financial or otherwise) of the Company
(hereinafter a "Material Adverse Effect"). Complete and correct copies
of the articles of incorporation and the by-laws of the Company in
effect on the date hereof have been delivered to the Representative,
and no changes therein will be made on or subsequent to the date hereof
and prior to the Closing Date and/or any Option Closing Date.
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(6) Permits and Licenses. The Company has all approvals,
licenses, franchises, authorizations and permits (collectively,
"Permits") necessary under all applicable statutes, codes, rules,
regulations, orders and decrees of governments or governmental bodies
(collectively, "Laws") to own, lease or use its assets and to conduct
its business as described in the Prospectus, except where the failure
to have any such Permits, singly or in the aggregate, will not have a
Material Adverse Effect. The Company has not received notice of any
proceedings relating to the revocation or modification of any such
Permits and the Company is in all respects in compliance with all of
its Permits, except where the failure to comply, either singly or in
the aggregate, will not have a Material Adverse Effect. The Company is
not aware of any breach, violation or default with respect to such
Permits.
(7) Capitalization and Legality of Securities. The authorized,
issued and outstanding capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization." The Company will
have the adjusted capitalization set forth therein on the Closing Date
and each Option Closing Date, if any, based on the assumptions set
forth therein. There are no preemptive rights with respect to any
outstanding securities of the Company. The authorized capital stock of
the Company conforms to the descriptions thereof contained in the
Prospectus under the caption "Description of Securities," and consists
of 15,000,000 shares of Common Stock and 1,000,000 shares of preferred
stock, no par value per share ("Preferred Stock"). As of the date
hereof, there are 4,000,000 shares of Common Stock issued and
outstanding. There are no shares of Preferred Stock outstanding. In
addition, the Company does not have any outstanding options or warrants
to purchase shares of Common Stock. The Company has sufficient
authorized (and neither issued nor outstanding) Common Stock to be
offered and sold as contemplated herein, and to be issued upon exercise
of the Underwriters' Warrants. Except as otherwise set forth in the
Prospectus, there are no outstanding options, warrants, or other rights
to purchase any shares of Common Stock or other capital stock of the
Company, or to purchase any other securities convertible into or
exchangeable for Common Stock or any other capital stock of the
Company. The outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
the shares of Common Stock to be offered by the Prospectus have been
duly authorized and, when issued and delivered against payment therefor
as provided in this Agreement, the Prospectus, and the Underwriters'
Warrants, as applicable, will be validly issued, fully paid and
nonassessable. The Underwriters' Warrants will constitute, when sold
and delivered as contemplated, a valid and binding obligation of the
Company enforceable in accordance with its terms, except to the extent
that enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and similar laws and
court decisions now or hereafter in effect relating to or affecting
creditors' rights and remedies generally and (ii) general principles of
equity (regardless of whether such enforcement is considered in a
proceeding at law or in equity). A sufficient number of shares of
Common Stock have been reserved for issuance upon sale and exercise of
the Underwriters' Warrants.
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(8) Registration of Securities, Underwriters' Warrants and
Warrant Securities. Upon the effectiveness of the Registration
Statement, the Securities shall have been listed on the Nasdaq National
Market System7. The Company has taken no action designed, or likely, to
have the effect of terminating the registration of the Securities under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), nor has the Company received any notification that the
Commission is contemplating terminating such registration. The
registration of the Securities, Underwriters' Warrants and Warrant
Shares under the Exchange Act was declared effective on the Effective
Date, and the Company has not received any notification that the
Commission is contemplating terminating such registration.
(9) Exchange Act Filings. As of the filing date, each report
or statement filed by the Company with the Commission pursuant to the
Exchange Act complied as to form in all respects with the requirements
of the Exchange Act and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances
under which they were made, not misleading. From the Effective Date
thereafter, the Company shall comply with all periodic reporting and
proxy solicitation requirements imposed by the Commission pursuant to
the Exchange Act, and shall promptly furnish the Representative for a
period of five years from the Effective Date with copies of all
material filed with the Commission pursuant to the Exchange Act or
otherwise furnished to the shareholders of the Company.
(10) Taxes. 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, including the Warrant
Shares, (ii) the purchase by the Underwriters of the Securities from
the Company or the Selling Stockholder and the purchase by the
Representative of the Underwriters' Warrants from the Company, (iii)
the consummation by the Company of any of its obligations under this
Agreement, or (iv) resales of the Securities in connection with the
distribution contemplated hereby.
(11) Financial Statements. The financial statements (audited
and unaudited), and related financial schedules and notes
(collectively, the "Financial Statements"), filed with and as part of
the Registration Statement, comply in all respects with the applicable
accounting requirements of the Securities Act and the Regulations and
present fairly the financial position of the Company as of the dates
thereof and results of operations and changes in cash flows of the
Company for the periods to which they apply, and such Financial
Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved. All adjustments that, in the opinion of management,
are necessary for a fair presentation of the results for all such
periods have been made. The Financial Statements included in the
Registration Statement and the Prospectus are the only financial
statements required under the Securities Act or the Regulations to be
included in the Registration Statement and the Prospectus. The other
financial and statistical information included in the Prospectus,
including, without limitation, "Prospectus Summary," "Summary
Consolidated Financial and Operating Data" and "Selected Consolidated
Financial Data"
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presents fairly the information shown therein, and has been compiled
on a basis consistent with that of the audited financial statements
included in the Registration Statement and the books and records of
the Company.
(12) Material Loss. The Company has not, since the date of the
latest financial statements included in the Prospectus or the
Registration Statement, sustained any material loss or interference
with its business from fire, explosion, flood, or other calamity,
whether or not covered by insurance, or from any labor dispute or court
or governmental action, order, or decree, other than as set forth in
the Prospectus. Since the respective dates as of which information is
set forth in the Prospectus, and except as otherwise set forth therein:
(i) there has not been any change in the capital stock, or material
increase in the short term or long-term debt, of the Company; (ii)
there has not been any material adverse change or any prospective
material adverse change in the condition (financial or otherwise),
business, prospects (financial or otherwise), results of operations,
general affairs, or management of the Company, whether or not arising
in the ordinary course of business; (iii) no event has occurred that
would result in a material write-down of assets of the Company; (iv)
the Company has not incurred any material liability or obligation,
direct or contingent, or entered into any material transaction, other
than those in the ordinary course of business; (v) the Company has not
purchased any of the Company's outstanding securities; (vi) there has
been no dividend or distribution of any kind declared, paid, or made by
the Company in respect of the Common Stock; and (vii) there has not
been any execution or imposition of any material lien, charge, or
encumbrance upon the respective property or assets of the Company.
(13) Insurance. The Company maintains such insurance,
including, but not limited to, general liability, product and property
insurance, as are necessary to insure the Company and its respective
employees, against such losses and risks generally insured against by
comparable businesses. The Company has (i) not failed to give notice or
present any insurance claim with respect to any matter, including but
not limited to such entity's business, property or employees, under any
insurance policy or surety bond in a due and timely manner, (ii) no
disputes or claims against any underwriter of such insurance policies
or surety bonds nor has it failed to pay any premiums due and payable
thereunder, and (iii) 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.
(14) Compliance with Documents and Laws. The Company is not in
violation of its articles of incorporation, by-laws, or other governing
documents. Except as set forth in the Registration Statement, the
Company is not in default in the due performance of any lease or other
contract, indenture, mortgage, deed of trust, note, loan, or other
agreement or instrument to which the Company is a party or it or any of
its properties or business is subject, or any applicable license,
franchise, certificate, permit, authorization, statute, rule or
regulation of or from any public, regulatory, or governmental agency or
authority having jurisdiction over the Company or any of its properties
or assets, or any approval, consent, order, judgment or decree. The
Company is in compliance with all
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laws, rules and regulations applicable to its business. The execution
and performance of this Agreement by the Company will not conflict
with or result in a breach or violation of, or default under, any
lease or other material contract, indenture, mortgage, deed of trust,
note, loan, or other material agreement or instrument to which the
Company is a party or by it or any of its properties or business is
subject and no consent, approval, authorization, or order of any court
or governmental authority or agency having jurisdiction over the
Company or any of its properties or assets is required to be obtained
by the Company for the consummation by the Company of the transactions
contemplated herein, except such as have been obtained or may be
required under the Securities Act or the Regulations or under state
securities laws or the applicable rules and regulations promulgated
thereunder.
(15) Authorization of Agreements. Each of this Agreement, the
Underwriters' Warrants and the Financial Consulting Agreement (as
described herein and in the Prospectus), has been duly authorized,
executed, and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement, the
Underwriters' Warrants and the Financial Consulting Agreement by the
Company, the consummation by the Company of the transactions herein and
therein contemplated, and the compliance by the Company with the terms
of this Agreement, the Underwriters' Warrants and the Financial
Consulting Agreement have been duly authorized by all necessary
corporate action and do not and will not, with or without the giving of
notice or the lapse of time, or both, (i) result in any violation of
the articles of incorporation or by-laws of the Company, (ii) result in
a breach of or conflict with any of the terms or provisions of, or
constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of the Company pursuant to any indenture, mortgage, note,
contract, commitment or other agreement or instrument to which the
Company is a party or under which the Company or any of its properties
or assets is or may be bound or affected, (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction
over the Company, or any of its properties or business, or (iv) violate
any Permits of the Company except for any Permits, the violation of
which will not cause a Material Adverse Effect. The Agreement, the
Underwriters' Warrants and the Financial Consulting Agreement conform
to the descriptions thereof in the Prospectus.
(16) Title to Property. The Company has good and marketable
title to, and valid and enforceable leasehold estates in, all items of
property described in the Registration Statement or the Prospectus as
owned or leased by it, as the case may be, or that are material to the
conduct of their businesses free and clear of all liens, encumbrances,
claims, security interests, and other restrictions, other than those
described in the Registration Statement or Prospectus. The leases,
licenses or other contracts or instruments under which the Company
leases, holds or is entitled to use any property, real or personal, are
valid, subsisting and enforceable, and the Company is not in material
default thereunder and no event has occurred which, with the passage of
time or the giving of notice, or both, would constitute a default
thereunder. The Company has not
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received notice of any violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased
properties. The Company has insured its properties against loss or
damage by fire or other casualty and maintains such other insurance as
management of the Company believes is adequate for the Company's
present business operations.
(17) Intellectual Property. Except as set forth in the
Prospectus, the Company owns or possesses the requisite licenses,
registrations or other evidences of adequate and full rights to use all
copyrights, patents, trademarks, service marks, trade names, trade
dress, logos, know-how, trade secrets, licenses, Internet domain names
and rights in any way thereof (collectively, the "Intellectual
Property") presently used in or necessary to conduct its business as
described in the Prospectus and the Registration Statement. The Company
has not knowingly infringed the rights of another with respect to any
item of Intellectual Property, and there is no outstanding claim of or
notice from others alleging any such infringement. There is no claim,
notice or action by any person pertaining to, or proceeding pending or,
to the Company's knowledge, threatened, which challenges the rights of
the Company with respect to any Intellectual Property used in the
conduct of its business.
(18) Litigation. There is no litigation or governmental or
other proceeding or investigation before any court or before or by any
public, regulatory, or governmental agency or authority (or any
judgment, decree, or order of such court, agency, or authority) pending
or, to the best knowledge of the Company, threatened to which the
Company is a party or to which its business or properties are subject
which is not disclosed in the Prospectus or Registration Statement as
required by the Securities Act or the Regulations. There are no
outstanding orders, judgments or decrees of any court, governmental
agency or other tribunal naming the Company or enjoining the Company
from taking, or requiring the Company to take, any action, or to which
it or its properties or business are bound or subject.
(19) Related Party Transactions. Except as set forth in the
Prospectus, no officer, director, shareholder or partner of the Company
or any "affiliate" or "associate" (as these terms are defined in Rule
405 of the 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
Relationships and Related 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 5% or greater
securityholder of the Company, or any partner, affiliate or associate
of any of the foregoing persons or entities.
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(20) Prohibited Payments. Neither the Company nor any of its
directors or officers acting in any capacity on its behalf, has used
any corporate funds for unlawful contributions, gifts, entertainment,
or other unlawful expenses relating to political activity; made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment.
(21) Internal Accounting Controls. The Company maintains a
system of internal accounting controls which, taken as a whole, is
sufficient to cause it to comply with the Foreign Corrupt Practices Act
of 1977, as amended, and to meet the broad objectives of preventing and
detecting errors or irregularities in amounts that would be material to
the Company's financial statements. Except as specifically disclosed in
the Prospectus, neither the Company, nor any employee or agent of the
Company, has made any payment or transfer of any funds or assets of the
Company, conferred any personal benefit by the use of the assets of the
Company, or received any funds, assets, or personal benefit in each
case in violation of any law, rule, or regulation, which is required to
be disclosed in the Prospectus or necessary to make the statements
therein not misleading.
(22) Tax Returns. The Company (i) has paid all federal, state,
local and foreign taxes which are due and payable and has furnished all
information returns it is required to furnish pursuant to the [Internal
Revenue Code of 1986, as amended], (ii) has established adequate
reserves for such taxes which are not yet due and payable and (iii)
does not have any tax deficiency or claims outstanding, proposed or
assessed against it. The Company has not executed or filed with any
taxing authority, foreign or domestic, any agreement extending the
period for assessment or collection of any income taxes, nor is it a
party to any pending action or proceeding by any foreign or domestic
governmental agency for assessment or collection of taxes; and no
claims for assessment or collection of taxes have been asserted against
either of it. The Company has not been, nor is currently being, audited
by any taxing authority, nor has the Company entered into any agreement
to toll any applicable statute of limitations with respect to the
payment of any taxes.
(23) Employee Plans. Except as set forth in the Registration
Statement or the Prospectus, the Company does not have any employee
benefit plans (including, without limitation, pension, profit sharing,
and welfare benefit plans) or deferred compensation arrangements. In
the event the Company establishes an employee stock option plan in the
future, such plan shall reserve not more than 400,000 shares of Common
Stock for issuance upon exercise of options granted thereunder, and
options granted thereunder shall have a vesting period of not less than
two years. Additionally, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ shall not be
eligible to participate in such a plan.
(24) Labor Disputes. The Company has generally enjoyed
satisfactory employer-employee relationships 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
11
are no pending investigations involving the Company by the [Department
of Labor], or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and
regulations. To the knowledge of the Company, there is no unfair labor
practice charge or complaint against the Company pending before the
National Labor Relations Board or any lockout, 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, no collective bargaining agreement or modification thereof
is currently being negotiated by the Company nor is the Company a party
to any such agreement. No grievance or arbitration proceeding is
pending under any expired or existing collective bargaining agreements
of the Company. No labor dispute exists or, to the knowledge of the
Company, is imminent with the employees of the Company.
(25) Registration Rights. No person, firm, or entity of any
nature whatsoever has any right to require the Company to register or
attempt to register under the Securities Act or any other securities
law any shares of capital stock, including Common Stock or securities
convertible into or exchangeable or exercisable for any shares of
capital stock including Common Stock, by reason of the filing of the
Registration Statement with the Commission or otherwise.
(26) Stabilization. Neither the Company, nor any person that
controls, is controlled by or is under common control with, the Company
has taken or will take, directly or indirectly, any action designed to,
or that might reasonably be expected to, cause or result in
stabilization or manipulation under the Exchange Act of the price of
any security in order to facilitate the sale or resale of any of the
Securities.
(27) Investment Company. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(28) Finder or Broker. The Company has not retained or dealt
with any broker or finder with respect to the transactions contemplated
hereby, and the Company knows of no outstanding claims for services in
the nature of a finder's fee or origination fee with respect to the
sale of the Securities hereunder. The Company hereby agrees to
indemnify and hold harmless the Underwriters with respect to any claim
for a finder's fee by any party claiming to be owed such fee based on
contacts, conversations, or arrangements with the Company.
(29) Contracts. Each contract or other instrument to which the
Company is a party or by its properties or business are or may be bound
or affected and to which reference is made in the Registration
Statement or Prospectus has been duly and validly executed by the
Company, is in full force and effect in all material respects and,
based on the fact that each other party has full power, corporate or
otherwise, to execute, deliver
12
and perform such contracts, is enforceable against the parties thereto
in accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and similar laws and court decisions
now or hereafter in effect relating to or affecting creditors' rights
and remedies generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding
at law or in equity). None of such contracts or instruments has been
assigned by the Company, nor is the Company in default thereunder and,
no event has occurred which, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder which
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect. Additionally, none of the material provisions
of such contracts or instruments violates any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency
or court having jurisdiction over the Company or any of its assets or
business.
(30) NASD Information. All information provided by the Company
to the Representative or its counsel in connection with any filings
made with the National Association of Securities Dealers, Inc. ("NASD")
with respect to the Public Offering is true and correct.
(31) Compliance With Environmental Laws and Regulations. The
Company is in compliance in all material respects with all applicable
federal, state and local environmental laws and regulations, including,
without limitation, those applicable to emissions to the environment,
waste management and waste disposal (collectively, the "Environmental
Laws"), except for any such noncompliance as may be described in the
Registration Statement or Prospectus and, to the Company's knowledge,
there are no circumstances that would prevent, interfere with, or
materially increase the cost of such compliance in the future. Except
as set forth in the Registration Statement or Prospectus, there is no
claim under any Environmental Laws ("Environmental Claim"), pending or
threatened against or affecting the Company and, there are no past or
present actions, activities, circumstances, events or incidents,
including, without limitation, releases of any material into the
environment that could form the basis of any Environmental Claim
against or affecting the Company.
(32) Business with Cuba. The Company is not doing business
with the government of Cuba or with any person or affiliate located in
Cuba.
(33) Indebtedness. There are no outstanding loans, advances
(except normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for the
benefit of any of the officers or directors of the Company or any of
the members of the families of any of them, except as disclosed in the
Registration Statement and the Prospectus.
(34) Acquisitions or Dispositions. Except as set forth in the
Registration Statement and Prospectus, the Company has not consummated
the acquisition or disposition of any business or property which is
"significant" to them within the meaning
13
of Regulation S-X under the Securities Act, and no such acquisition or
disposition is probable.
(35) Changes. At any time during the period of five years from
the Effective Date, if there is any change in the information referred
to in this Subsection 2(a), the Company will immediately notify
Representative of such change.
(36) Representations and Warranties of the Selling
Stockholder. The Company is not aware, and has no reason to believe,
that any representation or warranty of the Selling Stockholder set
forth in Subsection 2(b) below is untrue or inaccurate in any material
respect.
(37) Additional Representations. To the Company's knowledge,
no director, officer, or key employee of the Company has been arrested
or convicted of any felony, experienced a personal bankruptcy, or been
an officer, director, or key employee of any company that during their
tenure with such company experienced any bankruptcy, or had any
trustee, receiver, or conservator appointed with respect to its
business or assets.
(b) Representations and Warranties of the Selling Stockholder.
The Selling Stockholder represents and warrants to and agrees with
each Underwriter that:
(1) Organization, Qualification, Etc. The Selling Stockholder
is an Ontario corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, with
full power and authority to conduct its business.
(2) Authorization of Agreements. This Agreement has been duly
authorized, executed, and delivered by the Selling Stockholder and
constitutes a valid and binding obligation of the Selling Stockholder,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by the Selling Stockholder, the
consummation by the Selling Stockholder of the transactions herein
contemplated, and the compliance by the Selling Stockholder with the
terms of this Agreement have been duly authorized by all necessary
action and do not and will not, with or without the giving of notice or
the lapse of time, or both, (i) result in a breach of or conflict with
any of the terms or provisions of, or constitute a default under, or
result in the modification or termination of, or result in the creation
or imposition of any lien, security interest, change or encumbrance
upon any of the shares of Common Stock owned by the Selling Stockholder
pursuant to any indenture, mortgage, note, contract, commitment or
other agreement or instrument to which the Selling Stockholder is a
party or under which the Selling Stockholder or its properties or
assets are or may be bound or affected, or (ii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction
over the Selling Stockholder, or its properties or business.
(3) Transactions. No transaction has occurred between the
Selling Stockholder and the Company that is required to be described in
and is not described in the Registration Statement and the Prospectus.
14
(4) Ownership. The Selling Stockholder is the lawful owner of
the Securities to be sold by such Selling Stockholder pursuant to this
Agreement and has, and on any Option Closing Date will have, good and
clear title to such Securities, free of all restrictions on transfer,
liens, encumbrances, security interests and claims whatsoever and has
legal right and full power to sell, transfer and deliver the Securities
and will transfer such title to the Underwriters.
(5) Title to Securities. Upon delivery of and payment for such
Securities pursuant to this Agreement, good and clear title to such
Securities will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests and claims
whatsoever.
(6) Delivery of Certificates. Certificates in negotiable form
for the Selling Stockholder's shares of Common Stock to be transferred
pursuant to Subsection 1(b) of this Agreement have been delivered to
the transfer agent for delivery pursuant to the terms of this
Agreement; the shares of Common Stock represented by the certificates
so held in custody for such Selling Stockholder are subject to the
interests hereunder of the Underwriters; the arrangements for custody
and delivery of such certificates made by such Selling Stockholder
hereunder are not subject to termination by any acts of such Selling
Stockholder, or by operation of law, and if any such event shall occur
before the delivery of such shares of Common Stock hereunder,
certificates for the shares of Common Stock will be delivered in
accordance with the terms and conditions of this Agreement as if such
event had not occurred, regardless of whether or not the custodian
shall have received notice of such event.
(7) Stabilization. The Selling Stockholder has not taken, and
will not take, directly or indirectly, any action designed to, or which
might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the shares of Common Stock pursuant to the
distribution contemplated by this Agreement, and other than as
permitted by the Securities Act, the Selling Stockholder has not
distributed and will not distribute any prospectus or other offering
material in connection with the offering and sale of the Securities.
(8) Absence of Conflicts with Agreements. The execution,
delivery and performance of this Agreement by the Selling Stockholder,
compliance by the Selling Stockholder with all the provisions hereof
and the consummation of the transactions contemplated hereby will not
require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental
body (except as such may be required under the Securities Act or state
securities laws) and will not conflict with or constitute a breach of
any of the terms or provisions of any agreement, indenture or other
instrument to which the Selling Stockholder is a party or by which the
Selling Stockholder or property of the Selling Stockholder is bound, or
violate or conflict with any law, administrative regulation or ruling
or court decree applicable to either the Selling Stockholder or
property of the Selling Stockholder.
15
(9) Accuracy of Information. All information furnished to the
Company by or on behalf of the Selling Stockholder with respect to the
Selling Stockholder for use in connection with the preparation of the
Registration Statement is true, correct and complete in all material
respects as of the stated date of such information and the date hereof;
the Selling Stockholder has read the information appearing in the
Prospectus and, as it pertains to the Selling Stockholder, such
information does not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of circumstances under which they were made, not
misleading.
(10) Finder or Broker. The Selling Stockholder has not
retained or dealt with any broker or finder with respect to the
transaction contemplated hereby, and the Selling Stockholder does not
know of any outstanding claims for services in the nature of a finder's
fee or origination fee with respect to the sale of Securities by such
Selling Stockholder hereunder. The Selling Stockholder hereby agrees to
indemnify and hold harmless the Underwriters with respect to any claims
for a finder's fee by any party claiming to be owed such fee based on
contacts, conversations, or arrangements with the Company or the
Selling Stockholder.
(11) Reason for Sale. The sale of Securities by the Selling
Stockholder pursuant to this Agreement is not prompted by any
information concerning the Company which is not set forth in the
Registration Statement.
3. Covenants of the Company. The Company covenants to and agrees with the
Underwriters that:
(a) Effectiveness of Registration Statement. If the Effective
Date is not prior to the execution and delivery of this Agreement, the
Company will use its best efforts to cause the Registration Statement
and any subsequent amendments thereto to become effective as promptly
as possible. The Company will notify the Underwriters promptly (i)
when the Registration Statement or any subsequent amendment thereto
has become effective or any supplement to the Prospectus has been
filed and (ii) of the receipt of any requests, and the nature and
substance thereof, by the Commission for any amendment or supplement
to the Registration Statement or Prospectus or for any other
additional information. The Company will prepare and file with the
Commission, promptly upon the Representative's reasonable request, any
amendment or supplement to the Registration Statement or Prospectus
that may be necessary or advisable in connection with the sale or
distribution of the Securities, any of the Underwriters' Warrants or
the Warrant Shares to comply with the Regulations. The Company will
file no amendment or supplement to the Registration Statement or
Prospectus (other than any document required to be filed under the
Exchange Act that upon filing is deemed to be incorporated by
reference therein) to which the Representative shall reasonably object
by notice to the Company after having been furnished a copy within a
reasonable time, but no later than five business days, prior to the
proposed filing thereof, except in instances when the Company's
counsel advises such amendment or supplement is necessary pursuant to
the
16
Regulations or the rules and regulations of the Exchange Act. The
Company will furnish to the Representative at or prior to the filing
thereof with the Commission a copy of any document that upon filing is
deemed to be incorporated by reference in whole or in part in the
Registration Statement or the Prospectus.
(b) Notice of Stop Order. The Company will advise the
Underwriters promptly, and confirm in writing, when and if it receives
notice or obtains knowledge of (i) the issuance by the Commission or
any state securities commission in a state designated by the
Representative pursuant to Subsection 3(e) hereof of any stop order or
other order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or the effectiveness of the Registration
Statement or (ii) the suspension of the qualification of any of the
Securities, the Underwriters' Warrants or the Warrant Shares for
offering or sale in any jurisdiction in which they were previously
qualified, or (iii) the initiation or threat of any proceeding for
that purpose. The Company will promptly use its reasonable best
efforts to prevent the issuance, and to obtain the withdrawal if such
issuance is not prevented, of any such stop order or other suspension.
(c) Compliance with the Securities Act and the Exchange Act.
Within the time during which a Prospectus relating to the Securities,
the Underwriters' Warrants, or the Warrant Shares is required to be
delivered under the Securities Act, the Company will use its best
efforts to comply with all requirements imposed upon it by the
Securities Act and the Exchange Act, as now in effect and as hereafter
amended, and by the Regulations, as from time to time in force, to
permit the continuance of sales of or dealings in the distribution of
the Securities or the Underwriters' Warrants or the Warrant Shares, as
contemplated by the provisions therein, herein, and in the
Registration Statement or Prospectus. If during such period any event
as to which the Company has knowledge occurs as a result of which the
Registration Statement or the Prospectus as then amended or
supplemented includes an untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in
the light of the circumstances then existing, not misleading, or if
during such period it is necessary to amend the Registration Statement
or supplement the Prospectus to comply with the Securities Act, the
Company will notify the Representative promptly, will amend the
Registration Statement or supplement the Prospectus so as to correct
such statement or omission or otherwise to effect such compliance, and
will furnish without charge to the Underwriters and to any dealer in
securities as many copies of such amended or supplemented Prospectus
as the Underwriters may from time to time reasonably request.
Furthermore, the Company will prepare and file with the Commission,
promptly upon the request of the Representative, any amendments or
supplements to the Registration Statement or the Prospectus, which in
the opinion of the Representative may be reasonably necessary to
enable the Underwriters to continue the distribution of the
Securities, and will use its best efforts to cause the same to become
effective as promptly as possible.
(d) Copies of Securities Act Documents. The Company will deliver
to the Representative and the Selling Stockholder, from time to time
without charge, such number of copies of the Registration Statement
(two of which delivered to the
17
Representative shall be manually signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all
amendments and supplements thereto, in each case as soon as available
and in such quantities and to such persons as reasonably requested by
the Underwriters. The Company consents to the use of any Preliminary
Prospectus as originally filed, any amended Preliminary Prospectus,
the Prospectus and any amendments or supplements thereto by the
Underwriters and by any dealer for the purpose contemplated by the
Securities Act and the Regulations.
(e) State Securities Laws Qualifications. The Company will use
its best efforts, in cooperation with the Representative and the
Representative's counsel, to register or qualify the Securities, the
Underwriters' Warrants and the Warrant Shares for offer and sale under
the securities laws of such jurisdictions as the Representative may
reasonably designate, and will continue such qualifications in effect
for so long as may be necessary to complete the distribution and sale
of such securities.
(f) Section 11(a) Earnings Statement. The Company will make
generally available to its security holders (within the meaning of
Section 11(a) of the Securities Act) and deliver to the Representative
as soon as practicable an earnings statement that shall satisfy the
requirements of Section 11(a) and Rule 158 under the Securities Act,
covering a period of at least 12 consecutive months after the
Effective Date.
(g) Report SR to be Filed by Company. Within ten days after the
end of the first three-month period following the Effective Date, the
Company will prepare and file with the Commission a report on Form SR
as prescribed by Rule 463 of Regulation C under the 1933 Act.
(h) Information Provided to the Representative. After the Closing
Date and for a period of four years thereafter, the Company will
furnish or cause to be furnished to the Representative and the
Representative's counsel, with reasonable promptness, copies of (i)
quarterly balance sheets, statements of income of the Company (which
need not be audited) and all other reports prepared and issued to the
public. Additionally, for a period of three years after the Effective
date, the Company shall furnish to the Representative: (i) all
reports, if any, to its shareholders, (ii) all reports filed by the
Company with the Commission, any securities exchange and/or the NASD;
and (iii) such other material documents and information with respect
to the Company and its affairs as the Representative may from time to
time reasonably request and the Company can produce at reasonable
cost. The Company shall cause the Board of Directors to meet, at least
quarterly, upon proper notice, and shall also cause the agenda and
minutes of the last meeting to be mailed to each Director prior to
each meeting and a copy of such report to be sent to the
Representative. For a period of three years from the Closing Date, the
Company shall cause its transfer agent to provide the Representative
with copies of the Company's monthly transfer sheets and Depository
Trust Company transfer sheets. For a period of three years from the
Closing Date, upon request, the Company shall also provide the
Representative with current lists of its shareholders and warrant
holders, if any. The Representative will maintain the confidentiality
of any documents or
18
information provided to it pursuant to this Subsection 3(h) and will
comply fully with federal and state securities laws regarding the use
of such documents or information.
(i) Listing in Securities Manual; After-Market Trading
Memorandum; Non-Issuer Transaction. In the event the Common Stock is
not listed for quotation on Nasdaq National Market or the American
Stock Exchange, the Company shall have become listed at or prior to
the Effective Date, and shall use its best efforts to maintain such
listing, for at least five years after the Effective Date in Standard
and Poor's Corporation Records Service and/or ▇▇▇▇▇'▇ OTC Guide. For a
period of five years from the Effective Date, at the Company's sole
expense, the Company shall cause its counsel to provide to the
Representative a list of those states in which the Company's
securities may be traded in non-issuer transactions under the
securities laws of the 50 states.
(j) Listing on Nasdaq National Market or Exchanges. Prior to the
Effective Date, the Company, at its cost, shall use its best efforts
to have caused the Securities, and the Warrant Shares to be listed for
trading on Nasdaq National Market or the American Stock Exchange and,
if possible, on the Toronto Stock Exchange under symbols which are
acceptable to the Representative, and the Company shall use its best
efforts to have the Securities and the Warrant Shares remain listed
for at least five years from the Effective Date, and to ensure that
the Company otherwise complies with the prevailing requirements of The
Nasdaq Stock Market, Inc. or the American Stock Exchange, as the case
may be, and the requirements of the Toronto Stock Exchange if the
Common Stock is listed with such Exchange.
(k) Section 12(g) Registration. Upon the Effective Date, the
Common Stock will be registered with the Commission under the
provisions of Section 12(g) of the Exchange Act. The Company shall
comply with the Securities Act, the Regulations, the Exchange Act and
the rules and regulations promulgated thereunder, the applicable rules
and regulations of the NASD, and applicable state securities laws so
as to permit the continuance of sales of and dealings in the
Securities and the exercise of the Underwriters' Warrants and the
issuance and sale of the Warrant Shares upon such exercise in
compliance with applicable provisions of such laws, rules, and
regulations, including the filing with the Commission, NASD
Regulation, Inc. and state securities commissions in all states where
the Securities, including the Warrant Shares, have been issued or
sold, all reports required to be so filed, and the Company will
deliver to the holders of the Securities and/or Warrant Shares all
reports required to be provided to such holders pursuant to such laws,
rules, or regulations. The Company shall timely file with the
Commission and deliver to the Representative, from time to time as
required to make the same reasonably current, such statements and
reports as are required to be filed by a company registered under
Section 12(g) of the Exchange Act, as if the Company were a company
incorporated in the United States.
(l) Use of Proceeds. The Company shall apply the net proceeds
received from the sale of the Securities and the exercise of the
Underwriters' Warrants in the manner set forth under the caption "Use
of Proceeds" in the Registration Statement and
19
Prospectus, which shall state that the primary application of the
proceeds to be realized by the Company will be for expansion of
existing operations and for working capital.
(m) Board Meetings and Membership. For a period of three years
commencing on the Effective Date, the Representative shall have the
right to designate one nominee for election to the Company's Board of
Directors, which member shall be reasonably acceptable to the Company.
The Company shall, prior to the Effective Date, obtain from the
officers, directors and holders of 5% or more of the outstanding
Common Stock of the Company, agreements in writing to vote the shares
of Common Stock respectively owned by them, whether directly or
indirectly, during such three-year period in favor of the election of
such nominee. Following the election of such nominee as director, such
person shall receive the same compensation paid to other non-officer
directors of the Company for attendance at meetings of the Board of
Directors of the Company and shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such
meetings to the extent permitted under applicable law, and on the same
basis as all other directors of the Company. The Company agrees to
indemnify and hold such director harmless, to the maximum extent
permitted by law, against any and all claims, actions, awards and
judgments arising out of his or her service as director and, in the
event the Company maintains a liability insurance policy affording
coverage for the acts of its officers and directors, to include such
director as insured under such policy. The rights and benefits of such
indemnification and the benefits of such insurance shall, to the
extent possible, extend to the Representative insofar as it may be or
may be alleged to be responsible for such director, provided that the
extension of such rights and benefits to the Representative may be
done without additional cost to the Company.
In the event that the Representative does not elect to
designate one member to the Company's Board of Directors, the Representative
shall have the right during such three-year period to have one representative
attend all meetings of the Board of Directors of the Company, which meetings
shall be held at least quarterly, including any meetings of any committees of
the Board of Directors. All information received by such representative at such
meetings shall be kept confidential, shall not be disclosed by the
representative to any third party, and shall be dealt with in full compliance
with federal and state securities laws.
Additionally, the Company shall elect or cause to be elected,
a minimum of two (2) "outside" persons (i.e., excluding affiliates of the
Company and family members of the Company's existing directors, officers and
shareholders) to the Company's Board of Directors within 90 days after the
Effective Date, and shall designate an audit committee consisting of a majority
of such "outside" directors, which will generally supervise the financial
affairs of the Company, including, but not limited to, the application of the
proceeds of the Public Offering. The Company shall maintain (or establish if
necessary) any other such committees of the Board of Directors as are necessary
to comply with the corporate governance requirements imposed by the exchange(s)
or other organizations wherein the Common Stock is listed.
(n) Future Sales. The Company will not, during the period of the
Public Offering and for a period of twelve months from the Effective
Date, without the
20
Representative's prior written consent, offer, sell, contract to sell,
or otherwise dispose of, any securities of the Company, except for the
issuance of shares of Common Stock to be issued (a) pursuant to the
exercise of options or options currently reserved for future grant and
disclosed in the Registration Statement and Prospectus, (b) pursuant
to and in order to consummate a merger with or acquisition from an
unaffiliated party in a transaction negotiated at arms' length and
approved by a majority of the Company's Board of Directors, (c) in a
public offering, at a price not less than 90% of the average of the
closing bid prices of the Common Stock as reported on Nasdaq National
Market or the American Stock Exchange (if the Common Stock is listed
therein) for the 21 consecutive trading day period immediately
preceding the date of sale (the "Exempt Price"), and (d) in a private
sale at a price not less than 80% of the Exempt Price.
(o) Undertakings. The Company will comply with the provisions of
all undertakings contained in the Registration Statement or made in
connection with any application to register or qualify any of the
Securities, including the Warrant Securities, under state securities
laws.
(p) Certain Deliveries to the Representative. The Company shall
obtain from its officers, counsel, and accountants those certificates,
opinions, and letters referred to in Section 7. The Company shall,
upon request of the Representative, furnish to the Representative as
early as practicable prior to each of the date hereof, the Closing
Date and any Option Closing Date, but not later than two full business
days prior thereto, a copy of the latest available unaudited interim
financial statements of the Company (which in no event shall be as of
a date more than 30 days prior to the date of the Registration
Statement) which have been read by the Company's independent public
accountants, as stated in the accountants' letter to be furnished
pursuant to Subsection 7(k) hereof.
(q) Redemption and Dividends. For a period of three years from
the Effective Date, the Company shall not redeem any of its securities
and shall not pay any dividends or make any other cash distribution in
respect of its securities in excess of the amount of the Company's
current and retained earnings after the Closing Date, without
obtaining the Representative's prior written consent. The
Representative shall either approve or disapprove such contemplated
redemption of securities or dividend payment or distribution within
five business days from the date the Representative receives written
notice of the Company's proposal with respect thereto; a failure of
the Representative to respond within such period of five business days
shall be deemed consent to the transaction.
(r) Restrictions on Sales, Options and Voting by Affiliates.
Except as provided in the Registration Statement or upon prior written
consent of the Representative, all directors, officers, and holders of
10% or more of the Company's capital stock issued and outstanding as
of the Effective Date, as well as options, warrants or rights thereto,
shall agree not to sell any shares of any class of capital stock owned
by them, privately or publicly (either pursuant to Rule 144 of the
Regulations or otherwise) for a period of not less than 18 months
following the Effective Date or such shorter period as set forth in
the Registration Statement. An appropriate restrictive legend shall
21
be placed on the face of all stock certificates representing such
share of capital stock prior to the Effective Date. The Company will
cause its transfer agent to note such restriction on the transfer
books and records of the Company and will obtain "lock-up agreements"
from such directors, officers, and shareholders prior to the Effective
Date. This Subsection 3(r) shall not apply to the Selling Stockholder.
(s) Outstanding Warrants, Options and Other Rights. There shall
not be outstanding on the Closing Date any warrants, options, or other
rights to purchase any shares of Common Stock, except as otherwise set
forth in the Registration Statement or Prospectus.
(t) Accounting Firm. The Company shall retain a nationally
recognized, reputable independent public accounting firm reasonably
acceptable to the Representative for a period of five years from the
Effective Date. The Representative acknowledges that the accounting
firm of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is acceptable.
(u) Business with Cuba. The Company will inform the Florida
Department of Banking and Finance (the "Department") if at any time it
commences engaging in business with the government of Cuba or with any
person or affiliate located in Cuba after the Effective Date. Such
information will be provided to the Department within 90 days after
the commencement of business in Cuba or within 90 days after the
change occurs with respect to previously reported information.
(v) Closing Binders. The Company shall, at its sole cost and
expense, supply and deliver to the Representative and the
Representative's counsel, within a reasonable period not to exceed 180
days after the Closing Date, three sets of hard-bound transaction
binders, each of which shall include the Registration Statement, as
amended or supplemented, all exhibits to the Registration Statement,
each Preliminary Prospectus, the Prospectus, the Preliminary Blue Sky
Memorandum and any supplement thereto, correspondence filed with or
received from the Commission or the NASD and all underwriting and
other closing documents.
(w) Annual Reports. Until the third anniversary of the Effective
Date, the Company shall distribute an annual report to all
shareholders setting forth clearly the financial position of the
Company.
(x) Repayment of Indebtedness. Prior to the Closing Date, and
except as may be set forth in the Registration Statement, the Company
shall not repay (or agree to repay) any indebtedness to any of its
shareholders (or incur any indebtedness to any of its shareholders)
unless the terms thereof are approved in advance by the
Representative. The loan made by certain insiders of the Company to
the Company in the approximate sum of $760,000 shall be repaid in
quarterly installments over an 18-month period following the Closing
Date, provided that the Company is profitable for the particular
quarter in which a quarterly installment is paid, and the Company will
have sufficient cash flow after any such payment is made to operate
its business in the ordinary course.
22
(y) Transfer Agent. The Company will appoint transfer agent for
the Common Stock reasonably acceptable to the Representative.
(z) Insurance. The Company shall have, within 30 days from the
Closing Date, obtained directors and officers insurance and "key man"
life insurance in the amount of U.S. $2,000,000 on the life or lives
of its key officers, directors and employees as deemed necessary by
the mutual agreement of the Company and the Representative and on
terms acceptable to both the Company and the Representative. The
Company shall pay the premiums for such insurance and maintain such
insurance in force for a period of not less than five years from the
Effective Date; the Company shall be the named beneficiary on all such
insurance policies.
(aa) Employment Agreements. The Company shall have entered into
employment agreements with ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and other key
employees on terms approved by the Representative. The annual salary
provided in such employment agreements with ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇ shall be $175,000 with $25,000 annual bonuses payable if the
Company achieves specified projected post-tax earnings.
4. Representations, Warranties and Covenants of the Representative.
The Representative represents and warrants to, and agrees with, the Company
and the Selling Stockholder that:
(a) Registration as Broker-Dealer and Member of NASD. The
Representative is registered as a broker-dealer with the Commission
and in all states in which it shall offer the Securities, and is a
member in good standing of the NASD. Additionally, any firm with which
the Representative associates to act as an Underwriter shall also be
registered as a broker-dealer with the Commission and a member in good
standing of the NASD or shall be a foreign broker-dealer and a member
of the national stock exchange of its country of residency.
(b) No Pending Proceedings. There is not now pending or
threatened against the Representative any action or proceeding of
which it has been advised, either in any court of competent
jurisdiction or before the Commission, or before any state securities
commission or the NASD, concerning its activities as a broker or
dealer, that could have a material adverse effect upon its ability to
perform its obligations under this Agreement.
(c) No Untrue Statements. No information furnished to the Company
in writing by or on behalf of the Representative for the express
purpose of use in or for preparation of the Registration Statement or
the Prospectus contains any untrue statement of a material fact or
omits to state a 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. For all
purposes under this Agreement, the only information which shall be
deemed to have been provided by or on behalf of the Representative for
the express purpose of use in or for preparation of the Registration
Statement or the Prospectus shall be the information contained in the
"Underwriting" section of the Prospectus.
23
(d) Finder or Broker. Except as contemplated by this Agreement,
the Representative (i) has not retained or dealt with any broker or
finder or financial consultant with respect to the transactions
contemplated hereby, and (ii) does not know of any outstanding claims
for services in the nature of a finder's fee or origination fee with
respect to transactions contemplated hereby. The Representative agrees
to indemnify and hold harmless the Company with respect to any claims
for a finder's fee by any party claiming to be owed such fee based on
contacts, conversations, or arrangements with the Representative or
any Underwriter.
5. Offering Expenses and Related Matters.
(a) General. The Company agrees to pay or reimburse the
Representative, if paid by the Representative, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the issuance, sale and
delivery of the Securities, the Underwriters' Warrants and the Warrant
Shares and the performance of the obligations of the Company
hereunder, including without limiting the generality of the foregoing,
(i) the preparation, printing, filing, and copying of the Registration
Statement, Preliminary Prospectus, Prospectus, this Agreement, Blue
Sky memoranda, the Agreement Among Underwriters, if any, the Selected
Dealers Agreement, and other underwriting documents, if any, and any
drafts, amendments or supplements thereto, including the cost of all
copies thereof supplied to the Underwriter in such quantities as
reasonably requested by the Representative, the costs of mailing
Preliminary and Final Prospectuses to offerees and purchasers of the
Securities, excluding costs of mailing by the Representative or any
Underwriter; (ii)) the printing, engraving, issuance and delivery of
certificates representing the Securities, including any transfer or
other taxes payable thereon; (iii) the registration or qualification
of the Securities, including the Underwriters' Warrants and the
Warrant Shares, under state securities laws, including the reasonable
fees and disbursements of counsel (regardless of whether such counsel
is also counsel to the Representative, subject to the limitation set
forth in Subsection 5(d) below) and filing fees in connection
therewith; (iv) all fees and expenses of the Company's counsel,
accountants and all transfer or warrant agent fees; (v) all costs,
expenses and filing fees in connection with review of the terms of the
Public Offering by the NASD; (vi) all costs and expenses and filing
fees, including legal fees of the Company, of any listing of the
Securities on Nasdaq National Market and/or on a stock exchange and/or
in Standard and Poor's Corporate Reports and/or in any other
securities manuals; (vii) all costs and expenses of three bound
volumes provided to the Representative of all closing documents as set
forth in Section 3(v) hereof; (viii) the reasonable costs and
expenses, including travel expenses, of all pre-closing and
post-closing advertisements relating to the Public Offering (such as
tombstone advertisements) (ix) all costs of holding informational
meetings and "road shows"; and (x) all other costs and expenses
incurred or to be incurred by the Company in connection with the
transactions contemplated by this Agreement. The parties hereto
acknowledge that the Registration Statement and the exhibits thereto
have been prepared by counsel for the Company, and that the various
state securities and Blue Sky law applications and the survey
distributed by the Representative in connection therewith
24
have been prepared by the Representative's counsel, Broad and ▇▇▇▇▇▇,
whose costs and expenses in connection with such state applications
and survey up to a maximum of $35,000 shall have been paid for by the
Company at the Closing, provided that if the Common Stock is listed on
the Nasdaq National Market or the American Stock Exchange, such costs
and expenses payable by the Company shall not be more than $15,000.
The obligations of the Company under this Subsection 5(a) shall
survive any termination or cancellation of this Agreement.
(b) Representative's Discount. The Representative shall be
entitled to, and the Company agrees to pay to Representative, an
underwriting discount equal to 10% of the Public Offering Price paid
on each sale of Securities in the Public Offering, payable at the
Closing Date and any Option Closing Date.
(c) Non-Accountable Expense Allowance. In addition to the
Company's payment of the foregoing expenses and Representative's
discount, upon the consummation of the Public Offering herein
contemplated, the Company shall pay to the Representative a
non-accountable expense allowance equal to 3% of the gross proceeds of
the Public Offering, including in the computation of such amount the
proceeds from any sale of Optional Securities, of which $___________
has been paid to date as set forth below. The balance of
non-accountable expense allowance due shall be paid on the Closing
Date and on each Option Closing Date, as applicable.
(d) Expenses if the Public Offering is Not Completed. The
Representative hereby acknowledges its prior receipt from the Company
of [$25,000], which amount shall be applied to the non-accountable
expense allowance. If the proposed Public Offering is not completed
because: (i) the Company unilaterally withdraws the proposed Public
Offering from the Representative at a time when the Representative is
ready, willing and able to proceed with the Public Offering; or (ii)
of any material discrepancy in any representation or warranty made to
the Representative or the failure of the Company to meet any of its
obligations hereunder, then the $25,000 paid shall be retained by the
Representative as and for its expenses and without any further
liability whatsoever on the part of the Company except in the case of
fraud or willful misconduct on the part of the Company, in which case
the Company shall be responsible for the greater of: (A) such $25,000
or (B) the Representative's actual costs, expenses, and legal fees
incurred without limitation in connection with the transaction
contemplated hereunder. If the Representative does not raise capital
on behalf of the Company because the Representative unilaterally
withdraws from the Public Offering for any reason other than those
reasons set forth in this Subsection 5(d) above, then 50% of the
payments made by the Company pursuant to this subsection (c) shall be
reimbursed by the Representative to the Company. It is understood and
agreed by the parties hereto that any expenses incurred by the
Representative will be deemed to be reasonable and unobjectionable
upon demonstration by the Representative that such expenses were
incurred directly or indirectly in connection with the proposed
transaction and/or relationship of the parties hereto, as described
herein.
25
(e) Compliance with State Securities Laws. The Representative
shall determine in which states or jurisdictions the Securities,
including the Underwriters' Warrants and the Warrant Shares (as
described below), shall be registered or qualified for sale. Copies of
all applications and related documents for the registration or
qualification of securities (except for the Registration Statement and
Prospectus) filed with the various states shall be supplied to the
Company's counsel as soon as possible following their transmission to
the various states, and copies of all comments and orders received
from the various states shall be made available promptly to the
Company's counsel. Immediately prior to the Effective Date, counsel
for the Representative shall advise counsel for the Company in writing
of all states in which the offering has been registered or qualified
for sale or has been cancelled, withdrawn, or denied, the date of each
such event, and the number of Securities, including the Underwriters'
Warrants and the Warrant Shares, registered or qualified for sale in
each such state. Pursuant to Section 5(a) hereof, the Company shall be
responsible for the cost of state registration or qualification filing
fees and the legal fees of the Representative's counsel in connection
with such filings, which filing fees are payable to the
Representative's counsel in advance of such filings.
6. Underwriters' Warrants; Other Financial Arrangements.
(a) Underwriters' Warrants. On the Closing Date, the Company will
sell to the Underwriters the Underwriters' Warrants, for an aggregate
of $100, evidencing the Underwriter's right to purchase in the
aggregate the equivalent of 10% of the Securities sold in the Public
Offering, at an exercise price of $5.50 per share of Common Stock
(110% of the Public Offering Price per share of Common Stock). The
Underwriters' Warrants will be in the form of Exhibit A attached
hereto. The Underwriters' Warrants shall be non-exercisable and
non-transferable (other than to officers, consultants, partners or
directors of and members of the underwriting or selling group) for a
period of 12 months following the Effective Date. The Underwriters'
Warrants shall be exercisable, in whole or in part, commencing 12
months after the Effective Date and for a period of five years
thereafter (the "Term"). If the Underwriters' Warrants are not
exercised during the Term, they shall, by their terms, automatically
expire. The Underwriters' Warrants shall contain customary
anti-dilutive provisions relating to any recapitalization, stock
split, stock dividend or similar event involving the Company. The
Underwriters' Warrants shall also contain provisions providing for
demand and "piggyback" registration rights with respect to the
Underwriters' Warrants and the Warrant Shares, and shall not be
redeemable. The Underwriters' Warrants shall otherwise be transferable
after one year from the Effective Date pursuant to available
exemptions from registration under the Securities Act.
(b) Financial Consulting Agreement; Finder's Fee. On the Closing
Date, the Company shall enter into a financial consulting agreement
with Catalyst Financial Corp. ("Catalyst") in the form of Exhibit B
attached hereto, pursuant to which an affiliate of the Representative
will provide financial consulting services to the Company for a
two-year period beginning on the Closing Date (the "Financial
Consulting Agreement").
26
The Company shall pay to Catalyst a consulting fee equal to 1% of the
gross proceeds generated from the Public Offering, which will be
payable in full on the Closing Date.
(c) Right of First Refusal; No Negotiations with Other
Underwriters. The Representative shall have the right, during the
three-year period following the Closing Date, to act as the Company's
exclusive managing underwriter or placement agent, as the case may be,
in any public offering(s) and/or private placement(s) to be
effectuated by or on behalf of the Company or any subsidiary or
affiliate provided that the material terms offered by the
Representative are no less favorable than those offered by any other
underwriter broker-dealer or placement agent. The Company and the
Selling Stockholder agree not to negotiate with any other underwriter
or other person relating to a possible public offering of the Shares
or any other securities pending the completion or withdrawal of the
Public Offering or a nine-month period, whichever is lesser.
7. Conditions Precedent to the Obligations of the Underwriters.
Notwithstanding the execution and delivery of this Agreement or the performance
of any part hereof, the Underwriters' obligations to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction of each of
the conditions set forth in this Section 7, except to the extent that such
satisfaction is waived in writing by the Representative.
(a) Effectiveness of Registration Statement.
(i) The Registration Statement shall have been
declared effective by the Commission not later than _________,
Eastern Time, on September 30, 1998, or such later time or
date as shall have been consented to by the Representative in
writing.
(ii) On the Closing Date, no stop order suspending
the effectiveness of the Registration Statement or the
qualification or registration of the Securities, the
Underwriters' Warrants and the Warrant Shares, under the
securities laws of any jurisdiction (whether or not a
jurisdiction specified by the Representative) shall have been
issued, and no proceeding for that purpose shall have been
initiated or shall be threatened or contemplated by the
Commission or the authorities of any such jurisdiction to the
best of the Company's or the Underwriter's knowledge.
(iii) Any request of the Commission or any such
authorities for additional information to be included in the
Registration Statement or Prospectus or otherwise shall have
been complied with to the reasonable satisfaction of counsel
for the Representative.
(b) Representations; Compliance with Agreement. The
representations and warranties of the Company in this Agreement shall
be true and correct on and as of the Closing Date, with the same
effect as if made on the Closing Date, and the Company shall have
complied with all the agreements and satisfied all the obligations
required to be performed or satisfied by it at or prior to the Closing
Date.
27
(c) Sufficient Authorized Common Stock; Stock Split. The Company
shall have, as of the Effective Date, sufficient authorized (and
neither issued nor outstanding) Common Stock to be offered and sold in
the Public Offering, and to be issued and sold upon exercise of the
Warrants, Underwriters' Warrants and the Warrant Shares. The Company
shall have effectuated a split of its outstanding securities such
that, as of the Effective Date, the Company shall have, on a fully
diluted basis, 4,000,000 shares of Common Stock outstanding and no
shares of preferred stock outstanding. Neither the offer nor the sale
of the Shares shall be subject to any preemptive right of any kind.
(d) No Untrue Statements. The Registration Statement and the
Prospectus shall not contain any untrue statement of a material fact
or omit to state a 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, since
the Effective Date, there shall not have occurred any event required
to be set forth in an amended or supplemented Prospectus that has not
been so set forth (except any such statement or omission based upon
information furnished in writing by or on behalf of the Underwriters
for inclusion in the Registration Statement).
(e) No Material Change. Subsequent to the respective dates as of
which information is given in the Registration Statement and the
Prospectus, and except as set forth or contemplated in the Prospectus,
(i) there shall have been no Material Adverse Effect, actual or
threatened, for whatever reason, with respect to the properties,
operations, business, financial condition, results of operations or
prospects of the Company, (ii) the Company shall not have entered into
any material transaction not in the ordinary course of business, (iii)
the Company shall not have paid or declared any dividends or other
distributions on its capital stock, (iv) the conduct of the business
and operations of the Company shall not have been materially
interfered with by strike, fire, flood, hurricane, accident or other
calamity (whether or not insured), or by any court or governmental
action, order or decree, and the properties of the Company shall not
have sustained any material loss or damage (whether or not insured) as
a result of any such occurrence.
(f) NASD. The Representative shall have the obligation to satisfy
the requirements set forth by the rules and regulations of the NASD as
to the amount of compensation allowable or payable by the
Representative and, accordingly, by the Effective Date the
Representative 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 and this Agreement. The NASD
shall have indicated that it has no objection (i) to the underwriting
arrangements pertaining to the sale of the Securities by the
Underwriters and (ii) the participation by the Underwriters in the
sale of the Securities. No action shall have been taken by the
Commission or the NASD the effect of which would make it improper, at
any time prior to the Closing Date, for any member firm of the NASD to
execute transactions (as principal or as agent) in the Common Stock
and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the Underwriters' or the
Company's knowledge, shall be contemplated by the Commission or the
NASD. The Company and the Representative
28
each represent at the date hereof, and shall represent as of the
Closing Date or Option Closing Date, as the case may be, that neither
has any knowledge that any such action is in fact contemplated by the
Commission or the NASD.
(g) Officers' Certificate. The Company shall have furnished to
the Underwriters a certificate of the President and of the Chief
Financial Officer of the Company, dated as of the Closing Date, to the
effect that each signer of such certificate has examined the
Registration Statement, the Prospectus, and this Agreement, and the
conditions set forth in Subsections 7(a) through 7(d) have been
satisfied.
(h) Opinion of Company Counsel. At the time this Agreement is
executed and as of the Closing Date and the Option Closing Date, as
applicable, the Company shall have furnished to the Underwriters the
opinion of counsel for the Company, dated the Closing Date, in form
and substance reasonably satisfactory to counsel for the
Representative and substantially in the form of Exhibit C attached
hereto.
(i) Additional Documents. On or prior to each of the Closing Date
and the Option Closing Date, if any, counsel for the Representative
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 matters referred to in Subsection 7(h), or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions of the Company, as herein
contained.
(j) Certificates, Bylaws and Proceedings. The Company's
Certificate of Incorporation and By-Laws, and all proceedings taken in
connection with the authorization, issuance, or sale of the
Securities, the Underwriters' Warrants and the Warrant Shares, as
herein contemplated, shall be reasonably satisfactory in form and
substance to counsel for the Representative.
(k) Accountants' Letter. At the time this Agreement is executed
and as of the Closing Date and each Option Closing Date, as
applicable, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the current independent public
accountants for the Company, shall have furnished to the Underwriters
a letter addressed to the Underwriters and dated the date of this
Agreement and/or the Closing Date, and each Option Closing Date, as
applicable, to within five business days of such dates, in form and
substance satisfactory to the Representative and counsel to the
Representative, confirming that it is the independent public
accountant with respect to the Company within the meaning of the
Securities Act and the Regulations and published instructions, and
stating to the effect that:
(i) In its opinion, the audited financial statements
included in the Registration Statement and Prospectus covered
by its report included therein, comply as to form in all
material respects with the applicable requirements of the
Securities Act and the Regulations and published instructions.
(ii) On the basis of a reading of the minutes of the
shareholders' and directors' meetings of the Company since
their respective inceptions, inquiries of
29
officials of the Company responsible for financial and
accounting matters, and other specified procedures and
inquiries, nothing came to its attention causing it to believe
that:
(A) the unaudited financial information set
forth in the Prospectus does not comply as to form in
all material respects with the applicable
requirements of the Securities Act and the related
published instructions and Regulations and is not
fairly presented in accordance with generally
accepted accounting principles applied on a basis
consistent with the audited financial statements set
forth in the Prospectus, or
(B) with respect to the period subsequent to
March 31, 1998, there were, at a specified date not
more than three business days prior to the date of
such letter, any changes in the capital stock or
long-term debt obligations of the Company, or any
changes or decreases in shareholders' equity, net
assets, or current net assets of the Company, each as
compared with the amounts shown in the most recent
balance sheet of the Company included in the
Registration Statement or disclosed in such
Registration Statement, except as otherwise disclosed
in the letter.
It has compared specific dollar amounts, numbers of
shares of securities, percentages of revenues and earnings,
and statements about other financial or statistical
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, which are subject
to the system of internal accounting controls, including
worksheets, of the Company (and excluding any questions
requiring an interpretation by legal counsel), with the
results obtained from the application of specific 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.
(l) Change in Capitalization. Subsequent to the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there shall not have been any Material Adverse Effect on
or decrease in the capitalization of the Company that makes it
impractical or inadvisable in the reasonable judgment of the
Representative to proceed with the Public Offering or the delivery of
the Securities, as the case may be, as contemplated in the Prospectus.
(m) Nasdaq National Market. On or before the Closing Date, the
Securities shall have been approved for listing on Nasdaq National
Market, or the American Stock Exchange.
(n) "Market-Out" Provision. The Representative's obligations
hereunder shall be subject to, among other things, there being, in its
opinion: (i) no
30
material adverse change in the conditions or obligations of the
Company or its present or proposed business and affairs; and (ii) no
market conditions which might render the offer and sale of the
Securities herein contemplated inadvisable.
(o) Certificate of Selling Stockholder. The Selling Stockholder
shall have furnished to the Underwriters a certificate, signed by the
duly Selling Stockholder, dated as of the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that the representations and
warranties of the Selling Stockholder in this Agreement are true and
correct in all material respects on and as of the Closing Date to the
same effect as if made on the Closing Date.
(p) Letter Agreements. The Company will obtain letter agreements
executed by each of its officers, directors and principal shareholders
with respect to those matters referred to in Subsection 3(m).
(q) Other Information. Prior to the Closing Date, the Company and
the Selling Stockholder shall have furnished to the Representative
such further information, certificates, and documents in connection
with the Company's and the Selling Stockholder's obligations set forth
herein as the Representative may reasonably request.
If any of the conditions specified in this Section 7 shall not
have been fulfilled when and as required by this Agreement or expressly waived
in writing by the Representative, this Agreement and all obligations of the
Representative hereunder may be terminated by the Representative at, or at any
time prior to, the Closing Date. Notice of such termination shall be given to
the Company and the Selling Stockholder in writing, or by telegraph, facsimile
transmission or telephone and confirmed in writing. In such event, the Company,
the Selling Stockholder and the Representative shall not be under any obligation
to each other except to the extent provided in Sections 5 and 8 hereof.
8. Indemnification.
(a) Indemnification by Company. The Company agrees to indemnify
and hold harmless the Representative, each of the other Underwriters
and each person, if any, who controls any of the foregoing within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and each of them, from and against any and all loss,
liability, claim, damage, expense or action, joint or several
(including, but not limited to, any and all reasonable expenses
incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any
amount paid in settlement of any litigation), commenced or threatened,
or of any claim whatsoever, to which they or any of them may become
subject under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, at common law or otherwise, insofar
as such loss, liability, claim, damage, expense or action arises out
of or is based upon (i) any untrue statement or alleged untrue
statement or breach of any representation,
31
warranty or covenant made by the Company in this Agreement, (ii) any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or any amendment thereto), or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue
statement of a material fact contained in a Preliminary Prospectus or
the Prospectus (or any amendment or supplement thereto), or any
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary in order to make the statements therein
not misleading, or (iv) any untrue statement or alleged untrue
statement of a material fact contained in any application or other
document executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in
order to qualify all or any of the Securities, the Underwriters'
Warrants or the Warrant Shares under the securities laws thereof or
filed with the Commission, the NASD or any securities exchange, or any
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary in order to make the statements therein
not misleading; provided, however, that the Company shall not be
liable in any such case to the extent that such untrue statement or
omission or such alleged untrue statement or omission was made in
reliance upon and in conformity with information furnished in writing
by or on behalf of any of the Underwriters to the Company expressly
for use in the Registration Statement (or any amendment thereto), any
such Preliminary Prospectus or the Prospectus (or any amendment or
supplement thereto) or any such application or document. The Company
acknowledges that the statements under the caption "Underwriting"
contained in any Preliminary Prospectus and the Prospectus constitute
the only information furnished in writing by the Underwriters
expressly for inclusion in the Registration Statement, any Preliminary
Prospectus or the Prospectus. The indemnity agreement contained in
this Subsection 8(a) is in addition to any liability which the Company
may otherwise have to the Underwriters or any controlling person of
the Underwriters. The Company agrees to pay any legal and other
expenses for which it is liable under this subsection (a) from time to
time (but not more frequently than monthly) within 30 days after its
receipt of a ▇▇▇▇ therefor.
(b) Indemnification by the Representative. The Representative
agrees that it will indemnify and hold harmless the Company, the
Selling Stockholder, each of the Company's officers who signs the
Registration Statement, each of its directors, and each person who
controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage, expense or action, joint or several,
to the same extent as the foregoing indemnity from the Company and the
Selling Stockholder to the Underwriters in Subsection 8(a), but only
with respect to statements or omissions made in the Registration
Statement (or any amendment thereto) or a Preliminary Prospectus or
the Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with information furnished in writing by the
Representative to the Company expressly for use in the Registration
Statement (or any amendment thereto). The indemnity agreement
contained in this Subsection 8(b) is in addition to any liability
which the Representative may otherwise have to the Company and the
Selling Stockholder or any of the Company's directors, officers, or
controlling persons. The Company and the Selling Stockholder
32
acknowledges that the statements in any Preliminary Prospectus and in
the Prospectus made under the caption "Underwriting" constitute the
only information furnished in writing by the Representative or its
counsel on behalf of the Representative expressly for inclusion in the
Registration Statement, any Preliminary Prospectus or the Prospectus.
The Representative agrees to pay any legal and other expenses for
which it is liable under this Subsection 8(b) from time to time (but
not more frequently than monthly) within 30 days of receipt of a ▇▇▇▇
therefor.
(c) Indemnification by the Selling Stockholder. The Selling
Stockholder agrees to indemnify and hold harmless the Company, the
Representative, each of the other Underwriters and each person, if
any, who controls any of the foregoing within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, other than
the indemnifying party, and each of them, to the same extent as the
foregoing indemnity from the Company to the Underwriters in Section
8(a) above but only with respect to (i) statements or omissions of a
material fact, if any, made in any Preliminary Prospectus, any Rule
430A Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented), or any amendment or supplement
thereto, or in any application in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Selling Stockholder expressly for use in any Preliminary Prospectus,
any Rule 430A Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be, or (ii) any breach of any
representation, warranty, covenant or agreement of the Selling
Stockholder contained in this Agreement. In case any action shall be
brought against the Company, any Underwriter or any other person so
indemnified based on any Preliminary Prospectus, any Rule 430A
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or in any application, or with
respect to any such breach, and in respect of which indemnity may be
sought against any of the Selling Stockholder, the Selling Stockholder
shall have the rights and duties given to the indemnifying parties,
and the Company, the Underwriters and each other person so indemnified
shall have the rights and duties given to the indemnified parties
under the provisions of this Section 8.
(d) Claims. Promptly after receipt by an indemnified party under
this Section 8 of notice of any claim, threatened claim or the
commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the claim,
threatened claim or the commencement of that action; provided,
however, that the failure to notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may have
to an indemnified party otherwise than under this Section 8. If any
such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with its counsel, who shall be
reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to
assume the defense of such claim, threatened claim or action, the
indemnifying party shall not be liable to the indemnified
33
party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation;
provided, however, that the Representative shall have the right to
employ counsel to represent it and its controlling persons who may be
subject to liability arising out of any claim in respect of which
indemnity may be sought by the Representative against the Company
and/or the Selling Stockholder under this Section 8 if, in the
Representative's reasonable judgment, it is necessary for the
Representative and its controlling persons to be represented by
separate counsel in order to avoid an actual or potential conflict of
interest or if the Representative shall have reasonably concluded that
there may be defenses available to the Representative and its
controlling persons different from or in addition to those available
to the Company or the Selling Stockholder, and in either such event
the reasonable fees and expenses of such separate counsel shall be
paid by the Company and the Selling Stockholder. An indemnifying party
shall not be liable for any settlement of any action or claims
effected without its written consent (which consent shall not
unreasonably be withheld).
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Company in Subsection 8(a) hereof, the representations and
warranties in this Agreement and any representation or warranty as to the
accuracy of the Registration Statement or the Prospectus contained in any
certificate furnished by the Company pursuant to Section 7 hereof, insofar as
they may constitute a basis for indemnification for liabilities (other than
payment by the Company of expenses incurred or paid in the successful defense of
any action, suit or proceeding) arising under the Securities Act, shall not
extend to the extent of any interest therein of a controlling person or partner
of the Representative who is a director, officer or controlling person of the
Company when the Registration Statement has become effective, except in each
case to the extent that an interest of such person shall have been determined by
a court of appropriate jurisdiction as not against public policy as expressed in
the Securities Act. Unless in the opinion of counsel for the Company the matter
has been settled by a controlling precedent, the Company will, if a claim for
such indemnification is asserted, submit to a court of appropriate jurisdiction
the question whether such interest is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(e) Contribution. In order to provide for just and equitable
contribution in circumstances in which indemnification provided for in
Subsection 8(a), 8(b) or 8(c) is unavailable, the Company, the
Underwriters or the Selling Stockholder shall contribute to the
aggregate loss, claim, damage, expense and liability to which the
Company, the Underwriters or the Selling Stockholder may be subject
(and, in any case where the Company is seeking contribution, after
seeking contribution from persons who control the Company within the
meaning of the Securities Act, officers of the Company who signed the
Registration Statement and directors of the Company, who may be liable
for contribution and after deducting from such loss, claim, damage,
expense and liability the amount of contribution obtained from such
persons) in such proportions as are applicable to reflect the relative
benefits received by the Company, the Underwriters and the Selling
Stockholder from the offering of the Securities; provided, however,
that if such allocation is not permitted by applicable law or if the
indemnified party failed to give the notice
34
required under Subsection 8(d), then the relative fault of the
Company, the Underwriters or the Selling Stockholder, in connection
with the statements or omissions which resulted in such losses,
claims, damages and liabilities and other relevant equitable
considerations will be considered together with such relative
benefits. The relative benefits received by the Company and the
Selling Stockholder, on the one hand, and the Underwriters, on the
other hand, shall be deemed to be in the same proportion as the total
net proceeds from the Public Offering (before deducting expenses)
received by the Company and the Selling Stockholder bear to the total
underwriting discounts and commissions received by the Underwriters
(the "Underwriters Portion"), in each case appearing on the cover page
of the Prospectus; provided, however, that (i) the provisions of the
Agreement Among Underwriters, if any, shall govern the contribution
among Underwriters, (ii) in no case shall the Underwriters (except as
may be provided in the Agreement Among Underwriters, if any) be
responsible for any amount in excess of their respective pro rata
shares, based on the number of Securities purchased by each of them,
of the amount of the Underwriters Portion, and (iii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) will be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
relative fault of the Company and the Selling Stockholder, on the one
hand, and of the Underwriters, on the other hand, shall be determined
by reference to, among other things, whether in the case of an untrue
statement or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact, such statement
or omission relates to information supplied by the Company or the
Selling Stockholder, on the one hand, or by the Underwriters, on the
other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue
statements or omission. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this Subsection 8(e) were determined by
pro-rata allocation (even if the Underwriters are treated as one
entity for such purpose) or by any other method of allocation that
does not take account of the equitable considerations referred to in
this Subsection 8(e). The amount paid or payable by the indemnified
party as a result of the losses, claims, damages or liabilities
referred to above in this Subsection 8(e) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending against or
appearing as a third-party witness in any such action or claim. For
purposes of this Subsection 8(e), each person, if any, who controls
any of the Underwriters within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Underwriter and each person, if any,
who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each officer who
shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company,
subject in each case to clause (iii) of this Subsection 8(e). Each
party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought,
it will promptly give written notice of such service to the party or
parties from whom contribution may be sought, but the omission so to
notify such party or parties of any such service shall not relieve the
party from whom contribution may be sought from any obligations it may
have hereunder or otherwise
35
(except as specifically provided in Subsection 8(d)). No party shall
be liable for contribution with respect to any action or claim settled
without its consent (which consent shall not unreasonably be
withheld).
(f) Survival. The respective indemnity and contribution
agreements by the Underwriters, the Selling Stockholder and the
Company contained in this Section 8, and the covenants,
representations and warranties of the Selling Stockholder and the
Company set forth herein, shall remain operative and in full force and
effect regardless of (i) any investigation made by the Underwriters or
on their behalf or by or on behalf of any person who controls the
Underwriters, by the Company or any controlling person of the Company
or any director or any officer of the Company, (ii) acceptance and
delivery of the Securities, the Underwriters' Warrants and Warrant
Shares and payment therefor, or (iii) any termination of this
Agreement, and any successor to the Company or to the Underwriters or
any person who controls any of Underwriters or the Company, as the
case may be, shall be entitled to the benefit of such respective
indemnity and contribution agreements.
9. Effectiveness. This Agreement shall become effective
contemporaneously with the effectiveness of the Registration Statement;
provided, however, that the provisions of Sections 5, 8, and 9 hereof shall at
all times be in full force and effect from the date first written above.
10. Termination. This Agreement may be terminated, in the
Representative's sole and absolute discretion, by notice given to the Selling
Stockholder and the Company prior to the Closing Date if the Company or the
Selling Stockholder shall have failed, refused, or been unable, prior to the
Closing Date, to perform any material agreement required to be performed by it
hereunder, or if any other condition precedent to the Underwriters' obligations
hereunder determined to be material by the Representative required to be
fulfilled by the Company is not fulfilled. In addition, this Agreement may be
terminated, as set forth above, if, prior to the Closing Date, any of the
following shall have occurred: (i) material governmental restrictions (not in
force and effect on the date hereof) have been imposed on trading in securities
on The Nasdaq National Market System-Registered Trademark- (or the American
Stock Exchange if the Common Stock is listed thereon) or in the over-the-
counter market; (ii) a material adverse change, beyond normal fluctuations, in
general financial market or economic conditions from such conditions on the
date hereof; (iii) a material interruption in mail or telecommunications
service or other general means of communications within the United States after
the execution and delivery of this Agreement; (iv) a banking moratorium has
been declared by federal or New York or Florida state authorities; (v) an
outbreak of major international hostilities or other national or international
calamity has occurred; (vi) the passage by the Congress of the United States or
by any state legislative body of any act or measure, or the adoption of any
orders, rules, or regulations by any governmental body or executive or any
authoritative accounting institute or board, that the Underwriters believe will
have a material adverse effect on the business, financial condition, or
financial statements of the Company or the distribution of the Securities or
market for the Securities; or (vii) any Material Adverse Effect has occurred,
since the respective dates of which information is given in the Registration
Statement and Prospectus, in the condition of the Company, financial or
otherwise, whether or not arising in the ordinary course of business. Any such
termination shall
36
be without liability of any party to any other party, except as provided in
Section 8 herein and except that the Company shall remain obligated to pay costs
and expenses pursuant to Section 5 herein. If the Representative elects to
prevent this Agreement from becoming effective, or to terminate this Agreement,
as provided in this Section 10, the Representative shall promptly notify the
Company and the Selling Stockholder by telegram or telephone, and confirm by
letter, and the Representative shall not be under any liability to the Company
or the Selling Stockholder.
11. Default by the Underwriters. If the Underwriters shall fail at the
Closing Date to purchase the Securities that they are respectively obligated to
purchase pursuant to this Agreement (the "Defaulted Securities"), the
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriter, 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 Underwriters shall not have completed such arrangements within such
24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the total number of Securities, the non-defaulting Underwriters shall
be obligated to purchase the full amount thereof in the proportions
that their respective underwriting obligations bear to the
underwriting obligations of the non-defaulting Underwriters; and
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
In the event of any such default that does not result in a termination of this
Agreement, either the Underwriters or the Company 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. Nothing contained herein shall relieve a
defaulting Underwriter of any liability it may have for damages caused by its
default.
12. Survival of Representations, Warranties, and Indemnities. The
respective agreements, representations, warranties, and indemnities contained in
this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the Company or the Underwriters or their
respective officers or directors or controlling persons, and will survive
delivery of and payment for the Securities and the Underwriters' Warrants and
the Warrant Shares.
13. Notices. All notices and other communications hereunder (unless
otherwise expressly provided for herein) shall be in writing and shall be deemed
given when delivered in person, on the business day (before 5:00 P.M.) sent by
facsimile transmission with confirmation of receipt, or on the date indicated on
the return receipt if sent by registered or certified mail (return receipt
requested) to the party to receive the same at the following addresses (or at
such other address for a party as shall be specified by like notice):
37
If to the Company: ▇▇▇▇▇▇ International, Ltd.
Kodiak Crescent
Downsview, Ontario M3J 3E5
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to: Gersten, Savage, ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
If to the Selling Stockholder: Ranch Limited
[insert address and contact person]
If to the Representative: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
In each case with a copy to: Broad and ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Esquire
14. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors. Except as only
to the extent stated in Section 8 herein with respect to the officers, directors
and controlling persons referred to in such Section 8, no person other than the
parties hereto and their respective successors will have any right or obligation
hereunder. The terms "successor" and "successors and assigns" as used in this
Agreement shall not include any buyer, as such, of any of the Securities from
the Underwriters.
15. Consents and Prior Approvals. Any consent or approval by the
Underwriters required hereunder to any corporate action of the Company shall not
be unreasonably withheld, and, notwithstanding any other provision hereof, any
such consent or approval to any corporate action of the Company after the
Closing Date, shall not be required if the Company obtains an opinion from an
AV-rated law firm that the requirement of such consent or approval constitutes
an abrogation of the Board of Directors' duties under the corporate law of such
jurisdiction.
38
16. Entire Understanding; Incorporation by Reference. This Agreement,
together with the Financial Consulting Agreement, the Underwriters' Warrant, and
the other documents, exhibits and schedules referred to herein, contains the
entire understanding between the parties hereto and supersedes any prior
understandings or oral or written agreements between them respecting the subject
matter hereof. The documents, exhibits and schedules referred to in this
Agreement are incorporated herein by reference.
17. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which taken together
shall constitute one and same agreement.
18. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Florida, without giving
effect to choice of law or conflict of laws principles thereof, and any
proceeding arising between the parties in any manner pertaining or related to
this Agreement shall, to the extent permitted by law, be held in Miami-Dade
County, Florida.
[This space intentionally left blank.]
39
Please confirm, by signing and returning to the Company counterparts of
this Underwriting Agreement, that the foregoing correctly sets forth the
understanding between the Company, the Selling Stockholder and the
Representative, whereupon this Agreement will constitute a binding agreement
among us.
Very truly yours,
Company:
▇▇▇▇▇▇ INTERNATIONAL, LTD.,
an Ontario corporation
By
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
Selling Stockholder:
RANCH LIMITED, an Ontario corporation
By:
------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Confirmed and Accepted as of the date
first above-written:
Representative:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ INCORPORATED,
a Florida corporation
By:
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President
40
SCHEDULE 1
----------
Number
Underwriters of Shares
------------ ---------
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated
------------------
------------------
[Insert other Underwriters]
Total 1,650,000
EXHIBIT A
---------
UNDERWRITERS' WARRANT
---------------------
EXHIBIT B
---------
FINANCIAL CONSULTING AGREEMENT
------------------------------
EXHIBIT C
---------
OPINION OF COMPANY COUNSEL
--------------------------
1. The Company is duly organized and validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation, with all
requisite corporate power and authority to own or lease all of the assets owned
or leased by it and to conduct its business as described in the Registration
Statement and the Prospectus.
2. The Company is qualified to do business and in good standing as a
foreign corporation in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes such
qualification necessary, except for such jurisdictions where the failure, either
singly or in the aggregate, to do so or be in good standing would not have a
material adverse effect on the condition (financial or otherwise), earnings,
business, assets, properties, results of operations or prospects (financial or
otherwise) of the Company (hereinafter a "Material Adverse Effect"). The Company
does not own, directly or indirectly, any shares of stock or any other
securities of any corporation, or have any equity interest in any firm,
partnership, joint venture, association or other entity.
3. The Company has full corporate power and authority to execute and
deliver the Underwriting Agreement, the Underwriters' Warrant, and the Financial
Consulting Agreement (collectively, the "Transaction Documents"), to perform its
obligations thereunder and to consummate the transactions provided for therein.
The execution and delivery of the Transaction Documents by the Company, the
performance of its obligations thereunder, the consummation by the Company of
the transactions contemplated thereby and the Company's compliance with the
terms of the Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Company. The Transaction Documents have been
duly executed and delivered by the Company and constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except to the extent that (i)
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and general equitable principles or a requirement as to commercial
reasonableness, and (ii) enforceability of the indemnification and contribution
provisions set forth in the Underwriting Agreement may be limited by federal or
state securities laws or public policy underlying such laws.
4. The "lock-up" agreements described in Section 3(r) of the
Underwriting Agreement delivered to the Representative have been duly executed
and delivered by the shareholders who are parties thereto, and constitute legal,
valid and binding obligations of such shareholders, enforceable against each of
them in accordance with their respective terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general equitable principles.
C-1
5. None of (i) the Company's issue and sale of the Securities, the
Underwriters' Warrant and Warrant Shares (collectively, the "Registered
Securities"), and (ii) the execution and delivery of the Transaction
Documents, performance of the Company's obligations thereunder, consummation
of the transactions contemplated therein or the conduct by the Company of its
business as described in the Prospectus, conflicts with, or will conflict
with, results in, or will result in, any breach or violation of any of the
terms or provisions of, constitutes, or will constitute, a default under, or
results in, or will result in, the creation of any lien, charge, claim,
encumbrance or security interest of any kind or nature whatsoever upon any
property or assets of the Company pursuant to (A) the articles of
incorporation or by-laws of the Company, (B) to such counsel's knowledge
after due inquiry, any note, contract, commitment, indenture, deed of trust,
mortgage, voting trust agreement, shareholders agreement, license or other
agreement or instrument to which the Company is a party, by which it is bound
or to which any of its properties may be subject, or (C) any federal, state
or local law, rule or regulation applicable to the Company or, to such
counsel's knowledge after due inquiry, any judgment, order or decree of any
federal or state court, arbitrator, regulatory administrative or other
governmental agency or body having jurisdiction over the Company or any of
its properties or businesses.
6. No consent, approval, authorization or order of, and no
registration or filing with, any third party or any court, regulatory body,
administrative agency or other governmental agency or official (other than
such as may be required under the Securities Act or the Exchange Act, by the
NASD or state securities laws, as to which such counsel need not express an
opinion) is required for the valid authorization, issuance, sale and delivery
of the Registered Securities pursuant to the Transaction Documents, for the
execution and delivery by the Company of, and the performance by the Company
of its obligations under, the Transaction Documents and for the consummation
by the Company of the transactions contemplated by the Transaction Documents.
7. The Registration Statement has become effective under the
Securities Act. To such counsel's knowledge after due inquiry, no stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus has been issued, and no proceedings for that purpose have been
instituted or are pending or threatened.
8. Each of the Registration Statement and the Prospectus, and each
amendment or supplement thereto, comply as to form in all material respects
with the requirements of the Securities Act (except for the financial
statements, notes and schedules, and other statistical or other financial
data included therein, as to which such counsel need not express an opinion).
The conditions to use Form SB-2 have been satisfied with respect to the
Registration Statement.
9. There are no laws, rules or regulations, judgments, orders or
decrees, required to be described in the Registration Statement and the
Prospectus other than those described in the Registration Statement and
Prospectus. The statements in the Prospectus, insofar as such statements
constitute a summary of laws, rules, regulations or legal conclusions, are
accurate summaries and fairly and correctly present in all material respects
the information called for in the Securities Act with respect to such laws,
rules, regulations or conclusions.
C-2
10. To such counsel's knowledge after due inquiry, there are no
agreements, contracts or other documents or instruments required to be
described in the Registration Statement and the Prospectus or required to be
filed as an exhibit to the Registration Statement other than those described
in the Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement.
11. The persons listed under the caption "Principal and Selling
Stockholders" in the Prospectus are the respective record owners and, to such
counsel's knowledge after due inquiry, "beneficial owners" (as such phrase is
defined in Regulation 13d-3 under the Exchange Act) of the Common Stock set
forth opposite their respective names as and to the extent set forth therein.
12. Except as described in the Prospectus, to such counsel's
knowledge after due inquiry, 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 Registered Securities.
13. The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
14. No transfer tax, stamp duty or other tax, levy, impost,
deduction, charge or withholding is payable by or on behalf of the
Underwriters in connection with (i) the issuance by the Company of the
Registered Securities, (ii) the purchase by the Underwriters of the
Registered Securities, (iii) the purchase by the Representative of the
Underwriters' Warrants or the purchase of the Warrant Shares by the
Representative (or its permitted assignees) upon the exercise of the
Underwriters' Warrants, and (iv) the execution and delivery by the Company
of, or the performance by the Company of its obligations under, the
Transaction Documents or the issuance of the certificates and instruments
representing the Registered Securities.
15. All of the agreements of the Company described in, required to be
described in or attached as an exhibit to the Registration Statement have been
validly authorized, executed and delivered by the Company and constitute legal,
valid and binding agreements of the Company, enforceable against the Company and
in accordance with their respective terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general equitable principles. None of the provisions of any
such agreements, contracts, documents or instruments violates any judgment,
order, consent or decree or any federal or state governmental agency or court
having jurisdiction over the Company, or its properties or business, except
where such violation has not and will not have a Material Adverse Effect.
16. Except as described in the Prospectus, the Company is not in
violation of, or breach of, or in default under (i) their respective articles
of incorporation or bylaws, or (ii) to such counsel's knowledge after due
inquiry, any material license, contract, indenture, mortgage, installment
contract, deed of trust, lease, voting trust agreement, shareholders
agreement, note,
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loan or credit agreement, or other agreement or instrument to which the
Company is a party, by which the Company is bound or to which any of its
properties are subject.
17. The Company holds all licenses, permits, certifications,
registrations, approvals, consents and franchises from all governmental or
regulatory authorities, officials or agencies necessary to own or lease and
operate its properties and to conduct its business as described in the
Prospectus.
18. There are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries pending or, to such counsel's knowledge after due
inquiry, threatened against or involving the Company, or any of its
properties (i) that are required to be disclosed in the Registration
Statement in accordance with the Securities Act and are not so disclosed,
(ii) which question the validity of the capital stock of the Company, (iii)
which question the validity, performance or enforceability of any of the
Transaction Documents or any action taken or to be taken by the Company
pursuant thereto or in connection therewith, or (iv) which, in such counsel's
opinion, if adversely determined, would have a Material Adverse Effect.
19. Except as disclosed in the Prospectus, (i) there is no claim or
action by any person pertaining to, or proceeding pending or threatened, that
challenges the ownership or use by the Company of any copyright, trademark,
service ▇▇▇▇, service name, and trade name used by the Company in the conduct
of its business; and (ii) the Company owns and has full right, title and
interest in and to, or has the valid and exclusive right to, all copyrights,
trademarks, service marks, service names and trade names necessary in the
conduct of its business as presently conducted, or as proposed to be
conducted as described in the Prospectus, except where such failure has not
and will not have a Material Adverse Effect.
20. The Company has the capitalization set forth in the Prospectus.
All of the issued and outstanding shares of Common Stock of the Company have
been duly authorized, validly issued and are fully paid and nonassessable.
The holders thereof have no rights of rescission with respect thereto and are
not subject to personal liability solely by reason of being such holders.
None of such securities were issued in violation of any preemptive or similar
right. Except as described in the Prospectus, to such counsel's knowledge
after due inquiry, the Company is not a party to or bound by any outstanding
options, warrants or similar rights to subscribe for, or contractual rights
or obligations to issue, sell, transfer or acquire, any of the capital stock
of the Company or any securities convertible into or exchangeable for any of
the capital stock of the Company. All issuances of capital stock by the
Company prior to the date hereof either complied with or were not subject to
the registration requirements of the Securities Act and were made in full
compliance with all applicable federal or state laws, rules and regulations.
21. The certificates representing the shares of Common Stock are in
due and proper form. The Securities conform to the descriptions thereof set
forth in the Prospectus.
22. Except as described in the Prospectus, no person (i) has the
right to include and/or register any securities of the Company in the
Registration Statement or to require the Company to
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file any registration statement or, if filed, to include any security in any
registration statement filed by the Company, or (ii) holds any anti-dilution
rights with respect to any securities of the Company.
23. The Securities to be sold by the Company under the Agreement,
the Underwriters' Warrants to be sold by the Company under the Agreement, and
the shares of Common Stock to be sold by the Company upon the exercise of the
Underwriters' Warrants have been duly authorized, are not and will not be in
violation of any preemptive rights or any similar rights and, when issued,
paid for and delivered in accordance with the terms of the Agreement will be
validly issued, fully paid and nonassessable. The holders thereof will not be
subject to any restriction on the voting or transfer thereof (other than in
accordance with their terms) or to any personal liability solely by reason of
being such holders, and the issuance thereof is not in violation of any
preemptive or similar right.
24. All corporate action required to be taken for the authorization,
issue and sale of (i) the Securities, (ii) the Underwriters' Warrants, and
(iii) the shares of Common Stock underlying the Underwriters' Warrants, and
for the reservation of the shares of Common Stock required to be reserved for
issuance upon the exercise of the Underwriters' Warrants, have been duly and
validly taken.
25. The Underwriters' Warrants constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and
payment therefor, the number and type of securities of the Company called for
thereby. The shares of Common Stock issuable upon exercise of the
Underwriters' Warrants have been reserved for issuance at the exercise prices
and under the other terms and conditions provided for in the Underwriters'
Warrants.
26. When the certificates for the Securities being sold under the
Agreement by the Company are duly countersigned by the Company's transfer
agent and delivered to the Underwriters against payment therefor, as provided
in the Agreement, the Underwriters will acquire the Registered Securities
free and clear of any adverse claim that has been identified in a written
claim received by the Company, assuming the Underwriters acquired such shares
in good faith and without notice of any such adverse claim.
27. Counsel has participated in conferences with officers and other
representatives of the Company, representatives of the Company's accountants,
the Representative and counsel to the Representative, at which the contents
of the Registration Statement, the Prospectus and related matters were
discussed. Although counsel is not passing upon and does not assume
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus, on the basis of
the foregoing, no facts or circumstances have come to their attention which
lead them to believe that, on the Effective Date and on the Closing Date, the
Registration Statement and the Prospectus contained or contains any untrue
statement of a material fact or omitted or omits to state a 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
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misleading (other than the financial statements and other financial and
statistical data included therein, as to which such counsel need not express
an opinion).
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