Exh. 1.1
1,300,000 Shares of Common Stock
SCOOP, INC.
UNDERWRITING AGREEMENT
----------------------
Los Angeles, California
________________, 1997
SHAMUS GROUP, INC.
As Representative of the
Several Underwriters
Named in Schedule I Hereto
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Scoop, Inc., a Delaware corporation (the "Company") and successor to Scoop,
Inc., a California corporation ("Scoop California"), confirms its agreement with
the several Underwriters named in SCHEDULE I attached hereto and incorporated
herein by this reference (the "Underwriters") with respect to the sale by the
Company and the purchase by the Underwriters, severally and not jointly, of an
aggregate of 1,300,000 shares ("Firm Shares") of the Company's common stock,
$.001 par value (the "Common Stock"). The Company shall also sell to the
Underwriters, severally and not jointly, an aggregate of up to 195,000 shares of
Common Stock for the purpose of covering over-allotments, if any (the "Option
Shares"), in accordance with the provisions of Section 3(b) hereof. The Firm
Shares and the Option Shares are hereinafter referred to collectively as the
"Securities" and are more fully described in the Registration Statement and the
Prospectus referred to below. The Company also proposes to issue and sell to
the Shamus Group, Inc., a ________________ corporation (the "Representative") or
its designees, individually and not in its capacity as Representative, a warrant
(the "Representative Warrant") pursuant to the Representative's Warrant
Agreement (the "Representative Warrant Agreement"), for the purchase of an
additional (130,000) shares of Common Stock (the "Representative's Shares").
Further, the following additional shares of Common Stock (collectively, the
"Selling Stockholder Shares") are being registered in connection with this
offering, but are not being underwritten by the Underwriters, for the account of
certain non-affiliated selling security holders (collectively, the "Selling
Stockholders"): (i) up to 200,000 shares of Common Stock that may be issued
upon exercise of warrants (the "Consultant Warrants") previously issued to
certain consultants of the Company (the "Consultant Warrant Shares"), and (ii)
1,205,152 shares of Common Stock for the account of certain non-affiliated
stockholders in accordance with previously granted registration rights.
Capitalized terms used herein without definition have the meanings ascribed to
them in the Registration Statement (as defined below).
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Underwriters as of the date hereof,
and as of the Closing Date and each Option Closing Date (as such terms are
defined below), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form SB-2 (Registration
No. 333-15129), including any related preliminary prospectus (the
"Preliminary Prospectus"), for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"). As used in this Agreement,
the term "Registration Statement" means such registration statement, as
amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined) and any replacement registration
statement on Form S-3 or other appropriate form; the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
Registration Statement or any amendments thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means: (i) if the Company relies on Rule 434 under the Act, the
Term Sheet relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements, (ii) if the Company does not rely
on Rule 434 under the Act, the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Act, or (iii) if the Company does not rely
on Rule 434 under the Act and if no prospectus is required to be filed
pursuant to Rule 424(b) under the Act, the prospectus included in the
Registration Statement; and the term "Term Sheet" means any term sheet that
satisfies the requirements of Rule 434 under the Act. Any reference hereto
to the "date" of a Prospectus that includes a Term Sheet shall mean the date
of such Term Sheet. For purposes hereof, "Rules and Regulations" means the
rules and regulations adopted by the Commission under the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any of the
foregoing, and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any part thereof have been initiated or are
pending, contemplated or threatened. Each Preliminary Prospectus and the
Registration Statement (including each amendment thereto), at the time of filing
thereof, complied in all material respects with the requirements of the Act and
the Rules and Regulations, and neither any Preliminary Prospectus nor the
Registration Statement, at the time of filing thereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(c) The Company has filed a Form 8-A with the Commission providing
for the registration under the Exchange Act of its Common Stock, which
registration shall become effective concurrently with the effectiveness of the
Registration Statement.
(d) The Company does not own an interest in any corporation,
partnership, trust, joint venture or other entity. The Company has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly qualified
and licensed and in good standing as a foreign corporation, in each jurisdiction
in which it owns or leases property or in which the conduct of its business, as
currently being conducted, requires such qualification or licensing, except
where the failure to be so qualified, licensed or in good standing, singularly
or in the aggregate, would not have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs, position, stockholders'
equity, operations, properties, businesses or results of operations of the
Company taken as a whole (a "Material Adverse Effect"). The Company has all
requisite corporate power and authority, and has obtained any and all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials, agencies,
authorities and bodies (including, without limitation, those having jurisdiction
over environmental, health or similar matters) necessary to own
2
or lease its properties and conduct its business as described in the
Prospectus other than those authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
regulatory officials, agencies, authorities and bodies (including, without
limitation, those having jurisdiction over environmental, health or similar
matters) which, singularly or in the aggregate, the failure to obtain would
not have a Material Adverse Effect. The Company is and has been doing
business in substantial compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all federal, state
and local laws, rules, regulations and orders; and the Company has not
received any notice of proceedings relating to the revocation or modification
of any such authorizations, approvals, orders, licenses, certificates,
franchises or permits which, singularly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a Material Adverse
Effect.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or supplement
thereto, under "Capitalization" and "Description of Capital Stock" and will have
the adjusted capitalization set forth therein on the Closing Date (as
hereinafter defined) and each Option Closing Date, if any, based upon the
assumptions set forth therein. The Company is not a party to or bound by any
instrument, agreement or other arrangement or understanding providing for or
requiring it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the Representative Warrant Agreement, the
warrant to ▇▇▇▇ & ▇▇▇▇▇▇ for up to 750,000 shares of Common Stock, the warrant
to The Boston Group, L.P. for 92,667 shares of Common Stock, the warrant to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ for 11,250 shares of Common Stock, the Bride Warrant, the LOC
Warrant, the Company's 1996 Stock Incentive Plan (the "1996 Plan"), and the
Consultant Warrants. The Securities and all other securities issued or issuable
by the Company conform or, when issued and paid for, will conform, in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus. All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and non-
assessable; and the holders thereof have no rights of rescission with respect
thereto; and none of such securities was issued in violation of the preemptive
rights or other similar rights of any holders of any security of the Company.
The Securities are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable; all corporate action required to be taken
for the authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities, when delivered
by the Company, will be in due and proper form. Upon the issuance and delivery
of the Securities pursuant to the terms hereof and the Representative Warrant
Agreement and Representative Warrant and Representative's Shares to be sold by
the Company hereunder and thereunder, respectively, the Underwriters and the
Representative, respectively, will own to such Securities and Representative
Warrant and Representative's Shares, free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction of any kind
whatsoever.
(f) The financial statements of the Company and the notes thereto
included in the Registration Statement and the Prospectus fairly present the
financial position, results of operations and cash flow and changes in
financial position and stockholders' equity of the Company at the respective
dates and for the respective periods to which they apply, and such financial
statements have been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. The as adjusted and/or pro forma combined
financial information included in the Registration Statement and the
Prospectus present fairly the information shown therein, have been prepared
in conformity with the Rules and Regulations and have been properly compiled
on the basis described therein consistent with the historical financial
statements included in the Registration Statement and the Prospectus. The
3
assumptions underlying such as adjusted and/or pro forma financial
information are reasonable, and the adjustments made therein are appropriate
to give effect to the transactions or circumstances referred to therein.
There has been no material adverse change, or development involving a
material prospective change, in the condition (financial or otherwise),
earnings, business affairs, position, stockholders' equity, operations,
obligations, properties, businesses or results of operations of the Company,
whether or not arising in the ordinary course of business, since the date of
the financial statements included in the Registration Statement and the
Prospectus, except as described therein. The financial information set forth
in the Prospectus under the headings "Prospectus Summary--Summary Financial
Data," "Dilution," "Capitalization," "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" fairly presents the information set forth therein and such
financial information has been derived from or compiled on a basis consistent
with that of the audited financial statements included in the Registration
Statement and the Prospectus as described above.
(g) The Company (i) has paid all federal, state and local taxes for
which it is liable, including, but not limited to, withholding taxes and amounts
payable under Chapters 21 through 24 of the Internal Revenue Code of 1986, as
amended (the "Code"), and any other assessments, fines or penalties leveled
against it, to the extent any of the foregoing is due and payable or are being
contested, except for any of the foregoing which is currently being contested in
good faith by appropriate proceedings or as described or contemplated by the
Prospectus, and has furnished all information returns it is required to furnish
pursuant to the Code or otherwise, (ii) has established adequate reserves for
such taxes, assessments, fines or penalties which are not due and payable and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it, except where such deficiencies, claims or failure to pay
taxes, assessments, fines or penalties, furnish information returns or establish
reserves, singularly or in the aggregate, would not have a Material Adverse
Effect.
(h) [intentionally omitted]
(i) The Company maintains insurance policies, including, without
limitation, general liability, property and personal liability insurance, which
insure the Company, its employees and such other persons to whom such entities
may become liable against such losses and risks generally insured against by
comparable businesses.
(j) To the Company's best knowledge, there is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental or
other proceeding (including, without limitation, those pertaining to
environmental, health or similar matters) pending, or threatened, to which the
Company is subject or to which any property or assets (tangible or intangible)
of the Company is subject which (i) questions the validity of the capital stock
of the Company, of this Agreement, of the Representative Warrant Agreement or of
any action or transaction contemplated by this Agreement, the Representative
Warrant Agreement, the Registration Statement or the Prospectus, (ii) is
required to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings as are summarized in the Registration Statement are
accurately summarized in all material respects) or (iii) might, if adversely
determined, have a Material Adverse Effect, except as disclosed in the
Prospectus.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, to enter into this
Agreement and the Representative Warrant Agreement and to consummate the
transactions contemplated in such agreements, the Registration Statement and
the
4
Prospectus; and this Agreement has been duly and properly authorized,
executed and delivered by the Company.
(l) None of (i) the issuance, delivery and sale of the Securities,
(ii) the execution, delivery or performance of this Agreement or Representative
Warrant Agreement, (iii) the consummation of the transactions contemplated
herein and in the Representative Warrant Agreement, and Prospectus, (iv) the
consummation of the Merger (as hereinafter defined) or (v) the conduct of the
Company's business as described in the Registration Statement, the Prospectus
and any amendments thereof or supplements thereto, conflicts or will conflict
with, or results or will result in any breach or violation of any of the terms,
covenants, conditions or provisions of, or constitutes or will constitute (with
notice, the lapse of time or both) a default under, or results or will result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon any property or assets (tangible or intangible) of the Company (except as
described in the Prospectus) pursuant to the terms of, (x) the Certificate of
Incorporation or bylaws of the Company, (y) any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, purchase order, note, loan or credit
agreement or any other material agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any of its
properties or assets (tangible or intangible) is or may be subject except where
such conflict, breach, violation, lien or other restriction would not have a
Material Adverse Effect, or (z) any law, statute, judgment, decree, order, rule
or regulation applicable to the Company of any arbitrator, court, administrative
agency or other governmental or regulatory official, agency authority or body
(including, without limitation, those having jurisdiction over environmental,
health or similar matters) having jurisdiction over the Company or any of its
activities or properties, except where such conflict or violation would not have
a Material Adverse Effect.
(m) No consent, approval, authorization, registration, qualification,
or order of, and no filing with, any court, administrative agency or other
government or regulatory official, agency, authority or body is required for the
issuance, delivery and sale of the Securities pursuant to this Agreement, the
Prospectus and the Registration Statement, the performance of this Agreement and
the Representative Warrant Agreement and the consummation of the transactions
contemplated hereby and by the Representative Warrant Agreement, and Prospectus,
except such as have been or may be obtained under the Act, state securities or
"blue sky" laws and the rules of the National Association of Securities Dealers,
Inc. (the "NASD") in connection with the Underwriters' purchase and distribution
of the Securities, and except where the Company's failure to obtain any of the
foregoing would not have a Material Adverse Effect.
(n) All agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed or required to be filed
as exhibits to the Registration Statement to which the Company is a party or by
which it may be bound are accurately described and fairly present the
information required to be shown with respect thereto by Form SB-2 or the Rules
and Regulations; there are no agreements, contracts or other documents which are
required by the Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or filed as
required; and the exhibits which have been filed are complete and correct copies
of the agreements, contracts or other documents of which they purport to be
copies.
(o) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
done, or agreed to do, any of the following, (i) issued any
5
securities or incurred any liability or obligation, direct, indirect or
contingent, for borrowed money, (ii) entered into any transaction other than
in the ordinary course of business or (iii) declared or paid any dividend or
made any other distribution on or in respect of any class of its capital
stock; and, subsequent to such dates, there has not been any change in the
capital stock or any change in the debt (long- or short-term) or liabilities
or obligations or any material change in the condition (financial or
otherwise), earnings, business affairs, position, prospects, stockholders'
equity, operations, properties, businesses or results of operations of the
Company except for debt, liabilities and obligations incurred in the normal
course of business consistent with past practices.
(p) No material default exists, and no event has occurred which, with
notice, lapse of time or both, would constitute a material default in the due
performance and observance of any term, covenant, condition or provision of any
license, contract, indenture, mortgage, installment sale agreement, lease, deed
of trust, voting trust agreement, stockholders' agreement, purchase order, note,
loan or credit agreement or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party or by which it is or may be bound or
its properties or assets (tangible or intangible) are or may be subject, except
where such default would not have a Material Adverse Effect.
(q) The Company has generally enjoyed a satisfactory employer-
employee relationship with its employees and it is in substantial compliance
with all federal, state and local laws, rules, regulations and orders respecting
employment and employment practices, including, without limitation, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company by the U.S. Department of Labor, the
Department of Justice - Immigration and Naturalization Service or any other
governmental or regulatory official, agency, authority or body responsible for
the enforcement of such federal, state or local laws, rules, regulations and
orders, except where such investigation would not have a Material Adverse
Effect. There is no unfair labor practice charge or complaint pending or, to
the best of the Company's knowledge, threatened against the Company before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending, threatened or contemplated against or involving
the Company and none has ever occurred. There are no existing collective
bargaining agreements with the Company. To the best of the Company's knowledge,
no representation question exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being
negotiated by or on behalf of the Company. No grievance or arbitration
proceeding is pending or threatened under any expired collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
is pending or threatened.
(r) [Intentionally omitted]
(s) [Intentionally omitted]
(t) The Company owns all trademarks, trade names, service marks,
service names, copyrights, patents and patent applications or any licenses or
rights to the foregoing, which, individually or in the aggregate, are material
to its condition (financial or otherwise), earnings, business affairs, position,
stockholders' equity, operations, properties, businesses or results of
operations, and, except as specifically disclosed in the Prospectus and, to the
best of the Company's knowledge, no such trademarks, trade names, service marks,
service names, copyrights or patents are in dispute or are in conflict with any
right of any other person or entity.
(u) To the best of the Company's knowledge, the Company has the right
to use all trade secrets, know-how (including, without limitation, all
unpatented and/or unpatentable proprietary or
6
confidential information, systems or procedures), inventions, technology,
designs, processes, works of authorship, computer programs and technical data
and information that are material to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of and without violating any right, lien or claim of
others, including, without limitation, former employers of their employees.
(v) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it.
(w) Deloitte & Touche, L.L.P., whose report is filed with the
Commission as a part of the Registration Statement, each Preliminary Prospectus
and the Prospectus, is an accounting firm of independent certified public
accountants as required by the Act and the Rules and Regulations.
(x) [Intentionally omitted]
(y) There are no claims, payments, issuances, agreements,
arrangements or understandings, whether oral or written, for services in the
nature of a finder's fee, brokerage fee, origination fee or otherwise with
respect to the offerings contemplated by this Agreement, the Representative
Warrant Agreement, the Registration Statement and the Prospectus or any other
arrangements, agreements, understandings, payments or issuances that may affect
the Underwriters' compensation as determined by the NASD other than as disclosed
in the Registration Statement and Prospectus and other than as the
Representative may itself have agreed to with third parties.
(z) The Securities have been approved for quotation on the Nasdaq
SmallCap Market (the "SCM").
(aa) Neither the Company nor any officer, stockholder, employee, agent
nor any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or any
official or employee of any governmental agency or instrumentality of any
government or any political party or candidate for office or any other person
who was, is or may be in a position to help or hinder the business of the
Company (or assist them in connection with any actual or proposed transactions)
which might subject the Company or any other such person to any damage or
penalty in any civil, criminal or governmental action, suit, inquiry,
investigation, litigation or proceeding.
(ab) Except as set forth in the Prospectus under "Certain
Transactions" and except for transaction(s) that would not be required to be
disclosed in the Registration Statement pursuant to the Rules and Regulations,
to the best of the Company's knowledge, no officer, director or stockholder of
the Company, and no affiliate or associate (as those terms are defined in the
Rules and Regulations) of any of the foregoing persons or entity, 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 products or services or (ii) a beneficial
interest in any contract, arrangement, understanding or agreement to which the
Company is a party or by which the Company or any of its property or assets
(tangible or intangible) may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions" there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company and
any officer or director of the Company or any person listed in
7
the "Principal Stockholders" section of the Prospectus, or, to the best of
the Company's knowledge, any affiliate or associate of any of the foregoing
persons or entity.
(ac) The minute books of the Company have been made available to
the Representative and contain a complete summary of all meetings and actions
of the directors, including any committee thereof, and stockholders of the
Company since the time of its incorporation, and reflect all transactions
referred to in such minutes accurately in all material respects.
(ad) Except as described in the Registration Statement, no person,
corporation, trust, partnership, association or other entity has the right to
include or register any securities of the Company in the Registration
Statement or to require that any registration statement be filed by the
Company or, if filed, to include any security in such registration statement.
(ae) Any certificate signed by any officer of the Company
designated as an "Officer's Certificate" and delivered to the Representative
or to the Underwriters' Counsel shall be deemed a representation and warranty
by the Company to the Underwriters as to the matters covered thereby.
(af) [Intentionally omitted]
(ag) The Representative Warrant Agreement has been duly and validly
authorized by the Company and, assuming due execution by the Representative,
constitutes or will constitute a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights
to indemnity or contribution may be limited by applicable law). The Company
has reserved and available for issuance a sufficient number of shares of
Common Stock to be issued upon exercise of the Representative Warrant.
(ah) [Intentionally omitted]
(ai) The Company is familiar with the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
and has in the past conducted, and intends in the future to conduct, its
affairs in such a manner as to ensure that it will not become an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
(aj) The books, records and accounts of the Company accurately and
fairly reflect, in reasonable detail, the transactions and dispositions of
the assets of the Company. The system of internal accounting controls
maintained by the Company is sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary (A) to
permit preparation of financial statements in accordance with generally
accepted accounting principals and (B) to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any difference.
(ak) All transactions necessary to complete the merger (the "Merger")
of Scoop California with and into the Company in accordance with the terms of
that certain Agreement and Plan of Merger, dated February 25, 1997 (the "Merger
Agreement"), between the Company and Scoop California have been consummated and
the Merger was effectuated on March ___, 1997 (the "Merger
8
Date"). Each of the Company and Scoop California had all requisite corporate
power and authority to execute, deliver and perform the Merger Agreement.
All necessary corporate proceedings of the Company and Scoop California had
been duly taken to authorize the execution, delivery and performance of the
Merger Agreement. The Merger Agreement had been duly authorized, executed
and delivered by the Company and/or Scoop California, as the case may be, is
the legal, valid and binding obligation of the Company and/or Scoop
California, as the case may be, and is enforceable as to the Company and/or
Scoop California, as the case may be, in accordance with its terms. The
Company has obtained all consents, authorizations, approvals, orders,
licenses, certificates or permits of or from, or declaration or filing with,
any federal, state, local or other governmental authority or any court of
other tribunal which is required by the Company or Scoop California for the
execution, delivery, or performance of any Merger Agreement, except where the
Company's failure to obtain any of the foregoing would not have a Material
Adverse Effect. The Company has obtained all consents, approvals or
authorizations of any party to any material license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, purchase order, note, loan or credit
agreement or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument
to which the Company or Scoop California is a party or by which either of
them is or may be bound or to which either of their properties or assets
(tangible or intangible) are or may be subject, necessary for the execution,
delivery or performance by the Company or Scoop California of the Merger
Agreement, except where the Company's failure to obtain any of the foregoing
would not have a Material Adverse Effect. The execution, delivery and
performance of the Merger Agreement by the Company and Scoop California did
not conflict with and did not result in any breach or violation of any of the
terms, covenants, conditions or provisions of, did not constitute (with
notice, the lapse of time or both) a default under, result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever upon
any property or assets (tangible or intangible) of the Company or Scoop
California pursuant to the terms of, (i) the Certificate or Articles of
Incorporation or bylaws of the Company or Scoop California, (ii) any
contract, material license, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders' agreement,
purchase order, note, loan or credit agreement or any other material
agreement or instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company or Scoop
California was a party at the Merger Date or by which they were bound at the
Merger Date or to which any of their properties or assets (tangible or
intangible) were subject at the Merger Date or (iii) any law, statute,
judgment, decree, order, rule or regulation applicable to the Company or
Scoop California at the Merger Date of any arbitrator, court, administrative
agency or other governmental or regulatory official, agency authority or body
(including, without limitation, those having jurisdiction over environmental,
health or similar matters) having jurisdiction over the Company, Scoop
California or either of their activities or properties, except where such
conflict, breach, violation, default, lien, charge, claim, encumbrance,
pledge, security interest defect or other restriction or equity of any kind
would not have a Material Adverse Effect.
(al) The Company has all content provider and distributor
authorizations, permits, licenses and other approvals necessary for the
Company to conduct its business as described in the Prospectus other than
those authorizations, approvals, licenses and permits of and from content
providers and distributors which, singularly or in the aggregate, the failure
to obtain would not have a Material Adverse Effect. The Company is and has
been doing business in substantial compliance with all such authorizations,
approvals, licenses, and permits; and the Company has not received any notice
of violation, revocation or modification of any such authorizations,
approvals, licenses or permits which, singularly or in the aggregate, would
have a Material Adverse Effect.
9
2. [Intentionally omitted]
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriters the Firm Shares,
and each of the Underwriters agrees, severally and not jointly, to purchase
from the Company that number of the Firm Shares set forth opposite such
Underwriter's name, in Schedule I to this Agreement at a price equal to
$______ per Share.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of the Option Shares at a price
equal to $________ per share. The Option Shares shall be purchased, if the
option is exercised as provided herein, from the Company for the accounts of
the several Underwriters, severally and not jointly, in proportion to the
aggregate number of Firm Shares set forth opposite such Underwriter's name in
Schedule I to this Agreement, except that the respective purchase obligations
of each Underwriter may be adjusted by the Representative so that no
Underwriter shall be obligated to purchase fractional Option Shares. The
option granted hereby will expire, to the extent unexercised, forty-five (45)
days after the date hereof, and may be exercised, in the Representative's
sole discretion, in whole or in part from time to time, only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Firm Shares, upon notice by the Representative to the
Company setting forth the number of Option Shares as to which the
Underwriters are then exercising the option and the time and date of payment
for and delivery of any such Option Shares. Any such time and date of
delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than four (4) full business days after
the exercise of said option, or in any event prior to the Closing Date,
unless otherwise agreed upon by the Representative and the Company. Nothing
herein contained shall in any way obligate the Underwriters to exercise the
option granted hereby. No Option Shares shall be delivered unless the Firm
Shares shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates evidencing, the Firm Shares shall be made at the offices of
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Company, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other place as shall be agreed upon
by the Representative and the Company. Such delivery and payment shall be
made at 6:30 a.m. (Los Angeles time) on ____________ ___, 1997 or at such
other time and date as shall be agreed upon by the Representative and the
Company (such time and date of payment and delivery being herein called the
"Closing Date"). In addition, in the event that any or all of the Option
Shares are purchased by the Underwriters, payment of the purchase price for,
and delivery of certificates for, such Option Shares shall be made at the
above-mentioned office of the Representative or at such other place as shall
be agreed upon by the Representative and the Company with respect to each
applicable Option Closing Date as specified in the relevant notice from the
Representative to the Company. Delivery of the certificates representing the
Firm Shares and the Option Shares, if any, shall be made to the
Representative against payment by the Underwriters of the purchase price for
the Firm Shares and the Option Shares, if any, to the order of the Company by
certified or official bank checks payable in Los Angeles Clearing House funds
(next day funds). Certificates representing the Firm Shares and the Option
Shares, if any, respectively, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Representative may request in writing at
least two (2) business days prior to the Closing Date or the relevant Option
Closing Date, as the case may be. The certificates representing the Firm
Shares and
10
the Option Shares, if any, shall be made available to the Representative at
such offices or such other place as the Representative may designate for
inspection, checking and packaging no later than 9:30 a.m. Los Angeles time
on the last business day prior to the Closing Date or the relevant Option
Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to you,
individually and not in your capacity as the Representative, or to your
designees, the Representative Warrant for an aggregate purchase price of
fifty dollars ($50), which warrant shall entitle the holders thereof to
purchase an aggregate of an additional One Hundred Ninety-Five Thousand
(195,000) shares of Common Stock. The Representative Warrant shall be issued
pursuant to the Representative Warrant Agreement, substantially in the form
filed as Exhibit 4.2 to the Registration Statement. Payment for the
Representative Warrant shall be made on the Closing Date. The Representative
Warrant and the Representative's Shares underlying them shall be registered
in the Registration Statement and such Registration Statement shall be kept
effective as required by the Representative Warrant Agreement.
4. PUBLIC OFFERING OF THE SECURITIES. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Firm Shares and such of the
Option Shares as the Representative may determine at the initial price and
upon the other terms set forth in the Prospectus. The Underwriters may from
time to time increase or decrease the public offering price of the Securities
to such extent as the Representative, in its sole discretion, deems
advisable. The Underwriters may enter into one or more agreements as they,
in their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective
simultaneously with or as promptly as practicable after the date of this
Agreement and will not at any time, whether before or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or Term Sheet or supplement to the Prospectus or file any document
under the Act or the Exchange Act before termination of the offering of the
Securities to the public by the Underwriters of which the Representative
shall not previously have been advised and furnished with a copy or to which
the Representative shall have reasonably objected (unless the Company's
outside counsel reasonably determines in a written opinion that such
amendment or supplement is required to be filed pursuant to applicable law)
or which is not in compliance with the Act, the Exchange Act or the Rules and
Regulations. The Company shall use its best efforts to maintain the
effectiveness of the Registration Statement (by filing supplements or
post-effective amendments or as otherwise may be required under the Act and
the Rules and Regulations) until the earlier of the time that all
Representative's Shares have been sold pursuant to such registration
statement or the date which is five (5) years from the date the
Representative Warrant is initially issued.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the same in
writing (i) when the Registration Statement, as amended, becomes effective,
when any post-effective amendment to the Registration Statement becomes
effective and, if the provisions of Rule 430A promulgated under the Act will
be relied upon, when the Prospectus has been filed in accordance with said
Rule 430A, (ii) of the issuance by the Commission or any State or other
regulatory body of any stop order or other order, or of the initiation or the
threat or contemplation of any proceeding, the outcome of which may result in
the
11
suspension of the effectiveness of the Registration Statement or any order
preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement or Term Sheet thereto, or the
institution of any proceedings for that purpose, (iii) of the issuance by the
Commission or any State or other regulatory body of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale
in any jurisdiction or of the initiation or the threat or contemplation of
any proceeding for that purpose, (iv) of the receipt of any comments from the
Commission and (v) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for additional information. If the Commission or any state or other
regulatory body shall enter a stop order or other order suspending the
effectiveness of the Registration Statement or preventing or suspending the
use of the Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, or suspend such qualification at any time, the Company
will make every effort to obtain promptly the lifting of such order or
suspension.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) with the Commission, or transmit the
Prospectus by a means reasonably calculated to result in filing the same with
the Commission, pursuant to Rule 424(b)(1) under the Act (or, if applicable
and if reasonably consented to by the Representative, pursuant to Rule
424(b)(4)) within the time period specified in Rule 424(b)(1) (or if
applicable, Rule 424(b)(4)) or shall deliver and shall file with the
Commission a Term Sheet (in form and substance satisfactory to the
Representative) in accordance with Rule 434 under the Act.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendments) or any amendment or supplement or
Term Sheet to the Prospectus (including any revised prospectus which the
Company proposes for use in connection with the offering of any of the
Securities which differs from the corresponding prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether
or not such revised prospectus is required to be filed pursuant to Rule
424(b) under the Act), and will furnish the Representative with copies of any
such amendment or supplement or Term Sheet a reasonable amount of time prior
to such proposed filing or use, as the case may be, and will not file any
such amendment or supplement to which the Representative or Jeffer, Mangels,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, the Underwriters' counsel (the "Underwriters'
Counsel"), shall reasonably object unless the Company's outside counsel
reasonably determines in a written opinion that such amendment or supplement
or Term Sheet is required to be filed pursuant to applicable law.
(e) The Company shall use its best efforts, at or prior to the
time the Registration Statement becomes effective, to qualify the Securities
for offering and sale under the securities or "blue sky" laws of such
jurisdictions as the Underwriters may reasonably designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such
documents and furnish such information as may be required for such purpose;
PROVIDED, HOWEVER, the Company shall not be required to qualify as
a foreign corporation or to execute a general consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will use its best efforts to file and make
such statements or reports at such times as are or may be required by the
laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall comply in all material respects with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to
12
time in force, so far as necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and the
Prospectus, or any amendments or supplements thereto. If at any time when a
prospectus relating to the Securities is required to be delivered under the
Act, any event shall have occurred as a result of which, in the opinion of
the Company or counsel for the Company or the Representative or the
Underwriters' Counsel, the Prospectus, as then amended or supplemented, would
include an 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 the light of the circumstances in which they were made, not
misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with the Act, the Company will promptly notify the
Representative and prepare and file, at the Company's expense, with the
Commission an appropriate amendment or supplement to the Registration
Statement or an amendment or supplement to the Prospectus which will correct
such statement or omission, or effect such compliance, each such amendment or
supplement to be reasonably satisfactory to the Representative and the
Underwriters' Counsel, and the Company will furnish to the Underwriters
copies of such amendment or supplement as soon as available and in such
quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later than
forty-five (45) days after the end of the twelve (12) month period beginning
after the effective date of the Registration Statement, the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) under the Act, and to the Representative, an earnings statement
which will comply with the provisions of Section 11(a) of the Act and Rule
158(a) promulgated under the Act.
(h) During the three (3) year period commencing on the date
hereof, so long as the Company has securities which are registered under the
Act or the Exchange Act or otherwise publicly tradeable and Common Stock
continues to be outstanding, the Company, at its expense, will furnish to its
stockholders, as soon as practicable, annual reports (including financial
statements audited by independent certified public accountants) and will
deliver to the Representative:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD,
Nasdaq or any securities exchange;
(iii) as soon as they are available, all press releases,
material news items or articles of interest to the financial community in
respect of the Company or its affairs which are released by or on behalf of
the Company; and
(iv) any additional information of a public nature concerning
the Company or its businesses which the Representative may request.
During such three (3) year period, if the Company has active
subsidiaries or is a partner or member in any venture or limited liability
company, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries
(including any venture or company of which it is a partner or member) are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary (as defined in the Rules and Regulations) which is not
so consolidated.
13
(i) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for the Common Stock.
(j) The Company will furnish to the Representative and the
Underwriters, without charge and at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any
prospectus prepared after the effective date of the Registration Statement
and any Term Sheet, in each case as soon as available and in such quantities
as the Representative may reasonably request.
(k) The Company will assist the Representative's efforts to obtain
the agreement of ▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "Principal Stockholder"), ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ Del Rey, each of the holders of the Consultant Warrants, and each
executive officer and director of the Company, for a period of twelve (12)
months following the effective date of the Registration Statement, not to,
directly or indirectly, offer, offer to sell, sell, grant an option for the
purchase or sale of, transfer, assign, pledge, hypothecate or otherwise
encumber or enter into any agreement to do any of the foregoing with respect
to any securities issued or issuable by the Company, whether or not owned by
or registered in the name of such person, or dispose of any interest therein
(whether pursuant to Rule 144 under the Act or otherwise), without the prior
written consent of the Representative (collectively, the "Lock-Up
Agreements"). On or before the Closing Date, the Company shall deliver
instructions to its transfer agent authorizing such transfer agent to place
appropriate legends on the certificates representing the securities subject
to the Lock-Up Agreements and to place appropriate stop transfer orders on
the Company's ledgers. The Company agrees that, for a period of twelve (12)
months commencing with the effective date of the Registration Statement,
except as contemplated hereby, it shall not, without the prior written
consent of the Representative, issue, sell, grant an option for the sale of,
assign, transfer, pledge, distribute or otherwise dispose of, directly or
indirectly, or agree or offer to do any of the foregoing, any shares of
Common Stock or any option, warrant or other contract right or security
convertible, directly or indirectly, into shares of Common Stock, other than
grants of options under the 1996 Plan as described (including, without
limitation, as to the maximum number of shares of Common Stock issuable
thereunder) in the Registration Statement and the issuance of shares of
Common Stock upon the exercise of options granted under the 1996 Plan and
Warrants outstanding as of the effective date of the Registration Statement.
(l) The Company will not take, and will take appropriate measures
to prevent any of its officers, directors, stockholders or affiliates (within
the meaning of the Rules and Regulations) from taking, directly or
indirectly, any action designed to illegally stabilize or manipulate the
price of any securities of the Company or which might be expected to cause or
result in, under the Exchange Act or otherwise, the illegal stabilization or
manipulation of the price of any security of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Securities offered to the public in the manner set forth under the caption
"Use of Proceeds" in the Prospectus and will file any and all required Form
SR's in a timely manner. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company.
(n) The Company shall timely file all registrations, reports,
forms or other documents as may be required (including, without limitation,
any Form SR required by Rule 463 under the Act) from time to time under the
Act, the Exchange Act and the Rules and Regulations, all such registrations,
reports, forms and other documents shall comply in all material respects as
to form and
14
substance with the applicable requirements under the Act, the Exchange Act and
the Rules and Regulations. The Company shall promptly provide to the
Representative and, upon request, the Underwriters copies of such registrations,
regulations, reports, forms or other documents.
(o) The Company shall furnish to the Representative as early as
practicable but in no event later than two (2) full business days prior to the
Closing Date and each Option Closing Date, a copy of the latest available
preliminary unaudited interim financial statements of the Company (which in no
event shall be as of a date more than forty-five (45) days prior to the date
hereof, the Closing Date or the relevant Option Closing Date, as the case may
be) which have been read by the Company's independent certified public
accountants, as stated in their letters to be furnished pursuant to Sections
7(i) and 7(j) hereof.
(p) The Company shall cause the Securities to be quoted on the SCM or
some other nationally recognized stock exchange and for a period of five (5)
years from the date hereof, the Company shall maintain the appropriate SCM or
stock exchange listing of the Securities so long as the Company continues to
have securities registered under the Act or the Exchange Act or otherwise
publicly tradeable and Securities continue to be outstanding and shall comply in
all material respects with all registration, filing, reporting and other
requirements of the SCM or such stock exchange, which may from time to time be
applicable to the Company.
(q) [Intentionally omitted]
(r) [Intentionally omitted]
(s) As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, the
Company shall file a Form 8-A with the Commission providing for the registration
under the Exchange Act of the Securities, which registration shall become
effective concurrently on such effective date, and (ii) but in no event more
than one hundred twenty (120) days after the effective date of the Registration
Statement, the Company shall take all necessary and appropriate actions to be
included in Standard & Poor's Corporation Manual and ▇▇▇▇▇'▇ Investors Services,
Inc. Manual and to continue such inclusion for a period of not less than five
(5) years or so long as the Company has securities which are registered under
the Act or the Exchange Act or otherwise publicly tradeable and Common Stock
continues to be outstanding.
(t) [Intentionally omitted]
(u) Until the completion of the distribution (as such term would be
applied under Rule 10b-6 promulgated under the Exchange Act) of the Firm Shares
and, if applicable, the Option Shares, to the public, the Company shall not,
without the prior written consent of the Representative, issue, directly or
indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary course of
the Company's business consistent with past practices with respect to the
Company's operations or except as specifically required by law as advised to the
Company by its outside counsel.
(v) Prior to the earlier of (i) the date which is six (6) years from
the effective date of the Registration Statement and (ii) the date of the
completion of the sale to the public of all of the Representative's Shares, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Form S-1 or SB-2 or, commencing one year from the date hereof,
15
Form S-3 (or other appropriate form), for the registration under the Act of the
Representative's Shares.
(w) For a period of three (3) years after the effective date of the
Registration Statement, the Company shall permit one (1) individual selected in
writing from time-to-time by Representative to attend all meetings of the
Company's board of directors as a non-voting advisor and to receive all notices
and other correspondence and communications sent by the Company to members of
its board of directors. Such advisor shall receive no compensation from the
Company. Such advisor shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings, including, without
limitation, food, lodging and transportation in accordance with the policy
established by the independent members of the Board of Directors. The Company
hereby agrees to indemnify and hold such advisor harmless, to the maximum extent
permitted by law, against any and all actions, suits, proceedings, inquiries,
arbitrations, investigations, litigation, governmental or other proceedings and
awards and judgments arising out of such individual's service as an advisor and,
in the event the Company maintains a liability insurance policy affording
coverage for the acts of its officers or directors, and/or in the event that the
Company has entered into an indemnification agreement with any of its officers
or directors, the Company agrees to include such advisor as an insured under
such insurance policy and/or to enter into an indemnification agreement with
such advisor which is at least as favorable to such individual as any
indemnification agreement that the Company has entered into with any of its
officers or directors. The rights and benefits of such indemnification and the
benefits of such insurance shall, to the maximum extent possible, extend to the
Representative insofar as it may be or may be alleged to have any obligation or
liability in connection with an action or inaction of such director or advisor.
(x) [Intentionally omitted]
(y) For a period of seven (7) years from the effective date of the
Registration Statement, the Company and all of its subsidiaries shall obtain and
maintain insurance policies, including, without limitation, general liability,
property, and personal liability insurance, and surety bonds which insure such
entities, their employees and such other persons to whom such entities may
become liable against such losses and risks generally insured against by
comparable businesses.
(z) For a period of five (5) years from the date hereof, the Company
will retain Deloitte & Touche LLP (or such other nationally-recognized
accounting firm qualified to practice in front of the Commission as is
reasonably acceptable to the Representative) as its independent certified public
accountants and, during such period, the Company will promptly submit to the
Representative, upon written request, copies of all accountant's management
reports, Company representation letters and similar correspondence between the
Company's accountants and the Company.
(aa) The Company shall at all times following the Closing Date have
reserved and available for issuance a sufficient number of shares of Common
Stock to be issued upon exercise of the Representative Warrant.
(ab) When the Registration Statement becomes effective and at all
times subsequent thereto up to and including the Closing Date and each Option
Closing Date, if any, and during such other periods as a prospectus may be
required to be delivered in connection with sales by any Underwriter or a
dealer, the Registration Statement and the Prospectus will contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and will comply in all material respects with
the requirements of the Act and the Rules and Regulations, and at and through
such dates, neither the Registration Statement, the Prospectus nor any
amendment
16
thereof or supplement thereto will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
6. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay (such payment to be made on
the Closing Date as part of the closing on such date and on each Option
Closing Date as part of the closing on such date (to the extent not paid on
the Closing Date or a previous Option Closing Date)) all expenses and fees
(other than fees of the Underwriters' Counsel not specifically provided for
in this Section 6) incident to the issuance, offer, sale and delivery of the
Securities and the performance of the obligations of the Company under this
Agreement and the Representative Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of each Preliminary Prospectus, the Registration Statement and the
Prospectus and any amendments and supplements or Term Sheets thereto and the
printing, mailing (including the payment of postage with respect thereto) and
delivery of this Agreement, all other underwriting documents (including
Agreements Among Underwriters, Underwriter's Questionnaires, Underwriter's
Powers of Attorneys and Selected Dealer Agreements), the Representative
Warrant Agreement and agreements with selected dealers, and related
documents, including the cost of all copies thereof and of each Preliminary
Prospectus and of the Prospectus and any amendments thereof or supplements
thereto supplied to each of the Underwriters and such dealers as the
Underwriters may request, in such quantities as the Underwriters may
reasonably request, (iii) all costs and expenses (including issue and
transfer taxes) incurred in connection with the printing, engraving,
issuance, sale and delivery of the Securities, including (x) the purchase by
each of the Underwriters, severally and not jointly, of the number of the
Securities from the Company set forth opposite its name on Schedule I to this
Agreement, (y) the consummation by the Company of any of its obligations
under this Agreement and the Representative Warrant Agreement and (z) the
resale of the Securities by each of the Underwriters in connection with the
distribution contemplated hereby, (iv) all costs and expenses incurred in
connection with the qualification of the Securities under state securities or
"blue sky" laws and the determination of the status of such securities under
legal investment laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and
the "Legal Investments Survey," if any, (v) the fees, costs and expenses
incurred in connection with any required filing with the NASD and obtaining a
determination from the NASD with respect to the fairness and reasonableness
of the underwriting terms and arrangements and disbursements and fees of
Jeffer, Mangels, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in connection with such determinations,
filings, documents and qualifications of the Securities, (vi) all advertising
costs and expenses, including costs and expenses in connection with "road
shows," information meetings and presentations, bound volumes and prospectus
memorabilia and "tombstone" advertisements, (vii) all costs and expenses
incurred in connection with due diligence investigations by an independent
third party, subject to the Company's prior approval which shall not be
unreasonably withheld, including the fees of any independent counsel (other
than Jeffer, Mangels, ▇▇▇▇▇▇ & Marmaro LLP) or consultants, (viii) the fees
and expenses of a transfer agent and registrar for the Securities, (ix) the
fees payable to the Commission and (x) the fees and expenses incurred in
connection with the listing of the Securities on the SCM and any other
exchange.
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 7 or 12 hereof, or if the transactions
contemplated hereby are not consummated by the Company for any reason, the
Company shall reimburse and indemnify the Underwriters for all
17
of their accountable expenses, including, without limitation, all of the fees
and disbursements of Underwriters' Counsel (including, without limitation,
the fees of the Underwriters' Counsel specifically provided for herein).
(c) The Company further agrees that, in addition to the expenses
payable pursuant to Section 7(a) hereof, it will pay to you, individually and
not in your capacity as the Representative, on the Closing Date by certified or
bank cashier's check, or, at your election, by deduction from the proceeds of
the offering of the Firm Shares, a non-accountable expense allowance equal to
three percent (3.0%) of the aggregate offering proceeds from the sale of the
Firm Shares. In the event the Underwriters elect to exercise all or any part of
the over-allotment option described in Section 4(b) hereof, the Company agrees
to pay to you, individually and not in your capacity as the Representative, on
each Option Closing Date, by certified or bank cashier's check, or, at your
election, by deduction from the proceeds of the Option Shares purchased on such
Option Closing Date, a non-accountable expense allowance equal to three percent
(3.0%) of the aggregate offering proceeds from the sale of such Option Shares.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of each
of the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date and each Option Closing Date, if
any, of the statements of officers of the Company made and certificates of
officers of the Company delivered pursuant to the provisions hereof; and the
performance by the Company and on and as of the Closing Date and each Option
Closing Date, if any, of all of its covenants and obligations hereunder which
are possible to perform on and as of such date and to the following further
conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 p.m., New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, and, at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceedings for that purpose shall have been initiated or shall be
pending, threatened or contemplated by the Commission or any State or other
regulatory body and any request on the part of the Commission or any State or
other regulatory body for additional information shall have been complied with
to the reasonable satisfaction of the Representative and the Underwriters'
Counsel. If the Company has elected to rely upon Rule 430A under the Act, the
price of the Securities and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) under the
Act within the prescribed time period or shall have been delivered and shall
have been filed with the Commission as required by Rule 434 under the Act, as
applicable, and, prior to the Closing Date, the Company shall have provided
evidence satisfactory to the Representative of such timely filing, or a post-
effective amendment providing such information shall have been promptly filed
and declared effective in accordance with the requirements of Rule 430A under
the Act. Neither the Registration Statement nor the Prospectus nor any
amendment thereto or supplement thereof (including a Term Sheet) shall have been
filed to which the Representative shall have reasonably objected after it shall
have had the chance to review such amendment or supplement unless the Company's
outside counsel reasonably determines in a written opinion that such amendment
or supplement is required to be filed pursuant to applicable law.
(b) No Underwriter shall have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is
18
material, or omits to state a fact which, in the Representative's opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, or that the Prospectus, or any amendment or supplement
(including any Term Sheet) thereto, contains an untrue statement of fact
which, in the Representative's opinion, is material, or omits to state a fact
which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall have
received from the Underwriters' Counsel such opinion or opinions with respect to
the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and such other related matters as the
Representative may request and the Underwriters' Counsel shall have received
such papers and information as it may request in order to enable it to pass upon
such matters.
(d) At the Closing Date, the Representative shall have received the
favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Company, and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, the Company's General Counsel, each dated as of the Closing Date,
addressed to the Representative, in form and substance satisfactory to the
Underwriters' Counsel and subject to customary qualifications and conditions,
with respect to the matters set forth in Schedules II and III, respectively,
attached hereto and incorporated herein by this reference.
In rendering its opinion, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ may rely as to matters of
fact, to the extent it deems proper, on certificates and written statements of
responsible officers of the Company and certificates or other written statement
of officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such opinions, statements or certificates shall be delivered
to the Representative and the Underwriters' Counsel.
At each Option Closing Date, if any, the Representative shall have
received the favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, dated
as of such Option Closing Date, addressed to the Representative and in form and
substance satisfactory to Underwriters' Counsel confirming as of such Option
Closing Date the statements made by ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in
their respective opinions delivered on the Closing Date.
(e) On or prior to the Closing Date and each Option Closing Date, if
any, the Underwriters' Counsel shall have been furnished with such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to review or pass upon the matters referred to in Section 7(c)
hereof, or in order to evidence the accuracy, completeness or satisfaction of
any of the representations, warranties or conditions of the Company herein
contained.
(f) Prior to the Closing Date and each Option Closing Date, if any,
(i) there shall have been no adverse change or development involving a
prospective adverse change in the condition (financial or otherwise), earnings,
business affairs, position, stockholders' equity, operations, properties,
businesses or results of operations of the Company from the latest dates as of
which such matters are set forth in the Registration Statement and the
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business and consistent with past practices, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and the Prospectus, which may in any
way be materially adverse to the Company; (iii) the Company shall not be in
default, and no event shall have occurred which, with notice, lapse of time or
both, would constitute a default, under any provision of any agreement,
19
instrument or other document relating to any outstanding indebtedness, except
where such a default or event would not have a Material Adverse Effect; (iv) the
Company shall not have issued any securities (other than the Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class, and there shall not have been any change in the capital
stock, or any change in the debt (long- or short-term) or liabilities or
obligations (contingent or otherwise), of the Company except as provided for
herein; (v) no material amount of the property or assets (tangible or
intangible) of the Company shall have been pledged, mortgaged or otherwise
encumbered; and (vi) no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding (including,
without limitation, those pertaining to environmental, health or similar
matters) shall be pending or threatened to which the Company is subject or to
which any property or assets (tangible or intangible) of the Company are subject
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect and except as set forth in the Registration Statement and Prospectus and
except for debts, liabilities and obligations incurred in the normal course of
business consistent with past practices.
(g) At the Closing Date and each Option Closing Date, if any, the
Representative shall have received a certificate of the Company, signed by the
principal executive officer, the chief financial or chief accounting officer of
the Company, each such certificate to be dated the Closing Date or such Option
Closing Date, as the case may be, to the effect that the person(s) executing the
certificate has carefully examined the Registration Statement, the Prospectus
and this Agreement, and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made on and as of
the Closing Date or such Option Closing Date, and that the Company has complied
in all material respects with all agreements and covenants and satisfied all
conditions contained in this Agreement to be performed or satisfied at or prior
to the Closing Date or such Option Closing Date, as the case may be;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no proceedings
for that purpose have been initiated or are pending, contemplated or threatened;
(iii) the Registration Statement, the Prospectus and each
amendment and supplement thereto, if any, contain all statements and information
required to be included therein, and neither the Registration Statement nor any
amendment thereto, at the time such Registration Statement or amendment became
effective and as of the date of such certificate included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and neither
any Prospectus nor any supplement thereto, at the date of such Prospectus or
supplement thereto and at the date of such certificate, included any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; and
(iv) subsequent to the latest respective dates as of which
information is given in the Registration Statement and the Prospectus, (A) the
Company has not incurred any liabilities or obligations, direct, indirect or
contingent, other than in the ordinary course of business; (B) the Company has
not paid or declared any dividends or other distributions on its capital stock
or other ownership interests; (C) the Company has not entered into any
transactions not in the ordinary course of business; (D) there has not been any
change in the capital stock, long-term debt or short-term debt (other than any
increase in short-term debt in the ordinary course of business) of the Company;
(E) other than ordinary wear and tear, the Company has not sustained any
material loss or damage to
20
its property or assets (tangible and intangible), whether or not insured; (F)
there is no litigation which is pending or threatened against the Company
which is required to be set forth in an amended or supplemented Prospectus
which has not been so set forth; and (G) there has occurred no event required
to be set forth in an amended or supplemented Prospectus which has not been
so set forth.
References to the Registration Statement and the Prospectus in this Section 8(g)
are to such documents as amended and supplemented at the date of such
certificate.
(h) By the effective date of the Registration Statement, the
Representative shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriters, in the amount as
described in the Registration Statement.
(i) At or prior to the time this Agreement is executed, the
Representative shall have received a letter, dated such date, addressed to the
Representative and in form and substance satisfactory in all respects to the
Representative from Deloitte & Touche, L.L.P.:
(i) confirming that it is an accounting firm of independent
certified public accountants with respect to the Company within the meaning of
the Act and the Rules and Regulations;
(ii) stating its opinion that the financial statements and
schedules of the Company included in the Registration Statement comply as to
form in all material respects with the applicable accounting requirements of the
Act and the Rules and Regulations and that each of the Underwriters may rely
upon the opinion of Deloitte & Touche, L.L.P. with respect to such financial
statements and schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and the board of directors, including any
committees of the board of directors, of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to its attention which would lead it to believe that (A) the unaudited
financial statements and schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements of the Company included in the Registration Statement or (B) at a
specified date not more than five (5) days prior to the effective date of the
Registration Statement, there has been any change in the capital stock, short-
term debt or long-term debt of the Company, or any decrease in the stockholders'
equity or net current assets or net assets of the Company as compared with
amounts shown in the December 31, 1996 balance sheet included in the
Registration Statement or, if there was any change or decrease, setting forth
the amount of such change or decrease, or (C) during the period from January 1,
1997 to a specified date not more than five (5) days prior to the effective date
of the Registration Statement, there was any decrease in revenues, net income or
net earnings per share of Common Stock, in each case as compared with the
corresponding period beginning January 1, 1996, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) stating that it has compared specific dollar amounts,
numbers of shares, percentages, statements and other financial information
pertaining to the Company set forth in the
21
Registration Statement, in each case to the extent that such amounts,
numbers, percentages, statements and information may be derived from the
general accounting records, including work sheets or analysis, of the Company
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;
(v) stating it has read the unaudited financial statements
referred to in Section 5(o) hereof; and
(vi) statements as to such other matters as the Representative
may reasonably request.
(j) At the Closing Date and each Option Closing Date, if any, the
Representative shall have received from Deloitte & Touche, L.L.P. a letter,
dated as of the Closing Date or such Option Closing Date, as the case may be, to
the effect that (i) it reaffirms that statements made in the letter furnished
pursuant to Section 6(i) hereof, (ii) if the Company has elected to rely on Rule
430A under the Act or a Term Sheet under Rule 434, to the further effect that it
has carried out procedures as specified in clause (iv) of such Section 6(i) with
respect to certain amounts, numbers, percentages, statements and other financial
information as specified by the Representative and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) or 434 and has found such
amounts, numbers, percentages, statements and other financial information to be
in agreement with the documents specified in such clause (iv); and (iii) it has
read the unaudited financial statements referred to in Section 5(o) hereof.
(k) On the Closing Date and each Option Closing Date, if any, there
shall have been duly tendered to the Representative the appropriate number of
Securities.
(l) No order suspending the sale of the shares in any jurisdiction
designated by the Representative pursuant to Section 5(e) hereof shall have been
issued on either the Closing Date or any Option Closing Date, and no proceedings
for that purpose shall have been initiated or shall be pending, contemplated or
threatened.
(m) On or before the Closing Date, the Company shall have executed
and delivered to you, individually and not in your capacity as the
Representative, the Representative Warrant Agreement, substantially in the form
filed as Exhibit 4.2 to the Registration Statement. The executed version of the
Representative Warrant Agreement shall be reasonably satisfactory to you.
(n) On or before the effective date of the Registration Statement,
the Securities shall have been duly approved for quotation on the SCM.
(o) On or before the effective date of the Registration Statement,
the Company shall provide the Representative with true copies of executed Lock-
Up Agreements.
(p) The Company shall provide the Representative with such additional
documents and certificates as the Representative may reasonably request.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or at any Option Closing Date, as the case may
be, is not so fulfilled, the Underwriters may terminate this Agreement, without
liability to any of the Underwriters, or, if the Representative
22
so elects in its sole discretion, it may waive any such conditions which have
not been fulfilled or extend the time for their fulfillment.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter (for purposes of this Section 8, "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of each
Underwriter), and each person, if any, who controls any of the Underwriters, as
applicable ("controlling person"), within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses (including, without limitation, reasonable attorneys,
fees and expenses) or liabilities and all actions, suits, proceedings,
inquiries, arbitrations, investigations, litigation or governmental or other
proceedings (in this Section 8, collectively, "actions") in respect thereof,
whatsoever (including, without limitation, any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any action,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which any Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained (i) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Securities; (iii) in any application or other
document or written communication (in this Section 8, collectively,
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities or "blue sky" laws thereof or filed with the Commission,
any state securities commission or agency, the NASD or the SCM or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in light of the circumstances in which they were made), unless
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company by the Selling Stockholders or the
Representative with respect to an Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment thereof or supplement (including any Term Sheet) thereto, or in any
application, as the case may be. In addition to its other obligations under
this Section 8(a), the Company agrees that, as an interim measure during the
pendency of any action arising out of or based upon any untrue statement or
omission, or alleged untrue statement or alleged omission as described in this
Section 8(a), it will reimburse each Underwriter (and, to the extent applicable,
each controlling person), on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such action,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligations to reimburse each Underwriter and
(and, to the extent applicable, each controlling person), for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement is so held to have been improper as to the Company, each
Underwriter (and, to the extent applicable, each controlling person), shall
promptly return it to the Company together with interest compounded daily, based
on the "reference rate" announced from time to time by Bank of America NTSA (the
"Prime Rate"), but in no case more than is allowed by applicable law. Any such
interim reimbursement payments which are not made to an Underwriter, or a
controlling person, as applicable, within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request. Notwithstanding the foregoing or anything to the contrary in this
Agreement, the Company shall provide no indemnity and shall not hold harmless
the Representative or any Underwriter for any claims arising from or relating to
a Preliminary Prospectus where the Representative or Underwriter
23
failed to circulate a revised Preliminary Prospectus (if a revised
Preliminary Prospectus is prepared by the Company) or deliver the Final
Prospectus.
The indemnity agreement in this Section 8(a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each Underwriter severally, but not jointly, agrees to
indemnity and hold harmless the Company (for purposes of this Section 8,
"Company" shall include the officers, directors, partners, employees, agents
and counsel of the Company) and each other person, if any, who control the
Company ("controlling person") within the meaning of the Act, to the same
extent as the foregoing indemnity from the Company to each Underwriter, but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement (including any Term Sheet) thereto or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company by the Representative with respect to
such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment thereof or
supplement (including any Term Sheet) thereto or in any application. The
Company acknowledges that the statements set forth under the heading
"Underwriting" (other than statements regarding ▇▇▇▇ ▇▇▇▇▇▇▇▇), the risks
factors entitled "Inexperienced Representative" and "Representative's
Potential Influence on the Market," statements regarding waiver or release of
lock-up restrictions, and the stabilization legend in the Prospectus have
been furnished by the Representative with respect to the Underwriters
expressly for use therein and constitute the only information furnished in
writing by the Representative with respect to the Underwriters for inclusion
in any Preliminary Prospectus, the Registration Statement or the Prospectus.
In addition to its other obligations under this Section 8(b), each
Underwriter severally, but not jointly, agrees that, as an interim measure
during the pendency of any action arising out of or based upon any untrue
statement or omission, or alleged untrue statement or alleged omission as
described in this Section 8(b), it will reimburse Company and (and, to the
extent applicable, each controlling person) on a monthly basis for all
reasonable legal or other expenses incurred in connection with investigating
or defending any such action, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of such Underwriter's
obligations to reimburse the Company (and, to the extent applicable, each
controlling person) for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement is so held
to have been improper as to such Underwriter, such Underwriter (and, to the
extent applicable, each controlling person) shall promptly return it to the
Company, together with interest compounded daily, based on the Prime Rate,
but in no case more than is allowed by applicable law. Any such interim
reimbursement payments which are not made to the Company within thirty (30)
days of a request for reimbursement shall bear interest at the Prime Rate
from the date of such request. Notwithstanding the provisions of this
Section 8(b), no Underwriter shall be required to indemnify or hold harmless
the Company, or any controlling person for, in the aggregate, any amounts in
excess of the underwriting discount applicable to the Securities purchased by
such Underwriter hereunder.
The indemnity agreement in this Section 8(b) shall be in addition to any
liability which each Underwriter severally, but not jointly, may have at
common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 8 except to the extent that it has been materially
prejudiced by such failure). In case any such action is
24
brought against any indemnified party, and it notifies an indemnifying party
or parties of the commencement thereof, the indemnifying party or parties
shall be entitled to participate therein, and to the extent it or they may
elect by written notice delivered to the indemnified party or parties
promptly after receiving the aforesaid notice from such indemnified party or
parties, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party. Notwithstanding the foregoing, an indemnified
party shall have the right to employ its own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying party or parties in connection with
the defense of such action at the expense of the indemnifying party or
parties, (ii) the indemnifying party or parties shall not have employed
counsel reasonably satisfactory to such indemnified party to have charge of
the defense of such action within a reasonable time after notice of
commencement of the action or (iii) such indemnified party shall have
reasonably concluded that there may be one or more defenses available to it
which are different from or additional to those available to one or all of
the indemnifying parties (in which case the indemnifying parties shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
of one additional counsel (in addition to appropriate local counsel) shall be
borne by the indemnifying parties. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition
to appropriate local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 9 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement
of any claim or action effected without its written consent; PROVIDED,
HOWEVER, that such consent may not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 8, but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the
fact that the express provisions of this Section 8 provide for
indemnification in such case or (ii) contribution under the Act may be
required on the part of any indemnified party, then each indemnifying party
shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by
each of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, from the offering of the Securities or (B) if
the allocation provided by clause (A) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (A) above but also the relative fault of each
of the contributing parties, on the one hand, and the party to be
indemnified, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company, 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 offering of the
Securities (before deducting expenses) bear to the total underwriting
discounts received by the Underwriters hereunder, in each case as set forth
in the table on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company, or by
the Representative with respect to an Underwriter, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to in the first sentence of this Section
8(d) shall be deemed to include any
25
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Underwriter shall be
required to contribute any amount in excess of the underwriting discount
applicable to the Securities purchased by such Underwriter hereunder. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act and the cases and promulgations thereunder) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8(d), each
person, if any, who controls the Company, or an Underwriter within the
meaning of the Act, each officer of the Company who has signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Underwriters, or the Company, as the case may
be, subject in each case to the provisions of this Section 9(d). Any party
entitled to contribution will, promptly after receipt of notice of
commencement of any action against such party in respect to which a claim for
contribution may be made against another party or parties under this Section
8(d), notify such party or parties from whom contribution may be sought, but
the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or
they may have hereunder or otherwise than under this Section 8(d) except to
the extent it has been materially prejudiced by such failure. The
contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
The Underwriters' obligations in this Section 8(d) to contribute are several
in proportion to their respective underwriting obligations and not joint.
(e) The indemnity and contribution agreements contained in this
Section 9 and the representations and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter, the Company, its directors or
officers or any person controlling the Company, (ii) acceptance of any
Securities and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
(including any Term Sheet) thereto, each party against whom contribution may
be sought under this Section 8 hereby consents to the jurisdiction of any
court having jurisdiction over any other contributing party, agrees that
process issuing from such court may be served upon him or it by any other
contributing party and consents to the service of such process and agrees
that any other contributing party may join him or it as an additional
defendant in any such proceeding in which such other contributing party is a
party.
9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties, covenants and agreements contained in this
Agreement, or contained in certificates of officers of the Company or
delivered pursuant hereto, shall be deemed to be representations, warranties,
covenants and agreements at the Closing Date and at each Option Closing Date,
as the case may be, and such representations, warranties, covenants and
agreements of the Company and the respective indemnity and contribution
agreements contained in Section 8. hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Representative, any of the Underwriters or the Company and shall survive the
termination of this Agreement and the issuance, sale and delivery of the
Securities to the Underwriters.
26
10. EFFECTIVE DATE. This Agreement shall become effective at 10:00
a.m., New York City time, on the date hereof, or at such earlier time after
the Registration Statement becomes effective as the Representative, in its
sole discretion, shall release the Securities for sale to the public;
PROVIDED, HOWEVER, that the provisions of Sections 6, 8 and 11 hereof shall
at all times be effective. For purposes of this Section 10, the Securities
to be purchased hereunder shall be deemed to have been so released upon the
earlier of dispatch by the Representative of telegrams or facsimile
transmissions to securities dealers releasing such Securities for offering or
the release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Securities.
11. TERMINATION.
(a) The Representative shall have the right to terminate this
Agreement after it becomes effective, the exercise of which shall be
determined in the Representative's sole discretion, if: (i) any domestic or
international event or act or occurrence has, as determined in the
Representative's sole judgment, disrupted, or in the Representative's sole
judgment will in the immediate future materially disrupt, the financial
markets; or (ii) any material adverse change, as determined in the
Representative's sole judgment, in the financial markets shall have occurred;
or (iii) trading on the New York Stock Exchange, the American Stock Exchange,
the SCM, Nasdaq National Market or the over-the-counter market shall have
been suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required
on the over-the-counter market by the NASD or the Commission or any other
governmental authority having jurisdiction; or (iv) the United States shall
have become involved in a war or in hostilities, or there shall have been an
escalation in an existing war or hostilities or a national emergency shall
have been declared in the United States; or (v) a banking moratorium shall
have been declared by any Delaware, California or federal authority or body;
or (vi) a moratorium in foreign exchange trading shall have been declared; or
(vii) the Company shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Representative's sole judgment, make it inadvisable to
proceed with the offering, sale or delivery of the Securities; or (viii)
there shall have been a material adverse change or development involving a
material prospective change, in the condition (financial or otherwise),
earnings, business affairs, position, prospects, stockholders' equity,
operations, obligations, properties, businesses, management or results of
operations of the Company taken as a whole, whether or not arising in the
ordinary course of business, or (ix) if there shall have been a material
adverse change in the general market, political or economic conditions,
whether in the United States or elsewhere, as in the Representative's sole
judgment would make it inadvisable to proceed with the offering, sale or
delivery of the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, in the event of any termination of this Agreement (including,
without limitation, pursuant to Sections 7, 11(a) or 12 hereof), and whether
or not this Agreement is otherwise carried out, the provisions of Sections 6
and 8 hereof shall remain effective and shall not in any way be affected by
such termination or failure to carry out the terms of this Agreement or any
part hereof.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell and deliver hereunder on
such date, then this Agreement shall terminate (or, if such default shall
occur with respect to any Option Shares to be purchased on an Option Closing
Date, the Underwriters may, in the Representative's sole discretion, by
notice from the Representative to the Company, terminate the Underwriters'
obligation to purchase such Option Shares from the Company on such
27
date) with no liability whatsoever on the part of any non-defaulting party
other than pursuant to Sections 6, 8 and 11 hereof. No action taken pursuant
to this Section 12 shall relieve the Company from liability, if any, in
respect of such default.
13. SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Securities which it has agreed to
purchase under this Agreement, the non-defaulting Underwriters shall be
obligated to purchase (in the respective proportions which the number of
Securities set forth opposite the name of each non-defaulting Underwriter in
Schedule I to this Agreement bears to the total number of Securities set
forth opposite the names of all the non-defaulting Underwriters in Schedule I
to this Agreement) the Securities which the defaulting Underwriter agreed but
failed to purchase; except that the non-defaulting Underwriters shall not be
obligated to purchase any of the Securities if the total number of Securities
which the defaulting Underwriter or Underwriters agreed but failed to
purchase exceeds 10% of the total number of Securities, and any
non-defaulting Underwriter shall not be obligated to purchase more than 110%
of the number of Securities set forth opposite its name in Schedule I to this
Agreement plus the total number of Option Shares purchasable by it pursuant
to the terms of Section 3(b) hereof. If the foregoing maximums are exceeded,
the non-defaulting Underwriters, and any other underwriters satisfactory to
you who so agree, shall have the right, but shall not be obligated, to
purchase (in such proportions as may be agreed upon among them) all the
Securities. If the non-defaulting Underwriters or the other underwriters
satisfactory to you do not elect to purchase the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase, this
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter, the Company except for the payment of expenses to be borne by
the Company as provided in Section 6(a) hereof and the indemnify and
contribution agreements of the Company and the Underwriters contained in
Section 8 hereof; PROVIDED, HOWEVER, that this provision shall not affect any
Closing which at the time of such termination already shall have taken place.
Nothing contained herein shall relieve a defaulting Underwriter of
any liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agreed to purchase the
Securities of a defaulting Underwriter, either you or the Company may
postpone the Closing Date for up to seven full Business Days in order to
effect any changes that may be necessary in the Registration Statement, the
Prospectus or in any other document or agreement, and to file promptly any
amendments or any supplements to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary.
14. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed, delivered by hand or transmitted by
any standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representative at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇ ▇▇▇▇▇▇▇, with a copy to Jeffer, Mangels, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP, 2121 Avenue of the Stars, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. Notices to the Company shall be
directed to the Company at ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: President, with a copy to, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
15. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters and the Company and the controlling
persons, officers, directors and others referred to in Section 9 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right,
remedy or claim under or in
28
respect of or by virtue of this Agreement or any provisions herein contained.
No purchaser of Securities from an Underwriter shall be deemed to be a
successor merely by reason of such purchase.
16. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California, without
giving effect to conflict of laws principles thereof.
17. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an
original, and all of which taken together shall be deemed to he one and the
same instrument. Delivery of executed copies of this Agreement by facsimile
transmission shall be deemed to be delivery of an original, executed copy of
this Agreement by the transmitting party.
18. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Representative Warrant Agreement constitute the entire agreement of the
parties hereto concerning the subject matter hereof and supersede all prior
written or oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may not be amended, modified or
altered except in a writing signed by the Representative and the Company.
29
If the foregoing correctly sets forth the understanding among the
parties hereto, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
SCOOP, INC., A DELAWARE CORPORATION
By:
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
Confirmed and accepted as of
the date first above written.
SHAMUS GROUP, INC.
AS REPRESENTATIVE FOR THE
SEVERAL UNDERWRITERS NAMED
IN SCHEDULE I ATTACHED HERETO
By:
--------------------------------
▇▇▇ ▇▇▇▇▇▇▇
Title:
30
SCHEDULE I
----------
UNDERWRITER NUMBER OF SHARES
----------- ----------------
Shamus Group, Inc.
TOTAL 1,300,000