1
G15 EXHIBIT 1.1
1,200,000 Units
(each Unit consisting of (i) one share of Common
Stock, par value $.001 per share and (ii) one redeemable
Class A warrant to purchase
one share of Common Stock
PIRANHA INTERACTIVE PUBLISHING, INC.
UNDERWRITING AGREEMENT
▇.▇. ▇▇▇▇▇ Investment Banking Corp. March __, 1997
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
PIRANHA INTERACTIVE PUBLISHING, INC., a Nevada corporation
(the "Company"), proposes to issue and sell to ▇.▇. ▇▇▇▇▇ Investment Banking
Corp. (the "Underwriter") subject to the terms and conditions of this
Underwriting Agreement (the "Agreement"), an aggregate of 1,200,000 Units, each
unit being hereinafter referred to as a "Unit" and consisting of (i) one share
of Common Stock, par value $.001 per share, ("Shares") and (ii) one redeemable
Class A warrant ("Class A Warrant") to purchase one share of Common Stock at a
price of $6.50 from March __, 1997 to March __, 2002. The Class A Warrants are
referred to as the "Warrants". The Warrants are subject to redemption, in
certain instances commencing one year from the date of this Agreement. In
addition, the Company proposes to grant to the Underwriter, the option referred
to in Section 2(b) to purchase all or any part of an aggregate of 180,000
additional Units. Unless the context otherwise indicates, the term "Units" shall
include the 180,000 additional Units referred to above.
The aggregate of 1,200,000 Units to be sold by the Company,
together with all or any part of the 180,000 Units which the Underwriter has the
option to purchase, and the Shares and the Warrants comprising such Units, are
herein called the "Units." The Common Stock of the Company to be outstanding
after giving effect to the sale of the Shares is herein called the "Common
Stock." The Shares and Warrants included in the Units (including the Units which
the Underwriter has the option to purchase) are herein collectively called the
"Securities."
You have advised the Company that you desire to purchase the
Units. The Company confirms the agreements made by it with respect to the
purchase of the Units by you as follows:
1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the Underwriter that:
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(a) A registration statement (File No.
333-18605) on Form SB-2 relating to the public offering of the Units, including
a form of prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission under the Act and one or more amendments to such registration
statement may have been so filed. After the execution of this Agreement, the
Company will file with the Commission either (i) if such registration statement,
as it may have been amended, has been declared by the Commission to be effective
under the Act, either (A) if the Company relies on Rule 434 under the Act, a
Term Sheet (as hereinafter defined) relating to the Units that shall identify
the Preliminary Prospectus (as hereinafter defined) that it supplements
containing such information as is required or permitted by Rules 434, 430A and
424(b) under the Act or (B) if the Company does not rely on Rule 434 under the
Act a prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in such
registration statement), with such changes or insertions as are required by Rule
430A under the Act or permitted by Rule 424(b) under the Act and in the case of
either clause (i)(A) or (i)(B) of this sentence, as has been provided to and
approved by the Underwriter prior to the execution of this Agreement, or (ii) if
such registration statement, as it may have been amended, has not been declared
by the Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Underwriter prior to the
execution of this Agreement.
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); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment 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 (A) if the Company relies on Rule 434 under the Act, the Term
Sheet relating to the Units 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; (B) 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 (C) if the Company does not rely on Rule 434 under the Act and
if no prospectus is required to be filed pursuant to said Rule 424(b), such term
means the prospectus included in the Registration Statement; except that if such
registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement and prior
to the Option Closing Date (as hereinafter defined), the terms "Registration
Statement" and "Prospectus" shall include such registration statement and
prospectus as so amended, and the term "Prospectus" shall include the prospectus
as so supplemented, or both, as the case may be; and the term "Term Sheet" means
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any term sheet that satisfies the requirements of Rule 434 under the Act. Any
reference to the "date" of a Prospectus that includes a Term Sheet shall mean
the date of such Term Sheet.
(b) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus. At the time the
Registration Statement becomes effective and at all times subsequent thereto up
to and on the First Closing Date (as hereinafter defined) or the Option Closing
Date, as the case may be, (i) the Registration Statement and Prospectus will in
all respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus will
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make statements therein not
misleading; provided, however, that the Company makes no representations,
warranties or agreements as to information contained in or omitted from the
Registration Statement or Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus on page 2 with respect to stabilization,
under the heading "Underwriting" and the identity of counsel to the Underwriter
under the heading "Legal Matters" constitute the only information furnished in
writing by or on behalf of the Underwriter for inclusion in the Registration
Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect the Company's
business, properties or financial condition.
(d) The authorized, issued and outstanding
capital stock of the Company as of December 31, 1996 is as set forth in the
Prospectus under "Capitalization"; the shares of issued and outstanding capital
stock of the Company set forth thereunder have been duly authorized, validly
issued and are fully paid and non-assessable; except as set forth in the
Prospectus, no options, warrants, or other rights to purchase, agreements or
other obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been granted or
entered into by the Company; and the capital stock conforms to all statements
relating thereto contained in the Registration Statement and Prospectus.
(e) The Units and the Shares are duly
authorized, and when issued and delivered pursuant to this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights of any security holder of the Company. Neither the filing of
the Registration Statement nor the offering or sale of the Units as contemplated
in this Agreement gives rise to any rights, other than those which have been
waived or satisfied, for or
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relating to the registration of any shares of Common Stock, except as described
in the Registration Statement.
The Warrants have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Common Stock issuable
upon exercise of the Warrants have been reserved for issuance upon the exercise
of the Warrants and when issued in accordance with the terms of the Warrants and
Warrant Agreement, will be duly and validly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights and no personal liability
will attach to the ownership thereof. The Warrant Agreement has been duly
authorized and, when executed and delivered pursuant to this Agreement, will
have been duly executed and delivered and will constitute the valid and legally
binding obligation of the Company enforceable in accordance with its terms. The
Warrants and the Warrant Agreement conform to the respective descriptions
thereof in the Registration Statement and Prospectus.
The Shares and the Warrants contained in the Unit Purchase
Option (as hereinafter defined) have been duly authorized and, when duly issued
and delivered, such Warrants will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms and
entitled to the benefits provided by the Unit Purchase Option. The Shares
included in the Unit Purchase Option (and the shares of Common Stock issuable
upon exercise of such Warrants) when issued and sold, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights and
no personal liability will attach to the ownership thereof.
(f) This Agreement, the Unit Purchase Option,
the M/A Agreement, the Consulting Agreement and the Escrow Agreement have been
duly and validly authorized, executed and delivered by the Company. The Company
has full power and lawful authority to authorize, issue and sell the Units to be
sold by it hereunder on the terms and conditions set forth herein, and no
consent, approval, authorization or other order of any governmental authority is
required in connection with such authorization, execution and delivery or with
the authorization, issue and sale of the Units or the Unit Purchase Option,
except such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the
Company is not in violation, breach or default of or under, and consummation of
the transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the
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Company may be bound or to which any of the property or assets of the Company is
subject, nor will such action result in any violation of the provisions of the
articles of incorporation or the by-laws of the Company, as amended, or any
statute or any order, rule or regulation applicable to the Company of any court
or of any regulatory authority or other governmental body having jurisdiction
over the Company.
(h) Subject to the qualifications stated in the
Prospectus, the Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to its business; all of the material leases
and subleases under which the Company is the lessor or sublessor of properties
or assets or under which the Company holds properties or assets as lessee or
sublessee as described in the Prospectus are in full force and effect, and,
except as described in the Prospectus, the Company is not in default in any
material respect with respect to any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone adverse to rights
of the Company as lessor, sublessor, lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the right of the
Company to continued possession of the leased or subleased premises or assets
under any such lease or sublease except as described or referred to in the
Prospectus; and the Company owns or leases all such properties described in the
Prospectus as are necessary to its operations as now conducted and, except as
otherwise stated in the Prospectus, as proposed to be conducted as set forth in
the Prospectus.
(i) Coopers & ▇▇▇▇▇▇▇ LLP, independent auditors,
who have given their reports on certain financial statements filed and to be
filed with the Commission as a part of the Registration Statement, which are
incorporated in the Prospectus, are with respect to the Company, independent
public accountants as required by the Act and the Rules and Regulations.
(j) The financial statements, and Schedules
together with related notes, set forth in the Prospectus (or if the Prospectus
is not in existence, the most recent Preliminary Prospectus) or the Registration
Statement present fairly the financial position and results of operations and
changes in cash flow position of the Company on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Said statements and Schedules and related notes have been
prepared in accordance with generally accepted accounting principles applied on
a basis which is consistent during the periods involved. The information set
forth under the captions "Dilution", "Capitalization", and "Selected Financial
Data" in the Prospectus fairly present, on the basis stated in the Prospectus,
the information included therein.
(k) Subsequent to the respective dates as of
which information is given in the Registration Statement and Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus), the
Company has not incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and there has not
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been any change in the capital stock of, or any incurrence of short-term or
long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or any
development involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company and the
Company has not become a party to, and neither the business nor the property of
the Company has become the subject of, any material litigation whether or not in
the ordinary course of business.
(l) Except as set forth in the Prospectus, there
is not now pending or, to the knowledge of the Company, threatened, any action,
suit or proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of the
Company exist or are imminent which might be expected to adversely affect the
conduct of the business, property or operations or the financial condition or
results of operations of the Company.
(m) Except as disclosed in the Prospectus, the
Company has filed all necessary federal, state and foreign income and franchise
tax returns and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been or to the knowledge of the Company might be asserted
against the Company.
(n) The Company has sufficient licenses, permits
and other governmental authorizations currently required for the conduct of its
business or the ownership of its properties as described in the Prospectus and
is in all material respects complying therewith and owns or possesses adequate
rights to use all material patents, patent applications, trademarks, service
marks, trade-names, trademark registrations, service ▇▇▇▇ registrations,
copyrights and licenses necessary for the conduct of such business and had not
received any notice of conflict with the asserted rights of others in respect
thereof. To the best knowledge of the Company, none of the activities or
business of the Company are in violation of, or cause the Company to violate,
any law, rule, regulation or order of the United States, any state, county or
locality, or of any agency or body of the United States or of any state, county
or locality, the violation of which would have a material adverse impact upon
the condition (financial or otherwise), business, property, prospective results
of operations, or net worth of the Company.
(o) The Company has not, directly or indirectly,
at any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The
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Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(p) On the Closing Dates (hereinafter defined)
all transfer or other taxes, (including franchise, capital stock or other tax,
other than income taxes, imposed by any jurisdiction) if any, which are required
to be paid in connection with the sale and transfer of the Units to the
Underwriter hereunder will have been fully paid or provided for by the Company
and all laws imposing such taxes will have been fully complied with. (q) All
contracts and other documents of the Company which are, under the Rules and
Regulations, required to be filed as exhibits to the Registration Statement have
been so filed.
(r) The Company has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Units hereby.
(s) The Company has no subsidiaries.
(t) The Company has not entered into any
agreement pursuant to which any person is entitled either directly or indirectly
to compensation from the Company for services as a finder in connection with the
proposed public offering.
(u) Except as previously disclosed in writing
by the Company to the Underwriter, no officer, director or stockholder of the
Company has any affiliation or association with any member of the National
Association of Securities Dealers Inc. ("NASD").
(v) The Company is not, and upon receipt of the
proceeds from the sale of the Units will not be, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(w) The Company has not distributed and will not
distribute prior to the First Closing Date any offering material in connection
with the offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by the
Act, if any.
(x) The conditions for use of Form SB-2, as set
forth in the General Instructions thereto, have been satisfied.
(y) There are no business relationships or
related-party transactions of the nature described in Item 404 of Regulation
S-B2 involving the Company, the Subsidiaries and any person described in such
Item that are required to be disclosed in the Prospectus (or, if
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the Prospectus is not in existence, the most recent Preliminary Prospectus) and
that have not been so disclosed.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties, and agreements
herein contained, the Company agrees to issue and sell to the Underwriter, and
the Underwriter agrees to buy from the Company at $5.00 per Unit, at the place
and time hereinafter specified of 1,200,000 Units (the "First Units").
Delivery of the First Units against payment therefor
shall take place at the offices of ▇.▇. ▇▇▇▇▇ Investment Banking Corp., ▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. (or at such other place as may be designated by agreement
between you and the Company) at 10:00 a.m., New York time, on , 1997,
or at such later time and date as you may designate, such time and date of
payment and delivery for the First Units being herein called the "First Closing
Date."
(b) In addition, subject to the terms and
conditions of this Agreement, and upon the basis of the representations,
warranties and agreements herein contained, the Company hereby grants an option
to the Underwriter (or, at its option, to the Representative, individually) to
purchase all or any part of an aggregate of an additional 180,000 Units at the
same price per Unit as the Underwriter shall pay for the First Units being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Units being referred to herein as the "Option Units"). This option may be
exercised within 45 days after the effective date of the Registration Statement
upon notice by the Underwriter to the Company advising as to the amount of
Option Units as to which the option is being exercised, the names and
denominations in which the certificates for such Option Units are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Underwriter but shall not be
earlier than four nor later than ten full business days after the exercise of
said option, nor in any event prior to the First Closing Date, and such time and
date is referred to herein as the "Option Closing Date." Delivery of the Option
Units against payment therefor shall take place at the offices of ▇.▇. ▇▇▇▇▇
Investment Banking Corp., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. The Option granted
hereunder may be exercised only to cover overallotments in the sale by the
Underwriter of First Units referred to in subsection (a) above. In the event the
Company declares or pays a dividend or distribution on its Common Stock, whether
in the form of cash, shares of Common Stock or any other consideration, prior to
the Option Closing Date, such dividend or distribution shall also be paid on the
Option Units on the Option Closing Date.
(c) The Company will make the certificates for
the securities comprising the Units to be purchased by the Underwriter hereunder
available to you for checking at least two full business days prior to the First
Closing Date or the Option Closing Date (which are collectively referred to
herein as the "Closing Dates"). The certificates shall be in such names
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and denominations as you may request, at least two full business days prior to
the Closing Dates. Time shall be of the essence and delivery at the time and
place specified in this Agreement is a further condition to the obligations of
the Underwriter.
Definitive certificates in negotiable form for the
Units to be purchased by the Underwriter hereunder will be delivered by the
Company to you against payment of the purchase price by you, by certified or
bank cashier's checks or, at the Underwriter's option, by wire transfer in New
York Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriter exercises
the option to purchase from the Company all or any portion of the Option Units
pursuant to the provisions of subsection (b) above, payment for such Units shall
be made to or upon the order of the Company by certified or bank cashier's
checks or, at the Underwriter's option, by wire transfer payable in New York
Clearing House funds at the offices of ▇.▇. ▇▇▇▇▇ Investment Banking Corp., at
the time and date of delivery of such Units as required by the provisions of
subsection (b) above, against receipt of the certificates for such Units by the
Underwriter registered in such names and in such denominations as the
Representative may request.
It is understood that the Underwriter proposes to
offer the Units to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective.
3. Covenants of the Company. The Company covenants and
agrees with the Underwriter that:
(a) The Company will use its best efforts to
cause the Registration Statement to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise you and
will not at any time, whether before or after the effective date, file the
Prospectus, Term Sheet or any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you or your counsel shall have objected in
writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Units contemplated hereby (but in no
event more than nine months after the date on which the Registration Statement
shall have become or been declared effective) and (B) 25 days after the date on
which the Registration Statement shall have become or been declared effective,
the Company will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus which, in your opinion, may be necessary or advisable in connection
with the distribution of the Units.
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As soon as the Company is advised thereof, the
Company will advise you, and confirm the advice in writing, of the receipt of
any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order or
threat thereof suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Units for offering in any jurisdiction,
or of the institution of any proceedings for any of such purposes, and will use
its best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriter and dealers to use the Prospectus in
connection with the sale of the Units for such period as in the opinion of
counsel to the Underwriter the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a Prospectus is required under the
Act to be delivered in connection with sales by an underwriter or dealer of any
event of which the Company has knowledge and which materially affects the
Company or the securities of the Company, or which in the opinion of counsel for
the Company or counsel for the Underwriter should be set forth in an amendment
of the Registration Statement or a supplement to the Prospectus in order to make
the statements therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required to be delivered to a purchaser
of the Units or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the Rules and Regulations, the Company
will notify you promptly and forthwith prepare and furnish to you copies of such
amended Prospectus or of such supplement to be attached to the Prospectus, in
such quantities as you may reasonably request, in order that the Prospectus, as
so amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus or supplement
to be attached to the Prospectus shall be without expense to the Underwriter,
except that in case the Underwriter is required, in connection with the sale of
the Units to deliver a Prospectus nine months or more after the effective date
of the Registration Statement, the Company will upon request of and at the
expense of the Underwriter, amend or supplement the Registration Statement and
Prospectus and furnish the Underwriter with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 and the rules and
regulations thereunder in connection with the offering and issuance of the
Units.
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(b) The Company will use its best efforts to
qualify to register the Units for sale under the securities or "blue sky" laws
of such jurisdictions as the Underwriter may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent of service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Units. The Company will,
from time to time, prepare and file such statements and reports as are or may be
required to continue such qualification in effect for so long a period as the
Underwriter may reasonably request.
(c) If the sale of the Units provided for
herein is not consummated for any reason caused by the Company, the Company
shall pay all costs and expenses incident to the performance of the Company's
obligations hereunder, including but not limited to, all of the expenses
itemized in Section 8, including the accountable out-of-pocket expenses of the
Underwriter.
(d) The Company will use its best efforts to (i)
cause a registration statement under the Securities Exchange Act of 1934 to be
declared effective concurrently with the completion of this offering and will
notify the Underwriter in writing immediately upon the effectiveness of such
registration statement, and (ii) if requested by the Underwriter, to obtain a
listing on the Pacific Stock Exchange and to obtain and keep current a listing
in the Standard & Poors or ▇▇▇▇▇'▇ Industrial OTC Manual.
(e) For so long as the Company is a reporting
company under either Section 12(g) or 15(d) of the Securities Exchange Act of
1934, the Company, at its expense, will furnish to its stockholders an annual
report (including financial statements audited by independent public
accountants), in reasonable detail and at its expense, will furnish to you
during the period ending five (5) years from the date hereof, (i) as soon as
practicable after the end of each fiscal year, a balance sheet of the Company
and any of its subsidiaries as at the end of such fiscal year, together with
statements of income, surplus and cash flow of the Company and any subsidiaries
for such fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iv) as soon as they
are available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission or any securities exchange or
automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active
subsidiary or subsidiaries, such financial statements referred to in subsection
(e) above will be on a consolidated basis to the
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extent the accounts of the Company and its subsidiary or subsidiaries are
consolidated in reports furnished to its stockholders generally.
(g) The Company will deliver to the Underwriter
at or before the First Closing Date two signed copies of the Registration
Statement including all financial statements and exhibits filed therewith, and
of all amendments thereto, and will deliver to the Underwriter such number of
conformed copies of the Registration Statement, including such financial
statements but without exhibits, and of all amendments thereto, as the
Underwriter may reasonably request. The Company will deliver to or upon the
order of the Underwriter, from time to time until the effective date of the
Registration Statement, as many copies of any Preliminary Prospectus filed with
the Commission prior to the effective date of the Registration Statement as the
Underwriter may reasonably request. The Company will deliver to the Underwriter
on the effective date of the Registration Statement and thereafter for so long
as a Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriter may from time to time reasonably request. The
Company, not later than (i) 5:00 p.m., New York City time, on the date of
determination of the public offering price, if such determination occurred at or
prior to 12:00 noon, New York City time, on such date or (ii) 6:00 p.m., New
York City time, on the business day following the date of determination of the
public offering price, if such determination occurred after 12:00 noon, New York
City time, on such date, will deliver to the Underwriter, without charge, as
many copies of the Prospectus and any amendment or supplement thereto as the
Underwriter may reasonably request for purposes of confirming orders that are
expected to settle on the First Closing Date.
(h) The Company will make generally available to
its security holders and to the registered holders of its Warrants and deliver
to you as soon as it is practicable to do so but in no event later than 90 days
after the end of twelve months after its current fiscal quarter, an earnings
statement (which need not be audited) covering a period of at least twelve
consecutive months beginning after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from
the sale of the Units for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) The Company will, promptly upon your
request, prepare and file with the Commission any amendments or supplements to
the Registration Statement, Preliminary Prospectus or Prospectus and take any
other action, which in the reasonable opinion of Bachner, Tally, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, counsel to the Underwriter, may be reasonably necessary or advisable
in connection with the distribution of the Units, and will use its best efforts
to cause the same to become effective as promptly as possible.
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(k) The Company will reserve and keep available
that maximum number of its authorized but unissued securities which are issuable
upon exercise of the Unit Purchase Option outstanding from time to time.
(l) For a period of 13 months from the First
Closing Date, no present stockholders of the Company (except for stockholders
who at the date hereof hold an aggregate of not more than 2% of the Company's
common Stock), and no officer or director of the Company, will directly or
indirectly, offer, sell (including any short sale), grant any option for the
sale of, acquire any option to dispose of, or otherwise dispose of any shares of
Common Stock without the prior written consent of the Underwriter. In order to
enforce this covenant, the Company shall obtain lock-up letters in form
satisfactory to the Underwriter and impose stop-transfer instructions with
respect to the shares owned by such officer, director or stockholder until the
end of such period.
(m) Prior to completion of this offering, the
Company will make all filings required, including registration under the
Securities Exchange Act of 1934, to obtain the listing of the Units, Common
Stock, and Warrants on the Nasdaq Small Cap Market (or a listing on such other
market or exchange as the Underwriter consent to), and will use its best efforts
to effect and maintain such listing for at least five years from the date of
this Agreement.
(n) The Company and each of the Principal
Stockholders represents that it or he has not taken and agree that it or he will
not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Units, Shares or the Warrants
or to facilitate the sale or resale of the Securities.
(o) On the First Closing Date and simultaneously
with the delivery of the Units, the Company shall execute and deliver to you the
Unit Purchase Option. The Unit Purchase Option will be substantially in the form
of the Representative's Unit Purchase Option filed as an Exhibit to the
Registration Statement (the "Unit Purchase Option").
(p) During the 18 month period commencing on the
date of this Agreement, the Company will not, without the prior written consent
of the Underwriter, (A) grant options to employees, officers or directors to
purchase shares of Common Stock at an exercise price less than the greater of
(i) the initial public offering price of the Units (without allocating any value
to the Warrants); and (ii) the fair market value of the Common Stock on the date
of grant or (B) issue any shares of Common Stock to its employees, officers or
directors at less than the greater of such prices or (C) grant options to
purchase shares of Common Stock (or issue shares of Common Stock) to any other
person at less than the fair market value on the date of grant or issuance
(which may be based on an average over a reasonable period prior to the date of
issuance and subsequent to the effective date of the Registration Statement.
During the three year period from the First Closing Date, the Company will not,
without the prior written consent of the Underwriter, offer or sell any of its
securities pursuant to Regulation S under the Act; (iii)
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grant registration rights to any person which are exercisable sooner than 13
months from the First Closing Date; or (iv) issue any securities which have per
share voting rights greater than the voting rights of the Shares (or take any
corporate action which would have this effect).
(q) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be President and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be the Chief Financial Officer of the Company on the
Closing Dates. The Company has obtained key person life insurance on the lives
of each of Messrs. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in an amount of not less than $2 million and will use its best
efforts to maintain such insurance during the period commencing with the First
Closing and ending on the three year anniversary of such date. In the event such
term of employment is less than three years, the Company will use its best
efforts to obtain a comparable policy on the life of the such individual's
successor for the balance of the three year period. For a period of thirteen
months from the First Closing Date, the compensation of the executive officers
of the Company shall not be increased from the compensation levels disclosed in
the Prospectus.
(r) On the Closing Date and simultaneously with
the delivery of the Units the Company shall execute and deliver to you an
agreement with you regarding mergers, acquisitions, joint ventures and certain
other forms of transactions, in the form previously delivered to the Company by
you (the "M/A Agreement").
(s) So long as any Warrants are outstanding,
the Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter and
dealer as many copies of each such Prospectus as the Underwriter or dealer may
reasonably request. The Company shall not call for redemption any of the
Warrants unless a registration statement covering the securities underlying the
Warrants has been declared effective by the Commission and remains current at
least until the date fixed for redemption. In addition, for so long as any
Warrant is outstanding, the Company will promptly notify the Underwriter of any
material change in the business, financial condition or prospects of the
Company.
(t) Upon the exercise of any Warrant or Warrants
after March 11, 1997 , the Company will pay ▇.▇. ▇▇▇▇▇ Investment Banking Corp.
a fee of 5% of the aggregate exercise price of the Warrants, a portion of which
may be reallowed to the dealer who solicited in writing the exercise (which may
also be the Underwriter) if (i) the market price of the Company's Common Stock
is greater than the exercise price of the Warrants on the date of exercise; (ii)
the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc., (iii) the Warrant is not held in a
discretionary account; (iv) the disclosure of compensation arrangements has been
made in documents provided to customers, both as part of the original offering
and at the time of exercise, and (v) the solicitation of the Warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of 1934,
as amended. The Company agrees not to solicit the exercise of any Warrants other
than through ▇.▇. ▇▇▇▇▇
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Investment Banking Corp. and will not authorize any other dealer to engage in
such solicitation without the prior written consent of ▇.▇. ▇▇▇▇▇ Investment
Banking Corp., unless ▇.▇. ▇▇▇▇▇ Investment Banking Corp. refuses or is unable
to solicit such exercise.
(u) For a period of [three (3)] years from the
Effective Date the Company (i) at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) the Company's
financial statements for each of the first three (3) fiscal quarters prior to
the announcement of quarterly financial information, the filing of the Company's
10-Q quarterly report and the mailing of quarterly financial information to
stockholders and the Company shall not change its accounting firm to other than
another Big Six firm without the prior written consent of the Chairman or the
President of the Underwriter.
(v) As promptly as practicable after the Closing
Date, the Company will prepare, at its own expense, hard cover "bound volumes"
relating to the offering, and will distribute at least four of such volumes to
the individuals designated by the Underwriter or counsel to the Underwriter.
(w) For a period of five years from the First
Closing Date the Underwriter shall have the right, but not the obligation, to
designate one director of the Board of Directors of the Company. Prior to the
First Closing Date, the Company shall engage a public relations firm.
(x) The Company shall, for a period of six years
after date of this Agreement, submit such reports to the Secretary of the
Treasury and to stockholders, as the Secretary may require, pursuant to Section
1202 of the Internal Revenue Code, as amended, or regulations promulgated
thereunder, in order for the Company to qualify as a "small business" so that if
the Company qualifies, stockholders may realize special tax treatment with
respect to their investment in the Company. The Company does not represent or
warrant that it is a "small business" within the meaning of Section 1202 of the
Code.
(y) With respect to the Selling Securityholders,
the Company will send all post-effective amendments or prospectus supplements
disclosing actual price and selling terms to the NASD concurrently with the
filing thereof with the Commission. The Company will notify the Underwriter and
the NASD if the Company becomes aware that any 5% or greater stockholder of the
Company becomes an affiliated or associated person of an NASD member
participating in the distribution of this offering.
(z) On the First Closing Date, the right of
first refusal granted to the Underwriter pursuant to the Agency Agreement
between the Company and the Underwriter dated November 13, 1996 shall terminate.
4. Conditions of the Underwriter's Obligation. The obligations
of the Underwriter to purchase and pay for the Units which they have
respectively agreed to purchase
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hereunder, are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later
than 10:00 A.M., New York time, on the date on which the
amendment to the registration statement originally filed with
respect to the Units or to the Registration Statement, as the
case may be, containing information regarding the initial
public offering price of the Units has been filed with the
Commission, or such later time and date as shall have been
agreed to by the Underwriter; if required, the Prospectus or
any Term Sheet that constitutes a part thereof and any
amendment or supplement thereto shall have been filed with the
Commission in the manner and within the time period required
by Rule 434 and 424(b) under the Act; on or prior to the
Closing Dates no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that or a similar purpose shall have been
instituted or shall be pending or, to your knowledge or to the
knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for
additional information shall have been complied with to the
reasonable satisfaction of Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP, counsel to the Underwriter;
(b) At the First Closing Date, you shall have
received the opinion, dated as of the First Closing Date, of
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel for the Company, in
form and substance satisfactory to counsel for the
Underwriter, to the effect that:
(i) the Company has been duly incorporated and
is validly existing as a corporation in good standing
under the laws of the State of Nevada, with full
corporate power and authority to own its properties
and conduct its business as described in the
Registration Statement and Prospectus and is duly
qualified or licensed to do business as a foreign
corporation and is in good standing in Arizona and in
each other jurisdiction in which the ownership or
leasing of its properties or conduct of its business
requires such qualification;
(ii) to the best knowledge of such counsel, (a)
the Company has obtained, or is in the process of
obtaining, all licenses, permits and other
governmental authorizations necessary to the conduct
of its business as described in the Prospectus, (b)
such licenses, permits and other governmental
authorizations obtained are in full force and effect,
and (c) the Company is in all material respects
complying therewith;
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(iii) the authorized capitalization of the
Company as of December 31, 1996 is as set forth under
"Capitalization" in the Prospectus; all shares of the
Company's outstanding stock requiring authorization
for issuance by the Company's board of directors have
been duly authorized, validly issued, are fully paid
and non-assessable and conform to the description
thereof contained in the Prospectus; the outstanding
shares of Common Stock of the Company have not been
issued in violation of the preemptive rights of any
shareholder and the shareholders of the Company do
not have any preemptive rights or other rights to
subscribe for or to purchase, nor are there any
restrictions upon the voting or transfer of any of
the Stock, except with respect to the shares that are
subject to the irrevocable Proxy Agreement and the
Voting Trust described in the Prospectus; the Common
Stock, the Warrants, the Unit Purchase Option and the
Warrant Agreement conform to the respective
descriptions thereof contained in the Prospectus; the
Shares have been, and the shares of Common Stock to
be issued upon exercise of the Warrants and the Unit
Purchase Option, upon issuance in accordance with the
terms of such Warrants, the Warrant Agreement and
Unit Purchase Option have been duly authorized and,
when issued and delivered, will be duly and validly
issued, fully paid, non-assessable, free of
preemptive rights and no personal liability will
attach to the ownership thereof; all prior sales by
the Company of the Company's securities have been
made in compliance with or under an exemption from
registration under the Act and applicable state
securities laws and no shareholders of the Company
have any rescission rights with respect to Company
securities; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of
the Warrants and Unit Purchase Option and to the best
of such counsel's knowledge, neither the filing of
the Registration Statement nor the offering or sale
of the Units as contemplated by this Agreement gives
rise to any registration rights or other rights,
other than those which have been waived or satisfied
for or relating to the registration of any shares of
Common Stock;
(iv) this Agreement, the Unit Purchase Option,
the Warrant Agreement and the M/A Agreement have been
duly and validly authorized, executed and delivered
by the Company and, assuming due execution by each
other party hereto or thereto, each constitutes a
legal, valid and binding obligation of the Company
enforceable against the Company in accordance with
its respective terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of
-17-
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equitable principles in any action, legal or
equitable, and except as rights to indemnity or
contribution may be limited by applicable law;
(v) the certificates evidencing the shares of
Common Stock are in valid and proper legal form; the
Warrants will be exercisable for shares of Common
Stock of the Company in accordance with the terms of
the Warrants and at the prices therein provided for;
at all times during the term of the Warrants the
shares of Common Stock of the Company issuable upon
exercise of the Warrants have been duly authorized
and reserved for issuance upon such exercise and such
shares, when issued upon such exercise in accordance
with the terms of the Warrants and at the price
provided for, will be duly and validly issued, fully
paid and non-assessable;
(vi) such counsel knows of no pending or
threatened legal or governmental proceedings to which
the Company is a party which could materially
adversely affect the business, property, financial
condition or operations of the Company; or which
question the validity of the Securities, this
Agreement, the Warrant Agreement, the Unit Purchase
Option or the M/A Agreement, or of any action taken
or to be taken by the Company pursuant to this
Agreement, the Warrant Agreement, the Unit Purchase
Option or the M/A Agreement, and no such proceedings
are known to such counsel to be contemplated against
the Company; there are no governmental proceedings or
regulations required to be described or referred to
in the Registration Statement which are not so
described or referred to;
(vii) the Company is not in violation of or
default under, nor will the execution and delivery of
this Agreement, the Unit Purchase Option, the Warrant
Agreement or the M/A Agreement and the incurrence of
the obligations herein and therein set forth and the
consummation of the transactions herein or therein
contemplated, result in a breach or violation of, or
constitute a default under the certificate or
articles of incorporation or by-laws, in the
performance or observance of any material
obligations, agreement, covenant or condition
contained in any bond, debenture, note or other
evidence of indebtedness or in any contract,
indenture, mortgage, loan agreement, lease, joint
venture or other agreement or instrument to which the
Company is a party or by which it or any of its
properties may be bound or in violation of any
material order, rule, regulation, writ, injunction,
or decree of any government, governmental
instrumentality or court, domestic or foreign;
-18-
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(viii) the Registration Statement has become
effective under the Act, and to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have been
instituted or are pending before, or threatened by,
the Commission; the Registration Statement and the
Prospectus (except for the financial statements and
other financial data contained therein, or omitted
therefrom, as to which such counsel need express no
opinion) comply as to form in all material respects
with the applicable requirements of the Act and the
Rules and Regulations;
(ix) such counsel has participated in the
preparation of the Registration Statement and the
Prospectus and nothing has come to the attention of
such counsel to cause such counsel to have reason to
believe that the Registration Statement or any
amendment thereto at the time it became effective or
as of the Closing Dates contained any untrue
statement of a material fact required to be stated
therein or omitted to state any material fact
required to be stated therein or necessary to make
the statements therein not misleading or that the
Prospectus or any supplement thereto contains any
untrue statement of a material fact or omits to state
a material fact necessary in order to make statements
therein, in light of the circumstances under which
they were made, not misleading (except, in the case
of both the Registration Statement and any amendment
thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto
and other financial information and schedules
contained therein, as to which such counsel need
express no opinion);
(x) all descriptions in the Registration
Statement and the Prospectus, and any amendment or
supplement thereto, of contracts and other documents
are accurate and fairly present the information
required to be shown, and such counsel is familiar
with all contracts and other documents referred to in
the Registration Statement and the Prospectus and any
such amendment or supplement or filed as exhibits to
the Registration Statement, and such counsel does not
know of any contracts or documents of a character
required to be summarized or described therein or to
be filed as exhibits thereto which are not so
summarized, described or filed;
(xi) no authorization, approval, consent, or
license of any governmental or regulatory authority
or agency is necessary in connection with the
authorization, issuance, transfer, sale or delivery
of the Units by the Company, in connection with the
execution, delivery and performance of this Agreement
by the Company or in connection with the taking of
any action contemplated herein, or the issuance of
the Unit Purchase Option or
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the Securities underlying the Unit Purchase Option,
other than registrations or qualifications of the
Units under applicable state or foreign securities or
Blue Sky laws and registration under the Act;
(xii) the statements in the Registration
Statement under the captions "Business", "Use of
Proceeds", "Management", and "Description of
Securities" have been reviewed by such counsel and
insofar as they refer to descriptions of agreements,
statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions,
are correct in all material respects;
(xiii) the Units, the Common Stock and the
Warrants have been duly authorized for quotation on
the Nasdaq Small Cap Market and
(xiv) to such counsel's knowledge, there are no
business relationships or related-party transactions
of the nature described in Item 404 of Regulation
S-B2 involving the Company, any Subsidiary and any
person described in such Item that are required to be
disclosed in the Prospectus and which have not been
so disclosed.
(c) All corporate proceedings and other legal matters
relating to this Agreement, the Registration Statement, the Prospectus and other
related matters shall be satisfactory to or approved by Bachner, Tally, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP, counsel to the Underwriter, and you shall have received from such
counsel a signed opinion, dated as of the First Closing Date, with respect to
the validity of the issuance of the Units, the form of the Registration
Statement and Prospectus (other than the financial statements and other
financial data contained therein), the execution of this Agreement and other
related matters as you may reasonably require. The Company shall have furnished
to counsel for the Underwriter such documents as they may reasonably request for
the purpose of enabling them to render such opinion.
(d) You shall have received a letter prior to the
effective date of the Registration Statement and again on and as of the First
Closing Date from Coopers & ▇▇▇▇▇▇▇ LLP, independent public accountants for the
Company, substantially in the form approved by you, and including estimates of
the Company's revenues and results of operations for the period ending at the
end of the month immediately preceding the effective date and results of the
comparable period during the prior fiscal year.
(e) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and correct
with the same effect as if made on and as of the Closing Dates and the Company
shall have performed all of its obligations hereunder and satisfied all the
conditions on its part to be satisfied at or prior to such Closing Date; (ii)
the Registration Statement and the Prospectus and any amendments or supplements
-20-
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thereto shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all material
respects conform to the requirements thereof, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; (iii) there shall have been, since the respective dates as of
which information is given, no material adverse change, or any development
involving a prospective material adverse change, in the business, properties,
condition (financial or otherwise), results of operations, capital stock,
long-term or short-term debt or general affairs of the Company from that set
forth in the Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the effective
date of the Registration Statement, and the Company shall not have incurred any
material liabilities or entered into any agreement not in the ordinary course of
business other than as referred to in the Registration Statement and Prospectus;
and (iv) except as set forth in the Prospectus, no action, suit or proceeding at
law or in equity shall be pending or threatened against the Company which would
be required to be set forth in the Registration Statement, and no proceedings
shall be pending or threatened against the Company before or by any commission,
board or administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, property, condition (financial or otherwise), results of
operations or general affairs of the Company, and (v) you shall have received,
at the First Closing Date, a certificate signed by each of the Chairman of the
Board or the President and the principal financial or accounting officer of the
Company, dated as of the First Closing Date, evidencing compliance with the
provisions of this subsection (e).
(f) Upon exercise of the option provided for in
Section 2(b) hereof, the obligations of the Underwriter to purchase and pay for
the Option Units referred to therein will be subject (as of the date hereof and
as of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, and no stop
order suspending the effectiveness thereof shall have
been issued and no proceedings for that purpose shall
have been instituted or shall be pending, or, to your
knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any reasonable
request on the part of the Commission for additional
information shall have been complied with to the
satisfaction of Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to the Underwriter.
(ii) At the Option Closing Date there shall
have been delivered to you the signed opinion of
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel for the
Company, dated as of the Option Closing Date, in form
and substance satisfactory to Bachner, Tally, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP, counsel to the Underwriter, which
opinion shall be substantially the same in scope
-21-
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and substance as the opinion furnished to you at the
First Closing Date pursuant to Section 4(b) hereof,
except that such opinion, where appropriate, shall
cover the Option Units.
(iii) At the Option Closing Date there shall
have been delivered to you a certificate of the
Chairman of the Board or the President and the
principal financial or accounting officer of the
Company, dated the Option Closing Date, in form and
substance satisfactory to Bachner, Tally, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, counsel to the Underwriter, substantially
the same in scope and substance as the certificate
furnished to you at the First Closing Date pursuant
to Section 4(e) hereof.
(iv) At the Option Closing Date there shall
have been delivered to you a letter in form and
substance satisfactory to you from Coopers & ▇▇▇▇▇▇▇
LLP, dated the Option Closing Date and addressed to
the Underwriter confirming the information in their
letter referred to in Section 4(d) hereof and stating
that nothing has come to their attention during the
period from the ending date of their review referred
to in said letter to a date not more than five
business days prior to the Option Closing Date, which
would require any change in said letter if it were
required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and
issuance of the Option Units shall be satisfactory in
form and substance to you, and you and Bachner,
Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the
Underwriter, shall have been furnished with all such
documents, certificates, and opinions as you may
request in connection with this transaction in order
to evidence the accuracy and completeness of any of
the representations, warranties or statements of the
Company or its compliance with any of the covenants
or conditions contained herein.
(g) No action shall have been taken by the
Commission or the NASD the effect of which would make it improper, at any time
prior to the Closing Date, for members of the NASD to execute transactions (as
principal or agent) in the Units, Common Stock or the Warrants and no
proceedings for the taking of such action shall have been instituted or shall be
pending, or, to the knowledge of the Underwriter or the Company, shall be
contemplated by the Commission or the NASD. The Company represents that at the
date hereof it has no knowledge that any such action is in fact contemplated by
the Commission or the NASD. The Company shall have advised the Underwriter of
any NASD affiliation of any of its officers, directors, stockholders or their
affiliates.
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(h) If any of the conditions herein provided for
in this Section shall not have been fulfilled as of the date indicated, this
Agreement and all obligations of the Underwriter under this Agreement may be
cancelled at, or at any time prior to, each Closing Date by the Underwriter. Any
such cancellation shall be without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company. The
obligation of the Company to sell and deliver the Units is subject to the
condition that at the Closing Dates, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the condition to the obligations of the Company provided
for in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Units on
exercise of the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold
harmless the Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), to which the Underwriter or
such controlling person may become subject, under the Act or otherwise, and will
reimburse, as incurred, the Underwriter and such controlling persons for any
legal or other expenses reasonably incurred in connection with investigating,
defending against or appearing as a third party witness in connection with any
losses, claims, damages or liabilities, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in (A) the Registration Statement, any Preliminary Prospectus, the Prospectus,
or any amendment or supplement thereto, (B) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Units under the securities
laws thereof (any such application, document or information being hereinafter
called a "Blue Sky Application"), or arise out of or are based upon the omission
or alleged omission to state in the Registration Statement, any Preliminary
Prospectus, Prospectus, or any amendment or supplement thereto, or in any Blue
Sky Application, a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent, that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such preliminary Prospectus or
the Prospectus or any such amendment or supplement
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thereto. This indemnity will be in addition to any liability which the Company
may otherwise have.
(b) The Underwriter will indemnify and hold
harmless the Company, each of its directors, each nominee (if any) for director
named in the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, and will reimburse, as incurred, the Company and each of
the aforementioned persons for any legal or other expenses reasonably incurred
in connection with investigating, defending against or appearing as a third
party witness in connection with any losses, claims damages or liabilities,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
in any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Units under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any blue sky
application (i) in reliance upon and in conformity with written information
furnished to the Company by you specifically for use in the preparation thereof
and (ii) relates to the transactions effected by the Underwriter in connection
with the offer and sale of the Units contemplated hereby. This indemnity
agreement will be in addition to any liability which the Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified
party under this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section , notify in writing the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section . In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or
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other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that the fees and expenses of
such counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party or (ii) the named parties to any such action (including any
impleaded parties) include both the Indemnified Party and the indemnifying party
and in the judgment of the Indemnified Party, it is advisable for the
Indemnified Party to be represented by separate counsel (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Indemnified Party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
Indemnified Party, which firm shall be designated in writing by the Indemnified
Party). No settlement of any action against an indemnified party shall be made
without the consent of the indemnifying party, which shall not be unreasonably
withheld in light of all factors of importance to such indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under
the Act in any case in which (i) the Underwriter makes claim for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the Underwriter,
then the Company and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) in either
case (after contribution from others) in proportion to the relative fault of the
Company and the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company, or the Underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Underwriter agree (a) that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages (even if the Underwriter in the aggregate were treated as one
entity for such purpose) or by any
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other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7 and (b) that
the contribution of neither the Company nor the Underwriter shall be in excess
of its proportionate share of such losses, claims, damages or liabilities for
which it is responsible. No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of determining who is entitled to receive
contribution pursuant to the terms of this paragraph, the word "Company" and the
word "Underwriter" includes any officer, director, or person who controls the
Company or the Underwriter within the meaning of Section 15 of the Act. If the
full amount of the contribution specified in this paragraph is not permitted by
law, then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company to the full extent permitted by law
and the Company and each person who controls the Company shall be entitled to
contribution from the Underwriter to the full extent permitted by law. The
foregoing contribution agreement shall in no way affect the contribution
liabilities of any persons having liability under Section 11 of the Act other
than the Company and the Underwriter. No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes
effective or the sale of the Units to the Underwriter is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including, but not limited to, the fees and expenses of
counsel to the Company and of the Company's accountants; the costs and expenses
incident to the preparation, printing, filing and distribution under the Act of
the Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), Preliminary Prospectus and the Prospectus, as
amended or supplemented, or the Term Sheet, the fee of the NASD in connection
with the filing required by the NASD relating to the offering of the Units
contemplated hereby; all expenses, including reasonable fees and disbursements
of counsel to the Underwriter (not to exceed $25,000), in connection with the
qualification of the Units under the state securities or blue sky laws which the
Underwriter shall designate; the cost of printing and furnishing to the
Underwriter copies of the Registration Statement, each Preliminary Prospectus,
the Prospectus, this Agreement, Selling Agreement, Underwriter's Questionnaire,
Underwriter's Power of Attorney and the Blue Sky Memorandum, any fees relating
to the listing of the Units, Common Stock and Warrants on the Nasdaq Small Cap
Market or any other securities exchange, the cost of printing the certificates
representing the securities comprising the Units, the fees of the transfer agent
and warrant agent the cost of publication of at least two "tombstones" of the
offering (at least one of which shall be in national business newspaper and one
of which shall be in a major New York newspaper) and the cost of preparing at
least four hard cover "bound volumes" relating to the offering, in accordance
with the Underwriter's request. The Company shall pay any and all taxes
(including any transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriter
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hereunder. The Company will also pay all costs and expenses incident to the
furnishing of any amended Prospectus or of any supplement to be attached to the
Prospectus as called for in Section 3(a) of this Agreement except as otherwise
set forth in said Section.
(b) In addition to the foregoing expenses the
Company shall at the First Closing Date pay to the Underwriter, a
non-accountable expense allowance of $180,000 of which $40,000 has been paid. In
the event the overallotment option is exercised, the Company shall pay to ▇.▇.
▇▇▇▇▇ Investment Banking Corp. at the Option Closing Date an additional amount
equal to 3% of the gross proceeds received upon exercise of the overallotment
option. In the event the transactions contemplated hereby are not consummated by
reason of any action by the Underwriter (except if such prevention is based upon
a breach by the Company of any covenant, representation or warranty contained
herein or because any other condition to the Underwriter's obligations hereunder
required to be fulfilled by the Company is not fulfilled) the Company shall be
liable for the accountable out-of-pocket expenses of the Underwriter, including
legal fees, up to a maximum of $25,000. In the event the transactions
contemplated hereby are not consummated by reason of any action of the Company
or because of a breach by the Company of any covenant, representation or
warranty herein, the Company shall be liable for the accountable out-of-pocket
expenses of the Underwriter, including legal fees, up to a maximum of $150,000.
(c) No person is entitled either directly or
indirectly to compensation from the Company, from the Underwriter or from any
other person for services as a finder in connection with the proposed offering,
and the Company and the Underwriter each agree to indemnify and hold harmless
the other against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be limited to
all reasonable costs of defense and investigation and all reasonable attorneys'
fees), to which the other (or such other person) may become subject insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an employee
of the party claiming indemnity) or entity that he or it is entitled to a
finder's fee in connection with the proposed offering by reason of such person's
or entity's influence or prior contact with the indemnifying party.
9. Effective Date.
The Agreement shall become effective upon its execution except
that you may, at your option, delay its effectiveness until 11:00 A.M., New York
time on the first full business day following the effective date of the
Registration Statement, or at such earlier time after the effective date of the
Registration Statement as you in your discretion shall first commence the
initial public offering by the Underwriter of any of the Units. The time of the
initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Units, or the time when the Units
are first generally offered by you to dealers by letter or
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telegram, whichever shall first occur. This Agreement may be terminated by you
at any time before it becomes effective as provided above, except that Sections
3(c), 6, 7, 8, 12, 13, 14 and 15 shall remain in effect notwithstanding such
termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6,
7, 8, 12, 13, 14 and 15 hereof, may be terminated at any time prior to the First
Closing Date, and the option referred to in Section 2(b) hereof, if exercised,
may be cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Units agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree; (ii)
trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could materially adversely affect the Company; (vii)
except as contemplated by the Prospectus, the Company is merged or consolidated
into or acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the passage by the Congress of the United States or by
any state legislative body or federal or state agency or other authority of any
act, rule or regulation, measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Underwriter to have a material impact on the business, financial condition
or financial statements of the Company or the market for the securities offered
pursuant to the Prospectus; (ix) any adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement, or (x) any material adverse change having occurred,
since the respective dates of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of the Company, financial or otherwise, whether or not arising in the
ordinary course of business.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11 or in Section 10, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
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11. Unit Purchase Option.
At or before the First Closing Date, the Company will sell to
▇.▇. ▇▇▇▇▇ Investment Banking Corp., or its designees for a consideration of
$.0001 and upon the terms and conditions set forth in the form of Unit Purchase
Option annexed as an exhibit to the Registration Statement, a Unit Purchase
Option to purchase an aggregate of 120,000 Units. In the event of conflict in
the terms of this Agreement and the Unit Purchase Option, the language of the
Unit Purchase Option shall control.
12. Representations, Warranties and Agreements to
Survive Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its Principal Stockholders,
where appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriter, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.
13. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed or sent via overnight
courier, delivered and confirmed to it at ▇.▇. ▇▇▇▇▇ Investment Banking Corp.,
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, with a copy sent to Bachner, Tally,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or if sent
to the Company, will be mailed or sent via courier, delivered and confirmed to
it at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
14. Parties in Interest.
The Agreement herein set forth is made solely for the benefit
of the Underwriter, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or the Underwriter, and
directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from the Underwriter of the Units.
15. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be entirely performed within New York.
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If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
PIRANHA INTERACTIVE PUBLISHING, INC.
By: ______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
▇.▇. ▇▇▇▇▇ INVESTMENT BANKING CORP.
By: ______________________________________
Authorized Officer
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