[Form of Underwriting Agreement]
_________ Shares of Common Stock
U.S. Golf and Entertainment Inc.
UNDERWRITING AGREEMENT
Garden City, New York
______________, 199_
First United Equities Corporation
As Representative of the
Several Underwriters listed on Schedule A hereto
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Ladies and Gentlemen:
U.S. Golf and Entertainment Inc., a Delaware corporation (the "Company"),
confirms its agreement with First United Equities Corporation ("First United")
and each of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11 hereof), for whom First United is acting as
representative (in such capacity, First United shall hereinafter be referred to
as "you" or the "Representative"), with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares ("Shares") of the Company's common stock, $0.001
par value par share ("Common Stock"), set forth in Schedule A hereto are
hereinafter referred to as the "Firm Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also sell to the Underwriters, acting severally and not jointly,
up to an additional 190,500 shares of Common Stock for the purpose of covering
over-allotments, if any. Such 190,500 additional shares of Common Stock are
hereinafter referred to as the "Option Securities," and together with the Firm
Securities are hereinafter referred to as the "Securities."
The Company also proposes to issue and sell to you certain warrants (the
"Representative's Warrants") pursuant to the Representative's Warrant
Agreement (the "Representative's Warrant Agreement") to be dated as of the
Closing Date (as hereinafter defined) for the purchase of up to an additional
127,000 shares of Common Stock, each such Representative's Warrant entitling the
registered holder thereof to purchase one share of Common Stock. The
Representatives's Warrants shall be exercisable commencing 12 months from the
effective date of the Registration Statement and for a period of 48 months
thereafter (such 5-year period hereinafter the Representative's Warrant Period).
The Representative's Warrants and the shares of Common Stock issuable upon
exercise of the Representative's Warrants are hereinafter referred to as the
"Representative's Securities." The Securities and the Representative's
Securities are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each of the
Underwriters as of the date hereof, and as of the Closing Date and each Option
Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333-4873), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Securities and the Representative's Securities under the Securities Act of 1933,
as amended (the "Act"), which registration statement and amendment or amendments
have been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Rules and Regulations") of the
Commission under the Act. The Company will not file any other amendment thereto
to which the Underwriters shall have objected in writing after having been
furnished with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time such
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein (including without limitation those documents or
information incorporated by reference therein) and all information deemed to be
a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Rules and Regulations), is hereinafter called the "Registration Statement," and
the form of prospectus in the form first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations under the Act, is hereinafter called
the "Prospectus." For purposes hereof, "Rules and Regulations" mean the rules
and regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has issued
any order preventing or suspending the use of any of any Preliminary Prospectus,
the Registration Statement, or the Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement have been instituted or are pending or, to the best knowledge of the
Company after due inquiry, threatened. Each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus at the time of filing thereof
conformed with the requirements of the Act and the Rules and Regulations, and
none of the Preliminary Prospectus, the Registration Statement, or the
Prospectus at the time of filing thereof contained any untrue statement
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of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of any
Underwriter expressly for use in the Preliminary Prospectus, Registration
Statement or the Prospectus, or any amendment thereof or supplement thereto.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Option Closing Date, if any,
and during such longer period as the Prospectus may be required to be delivered
in connection with sales by the Underwriters or a dealer, each of the
Registration Statement and the Prospectus will contain all statements that are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company with respect to the Underwriters by or on behalf of any Underwriter
expressly for use in the Preliminary Prospectus, the Registration Statement, or
the Prospectus, or any amendment thereof or supplement thereto.
(d) Each of the Company and its subsidiary, U.S. Golf and Entertainment
Corp., a Delaware corporation ("U.S. Golf Corp.") has been duly organized and is
validly existing as a corporation in good standing under the laws of the state
of Delaware. U.S. Golf Corp. is sometimes hereinafter referred to as a
"Subsidiary." Except as set forth in the Prospectus, neither the Company nor the
Subsidiary owns an interest in any corporation, partnership, limited liability
company, trust, joint venture or other business entity. Each of the Company and
the Subsidiary is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations require such qualification or
licensing. The Company owns 100% of the outstanding capital stock of the
Subsidiary and all such shares have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive rights and are
owned free and clear of any liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever (collectively, "Liens"). Each of the Company and the Subsidiary has
all requisite power and authority (corporate and otherwise), and has obtained
any and all necessary authorizations, approvals, orders, licenses, certificates,
franchises, and permits of and from all governmental or regulatory authorities
(including without limitation those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; each of the Company and the Subsidiary is and has
been doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all federal, state,
local and foreign laws, rules and regulations; and neither the Company nor the
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order,
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license, certificate, franchise or permit that, if the subject of an unfavorable
decision, ruling or finding, could, individually or in the aggregate, have a
Material Adverse Effect (as hereinafter defined). The disclosures in the
Registration Statement concerning the effects of federal, state, local and
foreign laws, rules and regulations on each of the Company's and the
Subsidiary's business as currently conducted and as contemplated are correct in
all material respects and do not omit to state any material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made. For purposes of this Agreement, "Material
Adverse Effect" means any circumstance, change in or effect on the Company or
the Subsidiary that, individually or in the aggregate with any other
circumstance, change or in effect on the Company or the Subsidiary is, or could
be, materially adverse to the condition (financial or otherwise), earnings,
position, prospects, value, operation, properties, employee relationships,
customer or supplier relationships, liabilities, business or results of
operations of the Company or of the Subsidiary.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and each Option Closing Date, if any, based upon the
assumptions set forth therein, and neither the Company nor the Subsidiary is a
party to or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, warrants, options or other securities, or any
rights with respect thereto, except for this Agreement and the Representative's
Warrant Agreement and as described in the Prospectus. The Securities and the
Representative's Securities and all other securities issued or issuable by the
Company conform or, when issued and paid for, will conform, in all material
respects, to all statements with respect thereto contained in the Registration
Statement and the Prospectus. All issued and outstanding securities of the
Company and the Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable and the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities was issued in
violation of the preemptive rights of any holders of any security of the Company
or similar contractual rights granted by or binding upon the Company or the
Subsidiary. The Securities and the Representative's Securities are not and will
not be subject to any preemptive or other similar rights of any stockholder of
the Company or any other person, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof (and to the extent
applicable, of the Representative's Warrant Agreement), will be validly issued,
fully paid, and non-assessable and will conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be taken for
the authorization, issue, and sale of the Securities and the Representative's
Securities has been duly and validly taken; and the certificates evidencing the
Securities and the Representative's Securities will be in due and proper form.
Upon the issuance and delivery of the Securities and the Representative's
Securities against full payment therefor, the Underwriters or the
Representative, as the case may be, will acquire good and marketable title to
such Securities and Representative's Securities, free and clear of any Liens.
(f) The financial statements of the Company, the Subsidiary and Commack
Golf and Family Recreation Center, L.P., a New York limited partnership (the
"Commack Partnership"), together with the related notes and schedules thereto,
included in the Registration Statement, each
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Preliminary Prospectus and the Prospectus present fairly, in all material
respects, the financial position, income, changes in cash flow, changes in
stockholders' equity, and the results of operations of the Company, the
Subsidiary and the Commack Partnership at the respective dates and for the
respective periods to which they apply and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved. The
pro forma financial statements and other pro forma financial information
(including the notes thereto) included in the Registration Statement and the
Prospectus (A) present fairly, in all material respects, the information shown
therein, (B) have been prepared, in all material respects, in accordance with
the applicable requirements of Item 310 of Regulation S-B promulgated under the
Act, (C) have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and (D) have been
properly compiled on the bases described therein, and the assumptions used in
the preparation of the pro forma financial statements and other pro forma
financial information included in the Registration Statement and the Prospectus
are reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein. There has been no
Material Adverse Effect on the Company or the Subsidiary since the date of the
financial statements included in the Registration Statement and the Prospectus
and the outstanding debt, the property (both tangible and intangible), and
business of each of the Company and the Subsidiary conform in all respects to
the descriptions thereof contained in the Registration Statement and the
Prospectus. Financial information set forth in the Prospectus under the headings
"Summary Financial Data," "Selected Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," present fairly, on the basis stated in the Prospectus, the
information set forth therein, and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(g) Each of the Company, the Subsidiary and the Commack Partnership (i) has
paid all federal, state, local, and foreign taxes for which it is liable (other
than such taxes as are being contested in good faith for which adequate reserves
have been established) including, without limitation, withholding taxes and
amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has duly filed all information returns it is
required to file pursuant to the Code, (ii) has established adequate reserves
for such taxes that are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the Company of
the Securities or the Representative's Securities, (ii) the purchase by the
Underwriters of the Securities, and the purchase and exercise by the
Representative of the Representative's Warrants, the purchase of the Common
Stock issuable upon exercise of the Representative's Warrants, (iv) the
consummation by the Company of any of its obligations under this Agreement, the
Representative's Warrant Agreement or the Representative's Warrants, (v) the
initial sale to the public of the Securities or (vi) resales of the Securities
in connection with the distribution contemplated hereby.
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(i) Each of the Company and the Subsidiary maintains insurance policies,
including without limitation, general liability and property insurance, that
insure the Company, the Subsidiary and their employees and agents against such
losses and risks as are generally insured against by comparable businesses.
Neither the Company nor the Subsidiary has failed to give notice or present any
insurance claim with respect to any matter, including without limitation, to the
Company's or the Subsidiary's business, property or employees, under any
insurance policy or surety bond in a due and timely manner and has failed to pay
any premiums due and payable thereunder. To the best knowledge of the Company
after due inquiry, there are no facts or circumstances under any such insurance
policy or surety bond that would relieve any insurer of its obligation to
satisfy in full any otherwise valid claim of the Company or the Subsidiary.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including without
limitation those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or, to the best knowledge of the Company after due
inquiry, threatened against (or circumstances that may give rise to the same),
or involving the properties or business of, the Company or the Subsidiary that
(i) questions the validity of the capital stock of the Company or the
Subsidiary, this Agreement, the Representative's Warrant Agreement or the
Representative's Warrants, or any action taken or to be taken by the Company or
the Subsidiary pursuant to or in connection with this Agreement, the
Representative's Warrant Agreement or the Representative's Warrants, (ii) is
required to be disclosed in the Registration Statement that is not so disclosed
(and such proceedings, if any, as are summarized in the Registration Statement
are accurately summarized in all respects) or (iii), could, if adversely
determined, have a Material Adverse Effect.
(k) The Company has full legal right, power, and authority to authorize,
issue, deliver, and sell the Securities and the Representative's Securities, and
to enter into this Agreement, the Representative's Warrant Agreement and the
Representative's Warrants, and to consummate the transactions provided for in
such agreements; and this Agreement has been duly and properly authorized,
executed and delivered by the Company; and the Representative's Warrant
Agreement and the Representative's Warrants have been duly authorized by the
Company and will be duly executed and delivered by the Company at the Closing.
This Agreement constitutes, and each of the Representative's Warrant Agreement
and the Representative's Warrants, when delivered at the Closing will
constitute, a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms; and none of the Company's
issue and sale of the Securities or the Representative's Securities, its
execution or delivery of this Agreement, the Representative's Warrant Agreement
or the Representative's Warrants, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will conflict with, or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any Lien of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company or the Subsidiary pursuant to
the terms of (i) the certificate of incorporation or by-laws, in each case as
amended to date, of the Company or the Subsidiary, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or
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credit agreement, or any other agreement or instrument to which the Company or
the Subsidiary is a party or by which either of them is bound or to which any of
their properties or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or regulation,
applicable to the Company or the Subsidiary, of any arbitrator, court,
regulatory body, or administrative agency or other governmental agency or body
(including without limitation those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company or
the Subsidiary or any of their activities or properties.
(l) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court or governmental or
regulatory authority, domestic or foreign, or any other person or entity, is
required for the issuance of the Securities and the Representative's Securities
pursuant to the Prospectus and the Registration Statement, the performance of
the Company's obligations under this Agreement, the Representative's Warrant
Agreement and the Representative's Warrants, and the transactions contemplated
hereby and thereby, including without limitation any waiver of any preemptive,
first refusal or other rights that any person or entity may have for the issue
and/or sale of any of the Securities or the Representative's Securities, except
such as have been or may be obtained under the Act or may be required under the
state securities or blue sky laws ("Blue Sky laws"), in connection with the
Underwriters' purchase and distribution of the Securities and the purchase of
the Representative's Securities to be sold by the Company under the
Representative's Warrant Agreement and the Representative's Warrants.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company or the Subsidiary is party or by
which either of them may be bound or to which any of their assets, properties,
or business may be subject, have been duly and validly authorized, executed and
delivered by the Company or the Subsidiary and constitute the legal, valid and
binding agreements of the Company or the Subsidiary, and to the best knowledge
of the Company after due inquiry, the other parties thereto, enforceable against
the Company or the Subsidiary, as the case may be, and to the best knowledge of
the Company after due inquiry, the other parties thereto, in accordance with
their respective terms. The descriptions in the Registration Statement of
agreements, contracts and other documents are accurate and fairly present the
information required to be shown with respect thereto by Form SB-2, and there
are no contracts, agreements or other documents that are required by the Act to
be described in the Registration Statement or filed as exhibits to the
Registration Statement that are not described or filed as required, and the
exhibits that have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set forth
in the Registration Statement and Prospectus, and except as may otherwise be
indicated or contemplated herein or therein, neither the Company nor the
Subsidiary has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction other than in the ordinary course of business consistent with past
practice, or (iii) declared or paid any dividend or made any other distribution
on or in respect of its capital stock of any class, and, since such respective
dates, there has not been (i) any change in the capital stock, in the debt (long
or short term) or in the liabilities of the Company or the Subsidiary or (ii) a
Material Adverse Effect.
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(o) No breach or default by or of the Company or the Subsidiary or, to the
best knowledge of the Company after due inquiry, any other party exists in the
due performance and observance of any term, covenant or condition of any
material license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders agreement,
partnership agreement, note, loan or credit agreement, purchase order, or any
other material agreement or instrument evidencing an obligation for borrowed
money, or any other material agreement or instrument to which the Company or the
Subsidiary is a party or by which it may be bound or to which the property or
assets (tangible or intangible) of the Company or the Subsidiary is subject or
affected.
(p) Each of the Company and the Subsidiary has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
material compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment, and wages and hours. There are no pending investigations
involving the Company by the U.S. Department of Labor, or any other governmental
agency responsible for the enforcement of such federal, state, local, or foreign
laws and regulations. There is no unfair labor practice charge or complaint
against the Company or the Subsidiary pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or, to the best knowledge of the Company after due inquiry, threatened
against or involving the Company or the Subsidiary, or any predecessor entity,
and none has ever occurred. No representation question exists respecting the
employees of the Company or the Subsidiary, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or the Subsidiary. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or the
Subsidiary. No labor dispute with the employees of the Company or the Subsidiary
exists or, to the best knowledge of the Company after due inquiry, is imminent.
(q) Except as described in the Prospectus, neither the Company nor the
Subsidiary maintains, sponsors or contributes to any program or arrangement that
is an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). Neither the Company nor the Subsidiary maintains or
contributes (and has not previously maintained or contributed) to a "defined
benefit plan," as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Code, that could subject the
Company or the Subsidiary to any tax penalty on prohibited transactions and that
has not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure, and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. Determination or opinion letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code Section 401(a), stating that the form of such
ERISA Plan and the attendant trust are qualified thereunder. Neither the Company
nor the Subsidiary has ever completely or partially withdrawn from a
"multiemployer plan."
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(r) Neither of the Company, the Subsidiary, nor any of their respective
employees, directors, stockholders, partners, or affiliates (within the meaning
of the Rules and Regulations) has taken or will take, directly or indirectly,
any action designed to, or that has constituted or might be expected to cause or
result in (under the Exchange Act or otherwise), stabilization or manipulation
of the price of any security of the Company, whether to facilitate the sale or
resale of the Securities or otherwise; and neither the Company nor the
Subsidiary shall take, or permit any such person to take, any such action.
(s) Except as disclosed in the Prospectus, none of the patents, patent
applications, trademarks, service marks, trade names, copyrights, technology,
and know-how, and none of the license or rights to the foregoing, presently
owned or held by the Company and the Subsidiary or used in or necessary to the
conduct of their respective businesses as now conducted or proposed to be
conducted (all of the foregoing, collectively, its "Intellectual Properties"),
are in dispute or are in any conflict with the right of any other person or
entity. To the best of knowledge of the Company after due inquiry, each of the
Company and the Subsidiary (i) owns or has the right to use all of its
Intellectual Properties, free and clear of all Liens of any kind whatsoever,
without infringing upon or otherwise acting adversely to the right or claimed
right of any person or other entity under or with respect to any of the
foregoing and (ii) except as set forth in the Prospectus, is not obligated or
under any liability whatsoever to make any payment by way of royalties, fees, or
otherwise to any owner or licensee of, or other claimant to, any Intellectual
Properties with respect to the use thereof or in connection with the conduct of
its business or otherwise as described in the Prospectus.
(t) Except as disclosed in the Prospectus, each of the Company and the
Subsidiary owns and has the unrestricted right to use all trade secrets,
know-how (including all unpatented and/or unpatentable proprietary or
confidential information, systems, and procedures), inventions, designs,
processes, works of authorship, computer programs, and technical data and
information that are material to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company or
the Subsidiary, free and clear of and without violating any right, Lien or claim
of others, including without limitation former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company or the Subsidiary or their respective
employees or agents, could have developed trade secrets or items of technical
information similar or identical to those of the Company and the Subsidiary. The
Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
(u) Each of the Company and the Subsidiary has taken reasonable security
measures to protect the secrecy, confidentiality, and value of all of its
Intellectual Properties in all material respects.
(v) Each of the Company and the Subsidiary has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it free and
clear of all Liens of any kind whatsoever, other than (i) those referred to in
the Prospectus and (ii) Liens for taxes not yet due and payable.
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(w) ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P., whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(x) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors, stockholders, and all holders of securities, warrants, options or
other rights exchangeable or exercisable for, convertible into, or evidencing
any right to purchase or subscribe for, shares of Common Stock, has agreed that,
without the prior written consent of the Representative, such person or entity
will not directly or indirectly offer to sell, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate, or otherwise encumber or dispose
of any legal or beneficial interest in any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than 24 months following
the effective date of the Registration Statement. The Company will cause the
Transfer Agent, as defined below, to ▇▇▇▇ an appropriate legend on the face of
stock certificates representing all of such securities and to place "stop
transfer" orders with respect thereto on the Company's stock ledgers.
(y) There are no agreements, claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's, consulting or origination fee with respect to the sale of the
Securities or the Representative's Securities or any other agreements, claims,
payments, issuances, arrangements or understandings with respect to the Company,
the Subsidiary or any of their respective officers, directors, stockholders,
partners, employees, or affiliates that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(z) The Common Stock has been approved for quotation on the Nasdaq SmallCap
Market.
(aa) Neither the Company nor the Subsidiary nor any of their respective
officers, employees or agents, nor any other person acting on behalf of the
Company or the Subsidiary has, directly or indirectly, given or agreed to give
any money, gift, or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee, or agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company or the Subsidiary (or assist the Company or
the Subsidiary in connection with any actual or proposed transaction) that (a)
might subject the Company or the Subsidiary or any other such person to any
damage or penalty in any civil, criminal, or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, could have had a
Material Adverse Effect on the Company or the Subsidiary, or (c) if not
continued in the future, could have a Material Adverse Effect on the Company or
the Subsidiary. The Company's and
10
the Subsidiary's internal accounting controls are sufficient to cause the
Company or the Subsidiary to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(bb) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company or the Subsidiary, nor any "affiliate" or "associate"
(as these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities, has or has had, either
directly or indirectly, (i) an interest in any person or entity that (A)
furnishes or sells services or products that are furnished or sold or are
proposed to be furnished or sold by the Company or the Subsidiary, or (B)
purchases from or sells or furnishes to the Company or the Subsidiary any goods
or services, or (ii) a beneficial interest in any contract or agreement to which
the Company or the Subsidiary is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing or proposed agreements, arrangements, understandings, or
transactions between or among the Company or the Subsidiary and any officer,
director, or principal stockholder of the Company or the Subsidiary, or any
partner, affiliate or associate of any of the foregoing persons or entities.
(cc) Any certificate signed by any officer of the Company or Subsidiary and
delivered to the Underwriters or to Underwriters' Counsel (as defined herein)
shall be deemed a representation and warranty by the Company to the Underwriters
as to the matters covered thereby.
(dd) Each of the minute books of the Company and the Subsidiary have been
made available to the Representative and contains a complete summary of all
meetings and actions of the directors and stockholders of the Company and the
Subsidiary since the time of its incorporation, and reflects accurately in all
material respects all transactions referred to in such minutes.
(ee) No holders of any securities of the Company or of any options,
warrants, or other convertible or exchangeable securities of the Company or the
Subsidiary (i) have the right to include any securities issued by the Company or
the Subsidiary in the Registration Statement or (ii) except and to the extent
described in the Prospectus, have the right to include any securities issued by
the Company or the Subsidiary in any registration statement to be filed by the
Company or the Subsidiary or to require the Company or the Subsidiary to file a
registration statement under the Act; and, except and to the extent described in
the Prospectus, no person or entity holds any anti-dilution rights with respect
to any securities of the Company or the Subsidiary.
(ff) The Company has as of the effective date of the Registration Statement
(i) entered into an employment agreement with each of ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ in the forms filed as Exhibits 10.6, 10.7 and 10.8,
respectively, to the Registration Statement, and (ii) purchased term key-man
insurance on the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ in the amount of at least
$1,000,000, which policy names the Company as the sole beneficiary thereof.
2. Purchase, Sale, and Delivery of the Securities and Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each
11
Underwriter, and each Underwriter, severally and not jointly, agrees to
purchase from the Company at a price of $__________ (90% of the public offering
price) per Share, those numbers of Shares set forth in Schedule A opposite the
name of such Underwriter, subject to such adjustment as the Representative in
its sole discretion shall make to eliminate any sales or purchases of fractional
shares, plus any additional number of Firm Securities that such Underwriter may
become obligated to purchase pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase all or any part of an additional 165,000 shares of
Common of Stock at a price of $_____ (90% of the public offering price) per
share. The option granted hereby will expire 45 days after (i) the date the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Rules and Regulations, or (ii) the date of this Agreement
if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments that may be made in connection with the
offering and distribution of the Firm Securities upon notice by the
Representative to the Company setting forth the respective numbers of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for any such Option Securities.
Any such time and date of delivery (an "Option Closing Date") shall be
determined by the Representative, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Date, as hereinafter defined, unless otherwise agreed upon by the
Representative and the Company. Nothing herein contained shall obligate the
Underwriters to make any over-allotments. No Option Securities shall be
delivered unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and the delivery of certificates
for, the Firm Securities shall be made at the offices of the Representative at
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as shall be agreed upon by the Representative and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
__________________, 199_ or at such other time and date as shall be agreed upon
by the Representative and the Company, but not less than three nor more than
fifteen full business days after the effective date of the Registration
Statement (such time and date of payment and delivery being herein called
"Closing Date"). In addition, in the event that any or all of the Option
Securities are purchased by the Underwriters, payment of the purchase price for,
and delivery of certificates for, such Option Securities shall be made at the
above-mentioned office of the Representative or at such other place as shall be
agreed upon by the Representative and the Company on each Option Closing Date as
specified in the notice from the Representative to the Company. Delivery of the
certificates for the Firm Securities and the Option Securities, if any, shall be
made to the Underwriters against payment by the Underwriters, severally and not
jointly, of the purchase price for the Firm Securities and the Option
Securities, if any, to the order of the Company, by New York Clearing House
funds. If such option is exercised, each of the Underwriters, acting severally
and not jointly, shall purchase that proportion of the total number of Option
Securities then being purchased that the number of Firm Securities set forth in
Schedule A hereto opposite the name of such Underwriter bears to the
12
total number of Firm Securities, subject in each case to such adjustments as the
Representative in its discretion shall make to eliminate any sales or purchases
of fractional shares. Certificates for the Firm Securities and the Option
Securities, if any, shall be in the definitive, fully registered form, shall
bear no restrictive legends and shall be in such denominations and registered in
such names as the Underwriters may request in writing at least two (2) business
days prior to the Closing Date or the relevant Option Closing Date, as the case
may be. The certificates for the Firm Securities and the Option Securities, if
any, shall be made available to the Representative at such office or such other
place as the Representative may designate for inspection, checking and packaging
no later than 9:30 a.m. on the last business day prior to the Closing Date or
the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrants for an aggregate purchase price of
$127, which warrants shall entitle the holders thereof to purchase up to an
aggregate of 127,000 shares of Common Stock. The Representative's Warrants shall
be exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at an exercise price per share
purchased thereunder equal to one hundred thirty percent (130%) of the initial
public offering price of the Shares. The Representative's Warrant Agreement and
form of Warrant Certificate shall be substantially in the form attached hereto
as Exhibit A. Payment for the Representative's Warrants shall be made on the
Closing Date.
3. Public Offering of the Shares. As soon after the Registration Statement
becomes effective as the Representative deems advisable, the Underwriters shall
make a public offering of the Shares (other than to residents of or in any
jurisdiction in which qualification of the Shares is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Representative may from time to time increase or decrease the public
offering price of the Shares after distribution thereof has been completed to
such extent as the Representative, in its sole discretion, deems advisable. The
Underwriters may enter into one or more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and shall not at any time, whether before or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document under the Act or
the Exchange Act before termination of the offering of the Shares by the
Underwriters of which the Representative shall not previously have been advised
and furnished with a copy, or to which the Representative shall have objected or
which is not in compliance with the Act, the Exchange Act and the Rules and
Regulations.
13
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company shall advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, or if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission or authority of any proceedings
for the suspension of the qualification of any of the Securities or the
Representative's Securities for offering or sale in any jurisdiction or of the
initiation or threatening of any proceeding for that purpose, (iv) of the
receipt of any comments from the Commission, and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission or
any state securities commission or authority shall enter a stop order or suspend
such qualification at any time, the Company shall use its best efforts to obtain
promptly the lifting of such order or suspension.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
second business day following the execution and delivery of this Agreement.
(d) The Company will give the Representative notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus that the Company proposes for use by the
Underwriters in connection with the offering of the Securities that differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative or its counsel ("Underwriters' Counsel") shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities and the Representative's Securities for
offering and sale under the securities laws of such jurisdictions as the
Representative may designate to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution, and shall
make such applications, file such documents and furnish such information as may
be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company shall, unless the
Representative agrees that such action is not at the time necessary or
14
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under the
Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities and the Representative's Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or supplements thereto.
If at any time when a prospectus relating to the Securities or the
Representative's Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company shall notify the Representative promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
satisfactory to Underwriters' Counsel, and the Company shall furnish to the
Underwriters copies of such amendment or supplement as soon as available and in
such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45 days after
the end of the twelve-month period beginning on the day after the end of the
fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement that will be in the detail required by, and otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve consecutive months after the effective date
of the Registration Statement.
(h) The Company shall, for so long as the Shares are registered under the
Exchange Act, hold an annual meeting of stockholders for the election of
directors within 180 days after the end of each of the Company's fiscal years
and, within 150 days after the end of the Company's fiscal years, will provide
the Company's stockholders with the audited financial statements of the Company
as of the end of the fiscal year just completed prior thereto. Such financial
statements shall be those required by Rule 14a-3 under the Exchange Act and
shall be included in an annual report pursuant to the requirements of such Rule.
(i) During a period of seven years after the date hereof, the Company shall
furnish to its stockholders, as soon as practicable but no later than the end of
the period specified in the immediately preceding paragraph, if applicable,
annual reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and shall deliver to
the Representative:
15
i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company and the Subsidiary for
each quarter in the form furnished to the Company's stockholders and
certified by the Company's principal financial or accounting officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company and the Subsidiary as at the
end of the preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company and the Subsidiary for
such fiscal year, accompanied by a copy of the certificate thereon of
independent certified public accountants;
iii) as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any
securities exchange;
v) every press release and every material news item or article of
interest to the financial community in respect of the Company, the
Subsidiary or their respective affairs that was released or prepared by or
on behalf of the Company or the Subsidiary; and
vi) any additional information of a public nature concerning the
Company or the Subsidiary (and any future subsidiaries) or any of their
businesses that the Representative may reasonably request.
During such seven-year period, if the Company has active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any significant
subsidiary that is not so consolidated.
(j) The Company shall maintain a transfer agent, and if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the same
entity as the transfer agent) for its Common Stock.
(k) The Company shall furnish or cause to be furnished to the
Representative or on the Representative's order, without charge, at such place
as the Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (one of which copies shall be manually signed and shall include all
financial statements and exhibits), the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Representative may request.
(l) The Company has provided the Representative with true copies of duly
executed, legally binding and enforceable agreements (collectively, the "Lock-Up
Agreements") pursuant to
16
which, for a period of twenty-four (24) months after the effective date of the
Registration Statement, each of the Company's officers, directors, stockholders
and all holders of securities convertible into, exercisable or exchangeable for
or evidencing any right to purchase or subscribe for any shares of Common Stock
has agreed that, without the prior written consent of the Representative, such
person or entity (each, a "Restricted Party") shall not directly or indirectly
offer to sell, sell, grant any option for the sale of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein in accordance with the Rules and Regulations (all of
the foregoing being referred to collectively as "Restricted Securities").
Notwithstanding the foregoing, a Restricted Party may transfer any or all of the
Restricted Securities, either during the Restricted Party's lifetime or on the
Restricted Party's death, by grant of a bona fide gift to any person, by will or
intestate succession to the Restricted Party's immediate family or to a trust
the beneficiaries of which are exclusively the Restricted Party's and/or a
member or members of the Restricted Party's immediate family, or to any
affiliate (within the meaning of the Rules and Regulations), associate,
shareholders, employee or partner of the Restricted Party; provided, however,
that in any such case it shall be a condition to the transfer that the
transferee is receiving and holding the Restricted Securities subject to the
provision of the LockUp Agreement, and there shall be no further transfer of
such Restricted Securities except in accordance with such Lock-Up Agreement. In
addition, during the 12 month period commencing with the effective date of the
Registration Statement, the Company shall not, without the prior written consent
of the Representative, sell, contract or offer to sell, issue, transfer, assign,
pledge, distribute, or otherwise dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exchangeable or
exercisable for shares of Common Stock (other than upon the exercise or
conversion of currently outstanding options, warrants, convertible securities
and other rights to acquire shares of Common Stock (including the
Representative's Warrants)). On or before the Closing Date, the Company shall
deliver instructions to the transfer agent authorizing it to place appropriate
legends on the certificates representing the securities subject to the Lock-up
Agreements and to place appropriate stop transfer orders on the Company's
ledgers.
(m) Neither the Company nor the Subsidiary shall take, or permit any of
their respective officers, directors, or stockholders, or any of their
respective affiliates (within the meaning of the Rules and Regulations) to take,
directly or indirectly, any action designed to, or that might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities of the Company or the Subsidiary.
(n) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company or the
Subsidiary.
(o) The Company shall timely file all such reports, forms and other
documents as may be required (including without limitation a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time under the Act,
the Exchange Act, and the Rules and Regulations, and all
17
such reports, forms and documents filed shall comply as to form and substance
with the applicable requirements under the Act, the Exchange Act, and the Rules
and Regulations.
(p) The Company shall furnish to the Representative as early as practicable
prior to each of the date hereof, the Closing Date, and each Option Closing
Date, if any, but no later than two full business days prior thereto, a copy of
the latest available unaudited interim financial statements of the Company
(which in no event shall be as of a date more than 30 days prior to the date of
the Registration Statement) which have been read by the Company's independent
public accountants, as stated in their letters to be furnished pursuant to
Sections 6(m) and (n) hereof.
(q) Unless otherwise agreed by the Company and the Representative, the
Company shall cause the Common Stock to be quoted on the Nasdaq SmallCap Market,
and for a period of seven years from the date hereof, shall use its best efforts
to maintain the Nasdaq SmallCap Market quotation.
(r) For a period of five years from the Closing Date, the Company shall
furnish to the Representative, as and to the extent requested by the
Representative, at the Company's sole expense, (i) daily consolidated transfer
sheets relating to the Company's securities, (ii) the list of holders of all of
the Company's securities, and (iii) a Blue Sky "Trading Survey" for secondary
sales of the Company's securities prepared by counsel to the Company.
(s) The Company has filed a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Common Stock, and has requested that
such filing be declared effective at the same time as the Registration Statement
becomes effective, and as soon as practicable hereafter but in no event more
than 30 days from the effective date of the Registration Statement, shall take
all necessary and appropriate actions for the Common Stock to be included in
Standard and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual and to
continue such inclusion for a period of not less than seven years.
(t) The Company hereby agrees that it will not for a period of 24 months
from the effective date of the Registration Statement, adopt, propose to adopt
or otherwise permit to exist any employee, officer, director, consultant or
compensation plan or arrangement permitting (i) the grant, issue, sale or entry
into any agreement to grant, issue or sell any option, warrant or other contract
right (x) at an exercise price that is less than the greater of the public
offering price of the Shares set forth herein and the fair market value on the
date of grant or sale or (y) to any of its executive officers or directors or to
any holder of 5% or more of the Common Stock; (ii) the maximum number of shares
of Common Stock or other securities of the Company purchasable at any time
pursuant to options or warrants issued by the Company to exceed ______ shares;
(iii) the payment for such securities with any form of consideration other than
cash; or (iv) the existence of stock appreciation rights, phantom options or
similar arrangements.
(u) Until the completion of the distribution of the Securities, the Company
shall not, without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the
18
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations.
(v) Until after the earlier of (i) seven years from the date hereof, and
(ii) the sale to the public of all of the Representative's Securities, the
Company shall not take any action or actions that might prevent or disqualify
the Company's use of Form SB-2 (or other appropriate form) for the registration
under the Act of the Representative's Securities.
(w) For a period of five years after the effective date of the Registration
Statement, (i) the Company shall notify the Representative of each meeting of
the Board of Directors of the Company (the "Board"), and (ii) one individual
selected by the Representative (who may be a director, officer, agent or
affiliate of the Representative) shall be permitted to attend all meetings of
the Board and to receive all notices and other correspondence and communications
sent by the Company to the members of the Board. Such individual shall be
reimbursed for all reasonable out-of-pocket expenses incurred in connection with
such person's attendance at meetings of the Board of Directors.
(x) The Company shall use its best efforts to keep the Registration
Statement current for at lease until the expiration of the Representative's
Warrants and shall bear all of the costs associated with the filing of a new
registration statement in the event the Representative's Warrants are exercised.
(y) The Company shall, upon written request by a majority of holders of the
Representative's Warrants after 12 months from the effective date of the
Registration Statement and within the Representative's Warrant Period, one time
only, cause the securities underlying the Representative's Warrants to be
subject to a registration statement, as may be appropriate under the Act, so as
to enable the Representative or the Representative's assigns to offer publicly
the securities underlying the Representative's Warrants. All costs incurred in
the preparation of such registration statement shall be paid by the Company with
the exception of fees and expenses of counsel for the holders of the
Representative's Warrants and selling commissions to be paid to any underwriter
with respect to such securities.
(z) If, at any time or times during a period of five (5) years from the
effective date of the Registration Statement, the Company shall register any
primary or secondary offering of any debt or equity security issued or to be
issued by it pursuant to a registration statement under the Act, the Company
shall in each such event notify the Representative in writing not less than 30
days prior to filing such registration statement with the Commission, and the
Representative or the Representative's assigns shall have the right to register
the securities underlying the Representative's Warrants by notifying the Company
in writing, within 15 days of receipt of the Company's notice, requesting
registration of such securities and setting forth the intended method of
distribution and such other data or information as the Company or its counsel
shall reasonably require. Such registration shall be without cost to the
Representative except for sales commissions incurred if the securities
underlying the Representative's Warrants are sold, and fees and expenses of
counsel for the holders of the Representative's Warrants.
19
(aa) The Company hereby grants to First United, for a period of three years
after the effective date of the Registration Statement, a right of first refusal
on the terms and subject to the conditions set forth herein, should the Company
or any of its affiliates desire to sell any securities (including, without
limitation, any Securities) of the Company. The Company (or such affiliate)
shall consult with First United with regard to such sale and shall offer to
First United the opportunity, on terms not more or less favorable to the Company
(or such affiliate) than the Company (or such affiliate) can receive elsewhere,
to purchase or sell any such securities. If First United fails to accept in
writing such proposal made by the Company (or such affiliate) by the end of the
tenth business day following the date of receipt of a written notice containing
such proposal, then First United shall have no further claims or rights with
regard to the proposal contained in such notice, provided that the Company (or
such affiliate) consummates a sale of such securities on the same terms and
conditions within 90 days thereafter. If, thereafter, such proposal is modified
or such sale is not consummated with such 90-day period, the Company (or such
affiliate) shall again consult with First United with respect to any sale of
such securities (including with respect to the original proposal), any modified
proposal or any new proposal.
5. Payment of Expenses.
(a) The Company hereby agrees to pay, on each of the Closing Date and each
Option Closing Date (to the extent not paid at the Closing Date), all expenses
and fees (other than fees and expenses of Underwriters' Counsel, except as
provided in clause (iv) below) incident to the performance of the obligations of
the Company under this Agreement and the Representative's Warrant Agreement,
including without limitation (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing (including mailing and handling charges),
filing, delivery, and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto), and delivery of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities, including, but not limited to (x) the purchase by the Underwriters
of the Securities and the purchase by the Representative of the Representative's
Warrants from the Company, and (y) the consummation by the Company of any of its
obligations under this Agreement and the Representative's Warrant Agreement, and
(z) resale of the Securities by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities and
the Representative's Securities under state or foreign securities or "Blue Sky"
laws and determination of the status of such securities under legal investment
laws, including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum," and the "Legal Investment
Survey," if any, and disbursements and fees of counsel in connection therewith,
(v) advertising costs and expenses, and costs and expenses in connection with
bound volumes and prospectus memorabilia and "tomb-stone" advertisement
expenses, (vi) costs and expenses in connection with Company counsel's due
diligence investigations, including without
20
limitation the fees of any independent counsel or consultant retained, (vii)
fees and expenses of the transfer agent and registrar for the Common Stock,
(viii) the fees payable to the Commission and the NASD, and (ix) the fees and
expenses incurred in connection with the listing or quotation, as the case may
be, of the Securities on the Nasdaq SmallCap Market and any other exchange or
market system.
(b) The Company further agrees that, in addition to the expenses payable
pursuant to Section 5(a), it shall pay to the Representative on the Closing Date
by certified or bank cashier's check or, at the election of the Representative,
by deduction from the proceeds of the offering contemplated herein, a
non-accountable expense allowance equal to three (3) percent of the gross
proceeds received by the Company from the sale of the Firm Securities, $25,000
of which has been paid to date. If the Representative elects to exercise the
over-allotment option described in Section 2(b) hereof, the Company agrees to
pay to the Representative on each Option Closing Date (by certified or bank
cashier's check or, at the Representative's election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to three (3)
percent of the gross proceeds from the sale of the Option Securities sold on
such Option Closing Date.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, if any,
of the statements of the officers of the Company made pursuant to the provisions
hereof and the performance by the Company on and as of the Closing Date and each
Option Closing Date, if any, of its covenants and obligations hereunder and to
the following further conditions:
(a) The Registration Statement shall have become effective not later than
12:00 A.M., New York time, on the date of this Agreement or such later date and
time as shall be consented to in writing by the Representative, and at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact that, in the Representative's opinion, is material, or omits to state a
fact that, in the Representative's opinion, is
21
material and is required to be stated therein or is necessary to make the
statements therein not misleading, or that the Prospectus, or any supplement
thereto, contains an untrue statement of fact that, in the Representative's
opinion, is material, or omits to state a fact that, in the Representative's
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) On or prior to the Closing Date or Option Closing Date, as the case may
be, the Representative shall have received from Underwriters' Counsel, such
opinion or opinions with respect to the organization of the Company, the
validity of the Securities, the Representative's Warrants, the Registration
Statement, the Prospectus, and other related matters as the Representative may
request and Underwriters' Counsel shall have received such papers and
information as they request to enable them to pass upon such matters.
(d) On the Closing Date, the Underwriters shall have received the favorable
opinion of Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, P.C., counsel to the Company and
the Subsidiary, dated the Closing Date, addressed to the Underwriters, and in
form and substance satisfactory to Underwriters ("Company Counsel"), to the
effect that:
i) Each of the Company and the Subsidiary (A) has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the state of its incorporation, (B) is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction
in which its ownership or leasing of any properties or the character of its
operations requires such qualification or licensing, (C) has all requisite
power and authority (corporate and other), and has obtained all material
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory authorities (including
without limitation those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; to the best knowledge of such Counsel, each of
the Company and the Subsidiary is and has been doing business in compliance
with all such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all applicable federal, state and local laws,
rules and regulations; and to the best knowledge of such Counsel, neither
the Company nor the Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit that, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect. The disclosures in the
Registration Statement concerning the effects of federal, state, and local
laws, rules and regulations on the Company's and Subsidiary's business as
currently conducted and as contemplated by the Prospectus are correct in
all material respects and do not omit to state a fact necessary to make the
statements contained therein not misleading in light of the circumstances
in which they were made;
ii) the Company owns 100% of the outstanding capital stock of the
Subsidiary, and, to the best knowledge of such Counsel, neither the Company
nor the Subsidiary owns
22
an interest in any corporation, partnership, joint venture, trust or other
business entity (other than the Company's interest in the Subsidiary);
iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization," and will have the adjusted
capitalization set forth therein on the Closing Date and each Option
Closing Date, if any, based upon the assumptions set forth therein (except
that the effects of the exercise of the Underwriters' over-allotment option
are not reflected therein), and, to the best knowledge of such Counsel,
neither the Company nor the Subsidiary is a party to or bound by any
instrument, agreement, or other arrangement providing for it to issue any
capital stock, warrants, options, or other securities, or rights with
respect thereto, except for this Agreement and the Representative's Warrant
Agreement and as described in the Prospectus. The terms and provisions of
the Securities and the Representative's Securities, and the other
securities issued or issuable by the Company or the Subsidiary, conform in
all material respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and outstanding
securities of each of the Company and the Subsidiary have been duly
authorized and validly issued and the shares of Common Stock issued and
outstanding immediately prior to the Closing Date are fully paid and
non-assessable and the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities of the Company was issued
in violation of the preemptive rights of any person or entity. The
Securities and the Representative's Securities to be sold by the Company
hereunder and under the Representative's Warrant Agreement (i) are not and
will not be subject to any preemptive or other similar rights of any
stockholder or any other person or entity, (ii) have been duly authorized
and, when issued, paid for, and delivered in accordance with the terms
hereof and thereof, will be validly issued, fully paid, and non-assessable
and will conform to the description thereof contained in the Prospectus;
the holders thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities and the Representative's Securities has
been duly and validly taken; and the certificates representing the
Securities are in due and proper form. The Representative's Warrants
constitute legal, valid and binding obligations of the Company to issue and
sell, upon exercise thereof and payment therefor pursuant to the terms
thereof, the numbers and types of securities of the Company called for
thereby. Upon the issuance and delivery pursuant to this Agreement of the
Securities and the Representative's Securities to be sold by the Company,
and assuming that the Underwriters acquire such Securities, and the holders
of the Representative's Securities acquire such Representative's
Securities, in good faith and without notice of any adverse claim, then the
Underwriters will acquire good and marketable title to the Securities, and
the holders of the Representative's Securities will acquire good and
marketable title to the Representative's Securities, free and clear of any
Lien of any kind whatsoever, except as the Underwriters and the
Representative, or any of them, may have granted. No transfer tax is
payable by or on behalf of the Underwriters in connection with (A) the
issuance by the Company of the Securities or the Representative's
Securities, (B) the purchase by the Underwriters of the Securities and the
purchase and exercise by the Representative of the
23
Representative's Warrants, (C) the consummation by the Company of any of
its obligations under this Agreement, the Representative's Warrant
Agreement or the Representative's Warrants, or (D) the initial sale to the
public of the Securities in connection with the distribution contemplated
hereby;
iv) such Counsel has been orally advised by the Commission that the
Registration Statement was declared effective under the Act, and, if
applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, that such Counsel has been advised by the
Commission that no stop order suspending the use of the Preliminary
Prospectus, the Registration Statement, or the Prospectus, or any part of
any thereof, or suspending the effectiveness of the Registration Statement
has been issued, and to the best knowledge of such Counsel, no proceedings
for that purpose have been instituted or are pending or threatened or
contemplated under the Act;
v) each of the Preliminary Prospectus, the Registration Statement and
the Prospectus and any amendments or supplements thereto (other than the
financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) complies as to form in
all material respects with the requirements of the Act and the Rules and
Regulations. Such Counsel shall state that such Counsel has participated in
conferences with officers and other representatives of the Company and the
Subsidiary and representatives of the independent public accountants for
the Company and the Subsidiary, at which conferences such Counsel made
inquiries of such officers, representatives and accountants, and discussed
the contents of the Preliminary Prospectus, the Registration Statement and
the Prospectus and at which related matters were discussed and, although
such Counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement and Prospectus, on the
basis of the foregoing, no facts have come to the attention of such Counsel
that lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment
became effective, or the Preliminary Prospectus or Prospectus or amendment
or supplement thereto, as of the date of such opinion, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made (it being
understood that such Counsel need express no opinion with respect to the
financial statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement or the
Prospectus);
vi) to the best of such Counsel's knowledge, (A) there are no
agreements, contracts, or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed as
exhibits to the Registration Statement other than those described in the
Registration Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits thereto, and
the exhibits that have been filed are correct copies of the documents of
which they purport to be copies; (B) the descriptions in the
24
Registration Statement and the Prospectus and any supplement or amendment
thereto, of contracts and other documents to which the Company and the
Subsidiary is party or by which it is bound, including any such document
incorporated by reference into the Prospectus and any supplement or
amendment thereto, are accurate and fairly represent, in all material
respects, the information required to be shown by Form SB-2; (C) there is
not pending or threatened against the Company or the Subsidiary any action,
arbitration, suit, proceeding, inquiry, investigation, litigation, or
governmental or other proceeding (including without limitation those having
jurisdiction over environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give rise to the
same), or involving the properties or business of either of the Company or
the Subsidiary that (x) is required to be disclosed in the Registration
Statement and is not so disclosed (and such proceedings as are summarized
in the Registration Statement, if any, are accurately summarized in all
material respects), or (y) questions the validity of the capital stock of
the Company or the Subsidiary or this Agreement, the Representative's
Warrant Agreement or the Representative's Warrants, or of any action taken
or to be taken by the Company or the Subsidiary pursuant to or in
connection with any of the foregoing; (D) no statute or regulation or legal
or governmental proceeding required to be described in the Prospectus is
not described as required; and (E) there is no action, suit or proceeding
pending or threatened against or affecting the Company or the Subsidiary
before any court or arbitrator or governmental or regulatory authority in
which there is a reasonable possibility of an adverse decision that could
result in a Material Adverse Effect, that could adversely affect the
present or prospective ability of the Company to perform its obligations
under this Agreement, the Representative's Warrant Agreement or the
Representative's Warrants or which in any manner draws into question the
validity or enforceability of this Agreement, the Representative's Warrant
Agreement or the Representative's Warrants;
vii) the Company has full legal right, power and authority to enter
into each of this Agreement, the Representative's Warrant Agreement and the
Representative's Warrants and to consummate the transactions provided for
herein and therein; and each of this Agreement and the Representative's
Warrant Agreement has been, and the Representative's Warrants, upon due
execution and delivery against payment therefor in accordance with the
terms of the Representative's Warrant Agreement, will be, duly authorized,
executed and delivered by the Company. Each of this Agreement, the
Representative's Warrant Agreement and the Representative's Warrants,
assuming due authorization, execution and delivery by each other party
thereto, constitutes, a legal, valid, and binding agreement of the Company
enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable law); and
none of the Company's execution or delivery of this Agreement, the
Representative's Warrant Agreement or the Representative's Warrants, its
performance hereunder or thereunder, or its consummation of the
transactions contemplated herein or therein, conflicts with or will
conflict with or results or will result in any breach or violation of any
of the terms or provisions of, or constitutes or will constitute
25
a default under, or result in the creation or imposition of any Lien of any
kind whatsoever upon, any property or assets (tangible or intangible) of
the Company or the Subsidiary pursuant to the terms of (A) the certificate
of incorporation or bylaws of the Company or of the Subsidiary, each as
amended and in effect as of the date of such opinion, (B) to the best
knowledge of such Counsel, any license, contract, indenture, mortgage, deed
of trust, voting trust agreement, stockholders agreement, note, loan or
credit agreement, or any other agreement or instrument to which the Company
or the Subsidiary is party or by which they are or may be bound or to which
any of their respective properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, or (C) any statute, judgment, decree,
order, rule or regulation applicable to the Company or the Subsidiary of
any arbitrator, court, or governmental or regulatory authority (including
without limitation those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or the
Subsidiary or any of their respective activities or properties;
viii) except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory body,
governmental or regulatory authority or any other person or entity (other
than such as may be required under Blue Sky laws, as to which no opinion
need be rendered) is required in connection with the issuance of the
Securities pursuant to the Prospectus, the issuance and the exercise the
Representative's Warrants, the performance of this Agreement, the
Representative's Warrant Agreement and the Representative's Warrants, and
the transactions contemplated hereby and thereby;
ix) to the best knowledge of such Counsel, the properties and business
of each of the Company and the Subsidiary conform to the description
thereof contained in the Registration Statement and the Prospectus;
x) to the best knowledge of such Counsel, neither the Company nor the
Subsidiary is in breach of, or in default under, any term or provision of
any material license, contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders
agreement, partnership agreement, note, loan or credit agreement, or other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company or the Subsidiary is a
party or by which they are or may be bound or to which any of their
respective properties or assets (tangible or intangible) are or may be
subject or affected; and neither the Company nor the Subsidiary is in
violation of any term or provision of its certificate of incorporation or
bylaws, each as amended and in effect as of the date of such opinion, or,
to the best knowledge of such Counsel, in violation of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation;
xi) the statements in the Prospectus under "THE COMPANY," "BUSINESS,"
"MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN TRANSACTIONS,"
"DESCRIPTION OF SECURITIES," "SHARES ELIGIBLE FOR FUTURE SALE" and "SELLING
STOCKHOLDERS; PLAN OF DISTRIBUTION" have been reviewed by such
26
Counsel, and insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions, are correct
in all material respects;
xii) the Company has been advised that the Common Stock has been
approved for quotation on the Nasdaq SmallCap Market;
xiii) to the best knowledge of such Counsel, the persons listed under
the caption "PRINCIPAL STOCKHOLDERS" and "SELLING STOCKHOLDERS; PLAN OF
DISTRIBUTION" in the Prospectus are the respective "beneficial owners" (as
such phrase is defined in Rule 13d-3 of the Rules and Regulations), of the
securities set forth opposite their respective names thereunder as and to
the extent set forth therein;
xiv) to the best knowledge of such Counsel, no person, corporation,
trust, partnership, association or other entity has the right (x) to
include and/or register any securities of the Company in the Registration
Statement or (y) except as described in the Prospectus, to require the
Company to file any registration statement or, if any registration
statement (other than the Registration Statement) is filed, to include any
security in such registration statement;
xv) to the best knowledge of such Counsel, except as described in the
Prospectus, there are no claims, payments, issuances or other agreements,
understandings or arrangements for services in the nature of a finder's or
origination fee with respect to the sale of the Securities or the
Representative's Securities hereunder or financial consulting arrangement
or any other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation, as determined by
the NASD;
xvi) assuming due execution by the parties thereto other than the
Company, the Lock-up Agreements are legal, valid and binding obligations of
the parties thereto, enforceable against the party and any subsequent
holder of the securities subject thereto in accordance with its terms;
xvii) to the best knowledge of such Counsel, except as described in
the Prospectus, neither the Company nor any Subsidiary (A) maintains,
sponsors or contributes to any ERISA Plans, (B) maintains or contributes,
now or at any time previously, to a defined benefit plan, as defined in
Section 3(35) of ERISA, and (C) has ever completely or partially withdrawn
from a "multiemployer plan"; and
xviii) the Company is not an "investment company" required to be
registered or regulated under the Investment Company Act of 1940, as
amended.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company or the Subsidiary and
certificates or other written statements of officers of, departments of
various jurisdictions having custody of documents respecting the corporate
27
existence or good standing of the Company or the Subsidiary, provided that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel.
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Company Counsel dated the Option Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, confirming as of each Option Closing Date the statements
made by such counsel in its opinion delivered on the Closing Date.
(f) On or prior to each of the Closing Date and each Option Closing Date,
if any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in Section 6(c), or
in order to evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties or conditions of the Company and the Subsidiaries,
or herein contained.
(g) Prior to each of the Closing Date and each Option Closing Date, if any,
(i) there shall have been no Material Adverse Effect on the Company or the
Subsidiary; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company or the Subsidiary, from the
latest date as of which the financial condition of the Company or the Subsidiary
is set forth in the Registration Statement and Prospectus that is materially
adverse to the Company or the Subsidiary; (iii) neither the Company nor the
Subsidiary shall be in material breach or material default under any provision
of any instrument relating to any outstanding indebtedness; (iv) neither the
Company nor the Subsidiary shall have issued any securities (other than as
described in the Registration Statement and other than the Securities and the
Representative's Securities) or declared or paid any dividend or made any
distribution in respect of its capital stock of any class and there shall not
have been any change in the capital stock or any material change in the debt
(long or short term) or liabilities or obligations of the Company or the
Subsidiary (contingent or otherwise); (v) no material amount of the assets of
the Company or the Subsidiary shall have been pledged or mortgaged, except as
set forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company or the Subsidiary, or
involving or affecting their respective business or properties, before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding could have a Material
Adverse Effect on the Company or the Subsidiary, except as set forth in the
Registration Statement and Prospectus; and (vii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company, signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus, and this Agreement, and that:
28
i) The representations and warranties of the Company in this Agreement are
true and correct, as if made on and as of the Closing Date or such Option
Closing Date, as the case may be, and the Company has complied, in all material
respects, with all agreements and covenants and satisfied, in all material
respects, all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to such Closing Date or Option Closing Date, as the
case may be;
ii) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best of each of such
person's knowledge after due inquiry, are contemplated or threatened under the
Act;
iii) the Registration Statement and the Prospectus and each amendment and
each supplement thereto, if any, contain all statements and information required
to be included therein, and none of the Registration Statement, the Prospectus,
or any amendment or supplement thereto, includes any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and neither the Preliminary Prospectus or
any supplement thereto included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; except that such certification may expressly exclude
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters by or on
behalf of the Underwriters expressly for use in such Preliminary Prospectus,
Registration Statement or Prospectus; and
iv) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus, (a) neither the Company nor the
Subsidiary shall have incurred, up to and including the Closing Date or the
Option Closing Date, as the case may be, other than in the ordinary course of
its business consistent with past practice, any material liabilities or
obligations, direct or contingent; (b) neither the Company nor the Subsidiary
shall have paid or declared any dividends or other distributions on its capital
stock; (c) neither the Company nor the Subsidiary shall have entered into any
transactions not in the ordinary course of business consistent with past
practice; (d) there shall not have been any change in the capital stock or
long-term debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of business
consistent with past practice) of the Company or the Subsidiary; (e) neither the
Company nor the Subsidiary shall have sustained any material loss or material
damage to their respective property or assets, whether or not insured; (f) there
shall be no litigation which is pending or threatened (or circumstances giving
rise to same) against the Company or the Subsidiary or any affiliated party that
is required to be set forth in an amended or supplemented Prospectus and that
has not been so set forth; and (g) there shall not have occurred any event
required to be set forth in an amended or supplemented Prospectus that shall not
have been set forth.
29
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters shall have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated the date hereof, addressed to the Underwriters in form
and substance satisfactory (including as to the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
L.L.P.;
i) confirming that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
ii) stating that it is their opinion that the financial statements and
supporting schedules of the Company, the Subsidiary and the Commack
Partnership included in the Registration Statement comply as to form,
in all material respects, with the applicable accounting requirements
of the Act and the Rules and Regulations thereunder and that the
Representative may rely upon the opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
L.L.P. with respect to the financial statements and supporting
schedules included in the Registration Statement;
iii) stating that, on the basis of a limited review that included a reading
of the latest available unaudited interim consolidated financial
statements of the Company and the Subsidiary (with an indication of
the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the
stockholders and board of directors and the various committees of the
boards of directors of the Company and the Subsidiary, consultations
with officers and other employees of the Company and the Subsidiary
responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention that
would lead them to believe that (A) the pro forma financial
information contained in the Registration Statement and Prospectus
does not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or is not fairly presented in conformity with generally
accepted accounting principles applied on a basis consistent with that
of the audited consolidated financial statements of the Company or the
unaudited pro forma financial information included in the Registration
Statement, (B) the unaudited financial statements and supporting
schedules of the Company, the Subsidiary and the Commack Partnership
included in the Registration Statement do not comply as to form, in
all material respects, with the applicable accounting requirements of
the Act and the Rules and Regulations or are not fairly presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited consolidated
financial statements of the Company, the
30
Subsidiary and the Commack Partnership included in the Registration
Statement, or (C) at a specified date not more than five days prior to
the effective date of the Registration Statement, there has been any
change in the capital stock or long-term debt of the Company and the
Subsidiary, or any decrease in the stockholders' equity or net current
assets or net assets of the Company as compared with amounts shown in
the balance sheet included in the Registration Statement, other than
as set forth in or contemplated by the Registration Statement, or, if
there was any change or decrease, setting forth the amount of such
change or decrease, and (D) during the period from September 30, 1996
to a specified date not more than five days prior to the effective
date of the Registration Statement, there was any increase or decrease
in net revenues, net earnings or increase in net earnings per common
share of the Company and the Subsidiary, in each case as compared with
the corresponding period in the preceding year other than as set forth
in or contemplated by the Registration Statement, or, if there was any
such decrease or increase, setting forth the amount of such decrease
or increase;
iv) setting forth at a date not later than five days prior to the date of
the Registration Statement, the amount of liabilities of the Company
and the Subsidiary (including a break-down of commercial paper and
notes payable to banks);
v) stating that they have compared specific dollar amounts, numbers of
shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company, the Subsidiary and
the Commack Partnership set forth in the Prospectus, in each case to
the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records,
including work sheets, of the Company, the Subsidiary and the Commack
Partnership and, excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter, found
them to be in agreement;
vi) stating that they have not during the immediately preceding five-year
period brought to the attention of any of the Company's or the
Subsidiary's management any "weakness," as defined in Statement of
Auditing Standard No. 60 "Communication of Internal Control Structure
Related Matters Noted in an Audit," in any of the Company's or the
Subsidiary's internal controls;
vii) stating that they have in addition carried out certain specified
procedures, not constituting an audit, with respect to certain pro
forma financial information which is included in the Registration
Statement and the Prospectus and that nothing has come to their
attention as a result of such procedures that caused them to believe
such unaudited pro forma financial information does not comply in form
in all respects with the applicable accounting requirements of Item
301 of Regulation S-B or that
31
the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of that information; and
viii)statements as to such other matters incident to the transaction
contemplated hereby as the Representative may request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P. a letter,
dated as of the Closing Date or such Option Closing Date, as the case may be, to
the effect that they reaffirm that the statements made in the letter furnished
pursuant to subsection (j) of this Section, except that the specified date
referred to therein as of which the examination made by them as described
therein shall have been made shall be a date not more that five days prior to
Closing Date or such Option Closing Date, as the case may be, and if the Company
has elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (v) of
subsection (j) of this Section with respect to certain amounts, percentages and
financial information as specified by the Representative and deemed to be a part
of the Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with the
records specified in such clause (v).
(l) On each of the Closing Date and each Option Closing Date, if any, there
shall have been duly tendered to the Representative for its account and the
several Underwriters' accounts, certificates representing the appropriate
numbers and types of Representative's Securities and Securities, as the case may
be, against payment therefor as provided herein.
(m) No order suspending the sale of the Securities or the Representative's
Securities in any jurisdiction designated by the Representative pursuant to
subsection (e) of Section 4 hereof shall have been issued on either the Closing
Date or the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
(n) On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement, in
the form attached hereto as Exhibit A, and (ii) the Representative's Warrants,
in such denominations and to such designees (who must be officers of the
Representative) as shall have been requested by the Representative.
(o) On or before Closing Date, the Common Stock shall have been duly
approved for quotation on the Nasdaq SmallCap Market, subject to official notice
of issuance.
(p) On or before Closing Date, there shall have been delivered to the
Representative all of the Lock-Up Agreements, in form and substance satisfactory
to Underwriters' Counsel.
If any representation or warranty of the Company herein shall not be true
and correct, or if any other material condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at the Closing Date or the relevant Option
Closing Date, as the case may be, is not so fulfilled, the
32
Representative may terminate this Agreement or, if the Representative so elects,
it may waive any such conditions that have not been fulfilled or extend the time
for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7, "Underwriter" shall include the
officers, directors, stockholders, partners, employees, agents, and counsel of
each Underwriter, including specifically each person who may be substituted for
an Underwriter as provided in Section 11 hereof), and each person, if any, who
controls such Underwriter (each, a "controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any
and all losses, claims, damages, expenses, or liabilities, joint or several (and
actions, proceedings, investigations and inquiries in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation
commenced or threatened, or any claim whatsoever) (collectively, "Losses"), as
such are incurred, to which the Underwriter or such controlling person may
become subject under the Act, the Exchange Act, or any other statute or at
common law or otherwise or under the laws of foreign countries, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained (i) in any Preliminary Prospectus, the Registration Statement, or
the Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement or
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section collectively called "application")
executed by the Company or based upon written information furnished by the
Company in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, or the Nasdaq Stock Market, or any other securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made
exclusively in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement, or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability that the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters, but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement, or Prospectus or any amendment thereof or supplement
thereto or in any application, in reliance upon, and in strict conformity with,
written information furnished to the Company with
33
respect to any Underwriter by such Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement, or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement, or Prospectus directly
relating to the transactions effected by the Underwriters in connection with
this offering. The Company acknowledges that the statements with respect to the
public offering of the Securities set forth under the heading "Underwriting" and
the stabilization legend in the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriters for inclusion in the
Prospectus or the Registration Statement.
The indemnity agreement in this subsection (b) shall be in addition to any
liability that the several Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section, except to the extent that it has
been prejudiced in any material respect by such failure or from any liability
that it may have otherwise). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable period of time after notice of commencement of the
action, (iii) such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them that are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties) or (iv)
counsel to the indemnifying parties shall have concluded that a conflict exists
between the indemnified party or parties and the indemnifying parties, in any of
which events such fees and expenses of additional counsel shall be borne by the
indemnifying parties. Anything in this Section to the contrary notwithstanding,
an indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent unless such consent was unreasonably
withheld or delayed.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes a claim for indemnification pursuant to
this Section, but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the
34
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the express provisions of this Section provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Securities, or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such Losses, as well as any other relevant equitable
considerations. In any case where the Company is a contributing party and the
Underwriters are the indemnified parties, the relative benefits received by the
Company on the one hand, and the Underwriters, on the other, shall be deemed to
be in the same proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) bear to the total underwriting discounts
received by the Underwriters hereunder, in each case as set forth in the table
on the cover page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters, and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such untrue statement or omission. The amount paid or payable
by an indemnified party as a result of the Losses (or actions in respect
thereof) referred to above in this subdivision (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), the Underwriters shall
not be required to contribute any amount in excess of the underwriting discount
applicable to the Securities purchased by the Underwriters hereunder. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities that any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery.
35
All representations, warranties and agreements contained in this Agreement
or contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements at the
Closing Date and the applicable Option Closing Date, as the case may be, and
such representations, warranties and agreements of the Company and the
respective indemnity agreements contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, or any controlling person of any
Underwriter or the Company, and shall survive termination of this Agreement and
the issuance and delivery of the Securities to the Underwriters and the
Representative's Securities to the Representative, as the case may be.
36
9. Effective Date.
This Agreement shall become effective at 10:00 a.m., New York City time, on
the next full business day following the date hereof, or at such earlier time
after the Registration Statement becomes effective as the Representative, in its
discretion, shall release the Securities for the sale to the public; provided,
however, that the provisions of Sections 5, 7 and 10 of this Agreement shall at
all times be effective. For purposes of this Section, the Securities to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representative of telegrams to securities dealers releasing such
Securities for offering or the release by the Representative for publication of
the first newspaper advertisement that is subsequently published relating to the
Securities.
10. Termination.
(a) Subject to subsection (b) of this Section, the Representative shall
have the right to terminate this Agreement by providing written notice thereof
to the Company at any time prior to the delivery of any payment for the
Securities if prior to such time any of the following occurs: (i) any domestic
or international event or act or occurrence has disrupted, or in the
Representative's opinion will in the immediate future disrupt, the financial
markets; or (ii) any material adverse change in the financial markets shall have
occurred; or (iii) trading on the New York Stock Exchange, the American Stock
Exchange or in the over-the-counter market shall have been suspended, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter market by
the NASD or by order of the Commission or any other governmental or regulatory
authority having jurisdiction; or (iv) the United States shall have become
involved in a war or major hostilities, or there shall have been an escalation
in an existing war or major hostilities or a national emergency shall have been
declared in the United States; or (v) a banking moratorium shall have been
declared by a state or federal governmental or regulatory authority; or (vi) a
moratorium in foreign exchange trading shall have been declared; or (vii) the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Securities; or (viii) there shall have been a Material Adverse
Effect, or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere, as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities; or (ix) if _____________ no
longer serves the Company in his/her present capacity.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a), the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(b) above). Notwithstanding any
contrary provision contained in this Agreement, if this Agreement shall not be
carried out within the time specified herein, or any extension thereof granted
to the Representative, by reason of any failure on the part of the Company to
perform any undertaking or satisfy any
37
condition of this Agreement by it to be performed or satisfied (including,
without limitation, pursuant to Section 6 or Section 12 hereof) then the Company
shall promptly reimburse and indemnify the Representative for all of its actual
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriters (less amounts previously paid pursuant to Section 5(b) above). In
addition, the Company shall remain liable for all Blue Sky counsel fees and
expenses and Blue Sky filing fees. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
11. Substitution of the Underwriters.
If one or more of the Underwriters shall fail (otherwise than for a reason
sufficient to justify the termination of this Agreement under the provisions of
Section 6, Section 10 or Section 12 hereof) to purchase the Securities which it
or they are obligated to purchase on such date under this Agreement (the
"Defaulted Securities"), the Representative shall have the right, within 24
hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representative shall not have completed
such arrangements within such 24-hour period, then:
(a) If the anticipated net proceeds to the Company from the Defaulted
Securities does not exceed 10% of the total anticipated net proceeds to the
Company from the Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the anticipated net proceeds to the Company from the Defaulted
Securities exceeds 10% of the total anticipated net proceeds to the Company
from the Firm Securities to be purchased on such date, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriters
or the Company.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default that does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
38
12. Default by the Company.
If the Company shall fail at the Closing Date or any Option Closing Date,
as applicable, to sell and deliver the respective numbers and types of
Securities that it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Sections 5, 7 and 10 hereof. No
action taken pursuant to this Section shall relieve the Company from liability,
if any, in respect of such default.
13. Notices.
All notices and communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be deemed to have been duly
given if mailed by certified or registered mail, return receipt requested, sent
via an established, reputable overnight courier service, or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representative at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ____________ with a copy to ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant
▇▇▇▇▇▇▇▇ & Bilzin, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to
U.S. Golf and Entertainment Inc., ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman, with a copy to Ruskin Moscou ▇▇▇▇▇ & Faltischek, P.C.,
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
14. Parties.
This Agreement shall inure solely to the benefit of and shall be binding
upon, the Underwriters, the Company and the controlling persons, directors and
officers referred to in Section 6 hereof, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provisions herein contained. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
15. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to its
choice of law or conflict of laws principles.
39
16. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which taken together shall be
deemed to be one and the same instrument.
17. Entire Agreement; Amendments.
This Agreement and the Representative's Warrant Agreement constitute the
entire agreement of the parties hereto and supersede all prior written or oral
agreements, understandings, and negotiations with respect to the subject matter
hereof, including without limitation a letter of intent dated
___________________. This Agreement may not be amended except in a writing
signed by the Representative and the Company.
18. Severability.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement. The parties agree, however, that in the event any
provision of this Agreement shall be declared invalid or unenforceable, the
parties shall negotiate a new provision achieving to the extent possible the
purpose of the invalid provision.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
the Company and each of the several Underwriters.
Very truly yours,
U.S. GOLF AND ENTERTAINMENT INC.
By
--------------------------------
Name:
Title:
Confirmed and accepted as
of the date first above written:
FIRST UNITED EQUITIES CORPORATION
For itself and as Representative
of the several Underwriters listed
in the attached Schedule A
By
--------------------------------
Name:
Title:
40
SCHEDULE A
Number of Firm
Securities to
Name of Underwriter Be Purchased
------------------- --------------
TOTAL
41