SPORTSTRAC, INC.
675,000 Units, each Unit comprised
of one share of Common Stock
and Two Redeemable Class A Warrants
UNDERWRITING AGREEMENT
, 1997
IAR Securities Corp.
As Representative of the
Several Underwriters
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Sportstrac, Inc., a Delaware corporation (the "Company"), confirms its
agreement with IAR Securities Corp. ("IAR") and each of the other underwriters
named in Schedule I hereto (collectively, the "Underwriters," which term shall
also include any underwriter substituted as hereinafter provided in Section 12),
for whom IAR is acting as representative (in such capacity, IAR shall
hereinafter be referred to as the "Representative"), with respect to the
proposed sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of an aggregate of 675,000 Units, each unit (the
"Units") comprised of one share of the Company's common stock, par value $.01
per share (the "Common Stock") and two redeemable Class A Warrants (the "Class A
Warrants"), each of which entitles the holder thereof to purchase one share of
Common Stock at an exercise price of $5.00, pursuant to a warrant agreement
between the Company and the warrant agent (the "Warrant Agreement"), set forth
in said Schedule I, and with respect to the grant by the Company to the
Underwriters, acting severally and not jointly, of the option described in
Section 3(b) hereof to purchase all or any part of the additional Units for the
purpose of covering over-allotments, if any. The aforesaid 675,000 Units,
comprised of one share of Common Stock and two Redeemable Class A Warrants (the
"Firm Securities") and all or any part of the 101,250 Units subject to the
option described in Section 3(b) hereof (the "Option Securities") are
hereinafter collectively referred to as the "Securities." The Company also
proposes to issue and sell to the Representative warrants (the "Representative's
Purchase Option") pursuant to the Representative's Purchase Option Agreement
(the "Representative's Purchase Option Agreement") for the purchase of an
aggregate of 67,500 additional Units. The shares of Common Stock issuable upon
exercise of the Class A Warrants, and the Class A Warrants issuable upon the
exercise of the Representative's Purchase Option are hereinafter sometimes
referred to as the "Warrant Shares." The Common Stock, the Class A Warrants,
Representative Warrant's and the Warrant Shares 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 (as defined in subsection 3(c) hereof) and the Option Closing Date (as
defined in Subsection 3(b) hereof, if any, as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333-1634), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Units under the Securities Act of 1933, as amended (the "Act"), which
Registration Statement and amendment or amendments and Preliminary Prospectuses
have been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Regulations") of the Commission under
the Act. The Company will promptly file a further amendment to said Registration
Statement in the form heretofore delivered to the Underwriters and will not,
before the Registration Statement becomes effective (the "Effective Date"), file
any other amendment thereto unless the Underwriters shall have consented thereto
after having been furnished with a copy thereof. Except as the context may
otherwise require, such Registration Statement, as amended, on file with the
Commission at the time the Registration Statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein (including, but not
limited to those documents or information incorporated by reference therein
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Regulations), is hereinafter called the
"Registration Statement" and the form of prospectus in the form first filed with
the Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called
the "Prospectus." For purposes hereof, "Rules and Regulations" mean the rules
and regulations adopted by the Commission under either the Act or the Exchange
Act, as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed in
all material respects with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus, the Registration Statement
or Prospectus at the time of filing thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
and necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that this representation and
warranty does not apply to statements made in reliance upon and in conformity
with written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters expressly for use in such
Preliminary Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing Date
(as defined in Subsection 3(c) hereof, if any, and during such longer period as
the Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
compliance with the Act and the Rules and Regulations, and will in all material
respects conform
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to the requirements of the Act and the Rules and Regulations; neither the
Registration Statement or 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 supplied to the Company in writing by or on behalf
of any Underwriter expressly for use in the Registration Statement or Prospectus
or any amendment thereof or supplement thereto.
(d) The Company has been duly authorized and is validly
existing as a corporation in good standing under the laws of the state of
Delaware. Except as set forth in the Registration Statement or the Prospectus,
the Company does not own an interest in any corporation, partnership, trust,
joint venture or other business entity. The Company is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of properties or the character of its operations
require such qualification or licensing. Except as set forth in the Prospectus,
the Company does not, directly or indirectly own any equity securities in any
other company. The Company has all requisite power and authority (corporate and
other), and has obtained any and all necessary applications, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; the Company
is and has been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates, franchises and permits and all
federal, state, local and foreign laws, rules and regulations; and the Company
has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operation of any of the Company. The disclosures in the Registration Statement
and the Prospectus concerning the effects of federal, state, local, and foreign
laws, rules and regulations on the business of the Company as currently
conducted and as contemplated are correct in all respects and do not omit to
state a material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and will
have the adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth therein, and
except as set forth in the Prospectus the Company is not a party to or is bound
by any instrument, agreement or other arrangement providing for it to issue any
capital stock, rights, warrants, options or other securities, except for this
Agreement and as described in the Prospectus. The Units, the Representative's
Purchase Option, Common Stock, the Class A Warrants and the Warrant Shares and
all other securities issued or issuable by the Company conform, or when issued
and paid for will conform, in all respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and validly
issued
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and are fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company, or similar contractual rights granted by the Company. The Units, the
Common Stock, the Class A Warrants, the securities underlying the
Representative's Purchase Option, the Representative's Purchase Option to be
issued and sold by the Company hereunder and the Warrant Shares, are not and
will not be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and delivered
in accordance with the terms hereof, will be validly issued, fully paid and
non-assessable and will conform to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any personal liability
solely by reason of being such holders; all corporate action required to be
taken for the authorization, issue and sale of the Units, the securities
comprising the Units, the Representative's Purchase Option, and the Warrant
Shares has been duly and validly taken; and the certificates representing the
Common Stock, the Class A Warrants, the Representative's Purchase Option, and
the Warrant Shares will be in due and proper form. Upon the issuance and
delivery pursuant to the terms hereof of the Common Stock and Class A Warrants
to be sold by the Company hereunder, the Underwriters will acquire good and
marketable title to such Common Stock and Class A Warrants free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a prospective
change in the condition, financial or otherwise, or in the earnings, business
affairs, position, prospects, value, operation, properties, business, or results
of operation of any of the Company, whether or not arising in the ordinary
course of business, since the date of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company, conform
in all respects to the descriptions thereof contained in the Registration
Statement and in the Prospectus.
(g) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and taxes payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986, as amended (the "Code"), and has furnished all information returns
it is required to furnish pursuant to the Code, and has established adequate
reserves for such taxes which are not due and payable, and (iii) does not have
any tax deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Units, (ii) the purchase by the Underwriters of the Units
from the Company or (iii) the consummation by the Company of any of its
obligations under this Agreement.
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(i) The Company maintains insurance of the types and in the
amounts which it reasonably believes to be adequate for its businesses, all of
which insurance is in full force and effect.
(j) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
business of the Company which (i) questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or in the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operations of the Company.
(k) The Company has full legal right, power and authority to
enter into this Agreement, the Representative's Purchase Option Agreement and
the Consulting Agreement (as defined in Section 7(n) hereof) and to consummate
the transactions provided for in such agreements; and this Agreement, the
Representative's Purchase Option Agreement and the Consulting Agreement have
each been duly and properly authorized, executed and delivered by the Company.
Each of this Agreement, the Representative's Purchase Option Agreement and the
Consulting Agreement, constitute 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 Purchase Option
Agreement and the Consulting Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, or the conduct of its business as described in the Registration
Statement, the Prospectus, and any amendments or supplements thereto, conflicts
with or will conflict with or results or will result in any breach or violation
of any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of (i) the articles of
incorporation or by-laws of the Company, (ii) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any of their
respective properties or assets (tangible or intangible) is or may be subject to
any indebtedness, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or any of
their respective activities or properties.
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(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Units pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with the Underwriters' purchase and distribution of the Units
to be sold by the Company hereunder.
(m) All executed material agreements or copies of executed
material agreements filed as exhibits to the Registration Statement to which the
Company is a party or by which it may be bound or to which its assets,
properties or businesses may be subject has been duly and validly authorized,
executed and delivered by the Company, and constitute the legal, valid and
binding agreements of the Company, enforceable against it in accordance with its
terms. The descriptions in the Registration Statement and the Prospectus of
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 or other documents which are required by the Act to be described in
the Registration Statement and the Prospectus or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
Exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or made
any other distribution on or in respect of its capital stock.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets (tangible or intangible)
of the Company is subject or affected.
(p) The Company has generally enjoyed satisfactory
employer-employee relationships with its employees and is in compliance in all
material respects 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 or
foreign agency responsible for the enforcement of such federal, state, local, or
foreign laws and regulations. There is no unfair labor practice charge or
complaint against the Company, pending before the National Labor Relations Board
or any strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company, or any predecessor entity and none
has ever occurred. No representation question exists respecting the employees of
the Company, and no collective bargaining agreement or modification thereof is
currently being
6
negotiated by the Company. No labor dispute with the employees of the Company
exists, or, to the best knowledge of the Company, is imminent; and the Company
is not aware (having made no independent investigation for purposes of this
statement) of any existing or imminent labor disturbance by the employees of any
of their principal suppliers, manufacturers or contractors which might be
expected to result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company.
(q) Since its inception, the Company has not incurred any
material liability arising under or as a result of the application of the
provisions of the Act.
(r) The Company does not maintain, sponsor or contribute to
any program or arrangement that is an "employee pension benefit plan," an
"employee welfare benefit plan" or a "multi-employer 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"). The Company does
not maintain or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. The Company has not completely or
partially withdrawn from a "multi-employer plan."
(s) The Company is not (nor the manner in which it conducts
its business or proposes to conduct its business) in violation of any domestic
or foreign laws ordinances or governmental rules or regulations to which it may
be subject.
(t) Except as provided for in the Registration Statement and
Prospectus, no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any Registration Statement to be filed by the Company
within eighteen (18) months of the date hereof or to require the Company to file
a Registration Statement under the Act during such eighteen (18) month period.
(u) None of the Company, nor any of its respective employees,
officers, directors, stockholders or affiliates (within the meaning of the Rules
and Regulations) has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected to
cause or result in, under the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Units or otherwise.
(v) Except as described in the Prospectus, the Company does
not have any patents, patent applications, trademarks, service marks, trade
names and copyrights, and licenses and rights to the foregoing, which are in
dispute so far as known by the Company or are in any conflict with the right of
any other person or entity. To the best of the Company's knowledge, except as
disclosed in the Prospectus, (i) the Company owns or has the right to use, free
and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind whatsoever, all
trademarks used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise acting
7
adversely to the right or claimed right of any person, corporation or other
entity under or with respect to any of the foregoing, and (ii) except as set
forth in the Prospectus, the Company is not obligated or under any liability
whatsoever to make any payments by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service ▇▇▇▇,
trade name, copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its business or
otherwise.
(w) The Company owns and has the unrestricted right to use all
trade secrets know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual properly") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by it, 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 independent of the Company, as
the case may be, or their respective employees or agents, could have developed
trade secrets or items of technical information similar or identical to those of
the Company. The Company is not aware of any such development of similar or
identical trade secrets or technical information by others.
(x) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all the intellectual property.
(y) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus, owned or leased by it free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
(z) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co., LLP, independent certified public
accountants, 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.
(aa) On or before the Effective Date of the Registration
Statement, the Company shall cause to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers and
directors, has agreed not to, directly or indirectly, offer to sell, sell, grant
any option for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber any of their shares of Common Stock or any of their options, warrants
or other securities exercisable for or convertible into or exchangeable for
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 such Effective Date without the prior written
consent of the Representative. The Company will cause the Transfer Agent, as
defined below, to ▇▇▇▇ an appropriate legend on the face of stock certificates
representing all of such shares of Common Stock.
8
(bb) There are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee with
respect to the sale of the Units hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the Company or
any of its officers, directors, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers Inc. ("NASD").
(cc) The Units have not been approved for quotation on the
SmallCap Market of the Nasdaq Stock Market.
(dd) The Company, nor any of its respective officers,
employees agents or any other person acting on behalf of the Company, has not,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company, in connection with any actual or proposed
transaction) which (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company,
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The internal accounting
controls of the Company are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or the Company, has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company, or (B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficiary interest in any contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing material agreements, arrangements, understandings or
transactions, or proposed material agreements, arrangements, understandings or
transactions, between or among the Company, and any officer, director, or
principal stockholder of the Company, or any affiliate or associate of any such
person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
(gg) The Company has not entered into any employment
agreements, except as described in the Prospectus.
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(hh) The Company has granted the Representative and its
counsel access to all material agreements entered into by the Company.
2. [Intentionally omitted]
3. Purchase, Sale and Delivery of the Units and Representative's
Purchase Option.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter and each Underwriter,
severally and not jointly, agrees to purchase from the Company at the price per
Unit as set forth below in subsection (c), that proportion of the number of Firm
Securities set forth in Schedule I opposite the name of such Underwriter, as
bears to the total number of Firm Securities, subject to such adjustment as the
Representative in its discretion shall make to eliminate any sales or purchases
of fractional shares, plus any additional numbers of Firm Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 12 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional 101,250
Units at the price per share set forth below in subsection (c). The option
granted hereby will expire 30 days after the date of this Agreement, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for 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 Closing Date, as hereinafter defined, unless otherwise agreed
to between the Representative and the Company. In the event such option is
exercised, each of the Underwriters, acting severally and not jointly, shall
purchase that percentage of the total number of Option Securities then being
purchased which the number of Firm Securities set forth in Schedule I hereto
opposite the name of such Underwriter bears to the 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. Nothing herein contained shall obligate the Underwriters to purchase 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 delivery of
certificates for, the Firm Securities shall be made at the offices of the
Representative, 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 , 1997 or at such other time and date as
shall be agreed upon by the Representative and the Company but not less than
three (3) nor more than ten (10) business days after the Effective Date of the
Registration Statement (such time and date of payment and delivery being
hereafter called "Closing Date"). In addition, in the event
10
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 Representative
for the respective accounts of the several Underwriters against payment by the
several Underwriters through the Representative 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. Certificates for the shares of Common Stock
and Class A Warrants underlying the Firm Securities and the Option Securities,
if any, shall be in definitive, fully registered form, shall bear no restrictive
legends and shall be in such denominations and registered in such names as the
Representative may request in writing at least two (2) business days prior to
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the shares of Common Stock and Class A Warrants underlying the
Firm Securities and the Option Securities, if any, shall be made available to
the Underwriters 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 Closing Date or the relevant Option Closing Date, as
the case may be.
The purchase price per Unit to be paid by the Underwriters,
severally and not jointly, to the Company for the Units purchased hereunder will
be the same for each share sold, and will be $5.40. The Company shall not be
obligated to sell any Units hereunder unless all Firm Securities to be sold by
the Company are purchased hereunder. The Company agrees to issue and sell
675,000 Units to the Underwriters and the Company agrees to issue and sell up to
an aggregate of 101,250 Units to cover over-allotments.
(d) On Closing Date, the Company shall issue and sell to the
Representative, Representative's Purchase Option at a purchase price of $67.50,
which shall entitle the holders thereof to purchase an aggregate of 67,500
Units. The Representative's Purchase Option shall be exercisable for a period of
four (4) years commencing one (1) year from the Effective Date of the
Registration Statement at initial exercise prices equal to $9.90 per Unit. The
Representative's Purchase Option Agreement and form of Warrant Certificates
shall be substantially in the form filed as an Exhibit to the Registration
Statement. Payment for the Representative's Purchase Option shall be made on the
Closing Date.
4. Public Offering of the Units. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Units (other than to residents
of or in any jurisdiction in which qualification of the Units 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 after distribution of the Units has been completed to such
extent as the Representative, in its sole discretion deems advisable.
5. Covenants of the Company. The Company covenants and agrees
with the Underwriters as follows:
11
(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 will not at any time, whether before or after the
Effective Date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act before termination of the offering of the Units 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 or the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose, (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Units for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(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 earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifth business day after the Effective Date of
the Registration Statement.
(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 which the Company proposes for use
by the Underwriters in connection with the offering of the Units which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Representative and its counsel 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 shall object.
12
(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 Units for offering and sale under the
securities laws of such jurisdictions as the Representative may reasonably
designate, and shall make such applications, file such documents and furnish
such information as may be required for such purpose; provided, however, the
Company shall not be required to qualify as a foreign corporation or file a
general or limited consent to service of process in any such jurisdiction. In
each jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(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 Units 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 Units 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 will 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 reasonably satisfactory to
Underwriters' counsel, and the Company will furnish to the Underwriters a
sufficient number of copies of such amendment or supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the Effective Date of
the Registration Statement.
(h) During a period of five years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports (if requested by the Representative) of earnings,
and will deliver to the Representative:
13
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and certified by the
Company' s principal financial or accounting officer;
(ii) concurrently with furnishing such annual
reports to its stockholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of independent 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 or its affairs which is intended for release by the Company; and
(vi) any additional information of a public nature
concerning the Company and any future subsidiaries or their respective
businesses which the Representative may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(i) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
(j) The Company will furnish to the Representative or on the
Representatives'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 (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the Effective Date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative reasonably
request.
(k) Except for the offering contemplated by this Agreement,
for a period of 24 months from the Effective Date of the Registration Statement,
the Company's officers and directors, will not, directly or indirectly, issue,
offer to sell, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into 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
14
and Regulations or otherwise) or dispose of any beneficial interest therein
without the prior written consent of the Representative (the "Lock-up"). On or
before the Effective Date of the Registration Statement, the Company shall cause
to be duly executed legally binding and enforceable agreements pursuant to which
each of persons enumerated in the preceding sentence who are subject to the
Lock-up, has agreed to be bound by the Lock-up. During the 24 month period
commencing with the Effective Date of the Registration Statement, the Company
shall issue no shares of capital stock, or securities convertible into or
exchangeable for shares of Common Stock, except (i) shares issuable upon the
exercise of options or warrants referred to in the Registration Statement or in
conformity and compliance with the terms of this Agreement (including without
limitation an aggregate of 480,000 shares of Common Stock pursuant to options
which may be granted under the Company's stock option plan) or (ii) in
connection with any acquisition from, or business combination with, an
unaffiliated entity.
(l) Neither the Company, nor any of its officers or directors,
nor affiliates (within the meaning of the Rules and Regulations) will take,
directly or indirectly, any action designed to, or which might in the future
reasonably be expected to, cause or result in, stabilization or manipulation of
the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of
the Units 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.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including but not limited to a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company which have been read by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to Section 7(j)
hereof.
(p) The Company shall cause the Units to be quoted on the
SmallCap Market of the Nasdaq Stock Market at such time as the Units are
accepted for listing.
(q) For a period of three (3) years from the Closing Date, the
Company shall furnish to the Representative at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Common Stock; (ii) a list of
holders of Common Stock upon the Representative's reasonable requests; and (iii)
a list of the securities positions of participants in the Depository Trust
Company.
15
(r) For a period of five (5) years commencing during fiscal
1997 the Representative has right to appoint a director or representative to the
Company's Board of Directors. In the event the Representative does not designate
a member to be elected as a director, the Company shall notify the
Representative of each meeting of the Board. An individual selected by 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 members of the Board. The Company shall reimburse the
Representative's designee for his or her out-of-pocket expenses reasonably
incurred in connection with his or her attendance at the Board meetings.
(s) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the Warrant Shares, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other appropriate
form) for the registration under the Act of the Warrant Shares.
(t) Intentionally omitted.
(u) Intentionally omitted.
(v) On or before the Effective Date of the Registration
Statement, retain or make arrangements to retain a financial public relations
firm reasonably satisfactory to the Representative which shall be continuously
engaged from such engagement date to a date twenty-four months from Closing
Date.
(w) As soon as practicable, but in no event more than five (5)
days from the Effective Date of the Registration Statement, (i) file a Form 8-A
with the Commission providing for the registration under the Exchange Act of the
Company's securities and (ii) take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual
and to continue such inclusion for a period of not less than five (5) years.
(x) The Company shall furnish to the Representative, within
ninety (90) days following the Option Closing Date, three (3) bound volumes of
all papers and documents utilized in the public offering.
(y) Following the Effective Date of the Registration
Statement, the Company shall, at its sole cost and expense, prepare and file
such blue sky trading applications with such jurisdictions as the Representative
may reasonably request after consultation with the Company.
(z) The Company shall not amend or alter any term of any
written employment agreement, if any, between the Company and any executive
officer or director, during the term thereof, in a manner more favorable to such
employee or director, without the express written consent of the Representative.
(aa) The Company shall engage the Company's legal counsel to
deliver to the Representative a memorandum detailing those states in which the
shares of Common Stock and
16
Class A Warrants of the Company may be traded in non-issuer transactions under
the Blue Sky laws of the fifty states ("Secondary Market Trading Memorandum").
The initial Secondary Market Trading Memorandum shall be delivered to the
Representative on the Effective Date of the Registration Statement, which
Memorandum shall be updated on the first anniversary of the Effective Date. The
Company will have its counsel prepare and file a secondary trading application
in each state, if required in such state and if the Company meets the
requirements for such application to be approved, at the request of the
Representative.
(bb) The Company shall not release any press releases for a
period of 90 days after the Effective Date of the Registration Statement without
the prior approval of the Underwriter and its counsel.
6. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Option Closing Date (to the extent not paid at Closing Date) all
expenses and fees (other than fees of counsel to the Underwriters, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this 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, 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 and delivery of this Agreement, the Agreement
Among Underwriters, Underwriters Questionnaires, 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 in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the Units
including any transfer or other taxes payable thereon, (iv) the qualification of
the Units under state or foreign securities or "Blue Sky" laws and determination
of the status of such securities under legal investment laws, including the
costs of printing and mailing the "Preliminary Blue Sky Memorandum," the
"Supplemental Blue Sky Memorandum" and "Legal Investments Survey," if any, and
disbursements and fees of counsel in connection therewith, (v) advertising costs
and expenses, including but not limited to costs and expenses in connection with
the "road show", information meetings and presentations, bound volumes and
prospectus memorabilia, (vi) costs and expenses in connection with due diligence
investigations, including but not limited to the fees of any independent counsel
or consultant retained, (vii) fees and expenses of the Transfer Agent, (viii)
applications for assignments of a rating of the Units by qualified rating
agencies, (ix) the fees payable to the NASD, and (x) the fees and expenses
incurred in connection with the listing of the Units on the Nasdaq Stock Market
and any other exchange.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 7, Section 11 or Section 13, the
Company shall reimburse and indemnify the Underwriters for all of their
out-of-pocket expenses.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 6, it will pay to
the Representative a non-accountable expense
17
allowance equal to three percent (3%) of the gross proceeds received by the
Company from the sale of the Firm Securities. The Company will pay this amount
on the Closing Date by certified or bank cashier's check or, at the election of
the Underwriter, by deduction from the proceeds of the offering contemplated
herein. In the event the Representative elects to exercise the over-allotment
option described in Section 3(b) hereof, the Company further agrees to pay to
the Representative on the Option Closing Date (by certified or bank cashier's
check or, at the Representatives's election, by deduction from the proceeds of
the offering) a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Option
Securities.
7. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein 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
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 each of its or his covenants and obligations hereunder and to
the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Representative, and, at
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 Units and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the 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 which, in the Representative's opinion, is material or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or that
the Prospectus, or any supplement thereto, contains an untrue statement of fact
which, in the Representative's opinion, is material, or omits to state a fact
which, in the Representative's opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
18
(c) On or prior to the Closing Date, the Representative shall
have received the favorable opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to
the Company, addressed to the Representative and in form and substance
reasonably satisfactory to the Representative's Counsel, to the effect that:
(i) the Company (A) has been duly organized and is
validly existing as a corporation in good standing under the laws of its
jurisdiction, (B) with full corporate power and authority to own and operate its
properties and to carry on its business as set forth in the Registration
Statement and Prospectus, and (C) is qualified as a foreign corporation in each
state in which its ownership of property or its conduct of business requires
such qualification and where the failure to so qualify would have a material
adverse effect on its business;
(ii) to the best of such counsel's knowledge, the
Company owns, directly or indirectly no subsidiaries except as disclosed in the
Prospectus;
(iii) except as described in the Prospectus, to the best
knowledge of such counsel, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity;
(iv) the Company has duly authorized, issued and
outstanding 15,000,000 shares of Common Stock, $.01 par value, of which
2,904,000 shares are issued and outstanding, and 100,000 shares of preferred
stock, of which no shares are issued and outstanding, as set forth in the
Prospectus, and any amendment or supplement thereto, under "Capitalization". All
issued and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable and contain no pre-emptive
rights; the Units have been duly and validly authorized, and upon issuance
thereof and payment therefor in accordance with this Agreement, will be duly and
validly issued, fully paid and non-assessable, and will not be subject to
pre-emptive rights of any shareholder of the Company.
(v) The Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 424(b) and no stop order suspending the
effectiveness of the Registration Statement has been issued and to the best of
such counsel's knowledge, no proceedings for that purpose have been instituted
or are pending or threatened or contemplated under the Act and the Registration
Statement and Prospectus comply as to form in all material respects with the
requirements of the Act and Rules and Regulations thereunder, and such counsel
has no reason to believe and based upon a certificate of the Company's officer's
has received no notice to the effect that either the Registration Statement or
the Prospectus contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which made
(except that no opinion need be expressed as to financial statements contained
in the Registration Statement or Prospectus); and such counsel is familiar with
all contracts referred to in the Registration Statement or Prospectus and such
contracts are sufficiently summarized or disclosed therein or filed as exhibits
thereto as required, and to the best knowledge of counsel, there are no material
contracts required to be summarized or disclosed or filed, nor to the best of
such counsel's knowledge are there any legal or governmental proceedings pending
or threatened to which the
19
Company is the subject which are required to be disclosed in the Registration
Statement or the Prospectus which are not disclosed and properly described
therein.
(vi) The Company has full legal right, power and
authority to enter into each of this Agreement, the Representative's Purchase
Option Agreement, the Warrant Agreement, and the Consulting Agreement, and to
consummate the transactions provided for therein; and each of this Agreement,
the Representative's Purchase Option Agreement, the Warrant Agreement and the
Consulting Agreement has been duly authorized, executed and delivered by the
Company. This Agreement, the Representative's Purchase Option Agreement and the
Consulting Agreement, assuming due authorization, execution and delivery by each
other party thereto and further assuming that they are valid and binding
agreements of the Underwriters and the Representative, so as the case may be,
constitute legal, valid and binding agreements of the Company enforceable as
against the Company in accordance with their 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).
(vii) No consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or other body,
domestic or foreign, (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 Units pursuant to the Prospectus and the Registration Statement,
the performance of the Agreement, the Representative's Purchase Option, the
Warrant Agreement and the Consulting Agreement, and the transactions
contemplated thereby;
(viii) The Units have not been accepted for
quotation on the Nasdaq SmallCap Market of the Nasdaq Stock Market;
(ix) The minute books of the Company have been made
available to Underwriters' counsel and to the best of such counsel's knowledge
contain a complete summary of all meetings and actions of the directors and
stockholders since the time of the Company's incorporation and reflects all
transactions referred to in such minutes accurately in all respects.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Representative's
counsel) of other counsel reasonably acceptable to Representative's counsel,
familiar with the applicable laws; and (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible officers
of the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Representative's counsel
if requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriters and they are justified in relying thereon.
20
At each Option Closing Date, if any, the Representative shall have
received the favorable opinion of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to the Company,
dated the Option Closing Date, addressed to the Representative and in form and
substance satisfactory to Underwriter's counsel confirming as of Option Closing
Date the statements made by ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ in their opinion delivered on
the Closing Date.
(d) Intentionally omitted.
(e) On or prior to each of the Closing Date and the Option
Closing Date, 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 subsection (b)
of this Section 7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representation, warranties or conditions herein
contained.
(f) On or prior to each of the Closing Date and the Option
Closing Date, 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 subsection (c)
of this Section 7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
(g) Prior to each of Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness;
(iv) no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
to its knowledge threatened against the Company, or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vi) 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 Representative 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:
21
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement 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, 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 nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company, shall not 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, any material liabilities or obligations, direct or contingent. The
Company has not paid or declared any dividends or other distributions on its
capital stock; or has entered into any transactions not in the ordinary course
of business. 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) of the
Company; the Company shall not have sustained any material loss or damage to its
property or assets, whether or not insured; there shall not be any litigation
which is pending or threatened against the Company which is required to be set
forth in an amended or supplemented Prospectus which has not been set forth; and
there shall not have occurred any event required to be set forth in an amended
or supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (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 NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Representative
shall have received a letter, dated such date, addressed to the Representative
in form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to
22
in clause (iii) below) to the Representative and Representative's Counsel, from
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co., LLP, independent certified public accounts:
(i) confirming that they are independent 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, the
consolidated financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Underwriters may rely upon the opinion
of ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & Co., LLP, independent certified public accountants, with
respect to the financial statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
financial statements and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and Regulations
or are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement, or
(B) at a specified date not more than five (5) days prior to the Effective Date
of the Registration Statement, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts shown
in the Company's 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 (C) during the period from December 31, 1996 to a specified date not more
than five (5) days prior to the Effective Date of the Registration Statement,
there was any decrease in net revenues, net earnings or net earnings per common
share of the Company, in each case as compared with the corresponding period,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five
(5) days prior to the Effective Date of the Registration Statement, the amount
of liabilities of the Company (including a breakdown of commercial paper and
notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general
23
accounting records, including work sheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter
and found them to be in agreement; and
(vi) stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company'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 the Company's internal controls; and
(vii) Intentionally omitted.
(viii) statements as to such other matters incident
to the transaction contemplated hereby as the Underwriters may reasonably
request.
(k) On the Closing Date, and each Option Closing Date, if any,
the Underwriters shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co., LLP,
independent certified public accountants, a letter, dated as of the Closing
Date, and each Option Closing Date, if any, to the effect that they reaffirm
that statements made in the letter furnished pursuant to Subsection (j) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to Closing Date and each Option Closing Date, if any, 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 Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Units.
(m) No order suspending the sale of the Units in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 5 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, to the knowledge of the Company, shall be contemplated.
(n) On or before the Closing Date the Company shall have (i)
executed and delivered to the Representative the consulting agreement and
mergers and acquisition agreement, substantially in the form as filed as
Exhibits to the Registration Statement (the "Consulting Agreement") and (ii)
paid to the Representative $100,000 representing the three year retainer fee
pursuant to the Consulting Agreement.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled,
24
the Representative may terminate this Agreement or, if the Representative so
elects, it may waive any such conditions which have not been fulfilled or extend
the time for their fulfillment.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (including specifically each person who may be substituted for
an Underwriter as provided in Section 12 hereof) and each person, if any, who
controls any Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which such 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 and prospectus in
which is included securities of the Company issued or issuable upon exercise of
the Representative's Purchase Option; or (iii) in any application or other
document or written communication (in this Section 8 collectively called
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Common
Stock and Class A Warrants under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NASDAQ 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 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 which 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 made in reliance upon, and in strict
conformity with, written information furnished to the Company with 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;
provided, further, that the liability of each Underwriter to the Company under
this Section 8(b) shall be limited to the product of the Underwriter's discount
or commission and the number of Units sold by such Underwriter
25
hereunder. The Company acknowledges that the statements with respect to the
public offering of the Units set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 8. notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
or the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the foregoing
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 8 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 8 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions 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 Units or (B) if the allocation provided
26
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (A)
above but also the relative fault of each of the contributing parties, on the
one hand, and the party to be indemnified on the other hand in connection with
the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
In any case where the Company is the 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 Units (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, claims, damages, expenses or
liabilities (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 Units purchased by the
Underwriters hereunder. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person, if any, who controls the Company within the
meaning of the Act, each officer of the Company who has signed the Registration
Statement, and each 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 which any indemnifying party may have at common
law or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the date of
execution of this Agreement, the Closing Date and the Option Closing Date, as
the case may be, and such representations, warranties and agreements of the
Company and the indemnity agreements contained in Section 8 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, or any controlling person, and
shall survive termination of this Agreement or the issuance and delivery of the
Units to the Underwriters.
10. Effective Date.
27
(a) This Agreement shall become effective at
10:00 a.m., New York City time, on the next full business day following the
Effective Date of the Registration Statement, or at such earlier time after the
Registration Statement becomes effective as the Underwriter, in its discretion,
shall release the Units for the sale to the public, provided, however that the
provisions of Sections 6, 8 and 11 of this Agreement shall at all times be
effective. For purposes of this Section 10, the Units 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 shares for
offering or the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the Units.
11. Termination.
(a) Subject to subsection (b) of this Section 11,
the Representative shall have the right to terminate this Agreement, (i) if
any calamitous domestic or international event or act or occurrence has
materially disrupted or in the Representative's opinion will in the immediate
future materially disrupt, general securities markets in the United States; or
(ii) if 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 government authority having
jurisdiction; or (iii) if the United States shall have become involved in a war
or major hostilities; or (iv) if a banking moratorium has been declared by a
New York State or federal authority; or (v) if a moratorium in foreign exchange
trading has been declared; or (vi) if the Company shall have sustained a loss
material or substantial to the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which whether or
not such loss shall have been insured, will, in the Representative's opinion,
make it inadvisable to proceed with the delivery of the Units; or (vii) if
there shall have been such material adverse change in the conditions or
prospects of the Company, or such material adverse general market conditions or
such material adverse market conditions concerning the trading of the Units as
in the Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Units.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 11 and 12 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 6 and Section 8 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
12. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 7, Section 11 or
Section 13 hereof) to purchase the Units 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:
28
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of 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 number of Defaulted Securities exceeds
10% of the total number of Firm Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the 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.
13. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Units which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date), the Representative
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' several obligations to purchase Units from
the Company on such date, without any liability on the part of any
non-defaulting party other than pursuant to Section 6 and Section 8 hereof. No
action taken pursuant to this Section shall relieve the Company from liability,
if any, in respect of such default.
14. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at its offices of IAR Securities Corp., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, Attention: Syndicate Department. Notices to the Company shall be
directed to the Company at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
15. 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 8 hereof and their
respective successors, heirs, legal representatives and assigns, and their
respective successors, heirs, 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 Units from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
16. Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without
giving effect to the choice of law or conflict of laws principles.
29
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
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
us.
Very truly yours,
SPORTSTRAC, INC.
By: ___________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Confirmed and accepted as of the date first above written.
IAR SECURITIES CORP. For itself and as Representative of the other
Underwriters named in Schedule A hereto.
By:_____________________________
Name: __________________________ Title: ____________________
30
SCHEDULE A
Number of Firm Securities to be Purchased: 675,000 Units comprised of one
share of Common Stock, $.01 par value per share and two redeemable Class A
Warrants.
Name of Underwriters:
IAR Securities Corp.
31