2,700,000 Shares of Common Stock
AUDIO BOOK CLUB, INC.
UNDERWRITING AGREEMENT
Boca Raton, Florida
__________, 1997
National Securities Corporation
▇▇▇▇▇ Securities, Inc.
Representatives of the Several Underwriters
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Audio Book Club, Inc., a Florida corporation (the "Company"),
hereby agrees with National Securities Corporation ("National") and ▇▇▇▇▇
Securities Corporation ("▇▇▇▇▇") and each of the underwriters named in Schedule
A hereto (collectively, the "Underwriters," which term shall also include any
underwriter substituted as hereinafter provided in Section 11), for whom
National and ▇▇▇▇▇ are acting as representatives (in such capacity, National and
▇▇▇▇▇ shall hereinafter be referred to as "you" or the "Representatives") with
respect to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective amount of shares set forth in said
Schedule A of the Company's common stock, no par value per share (the "Common
Stock") which aggregate to 2,700,000 shares (the "Shares"). Upon your request,
as provided in Section 2(b) of this Agreement, a certain principal stockholder
of the Company shall also issue and sell to the Underwriters, acting severally
and not jointly, up to an additional aggregate of 405,000 shares of Common Stock
for the purpose of covering over-allotments, if any. Such shares of Common Stock
are hereinafter referred to as the "Option Shares." The Company also proposes to
issue and sell to you warrants (the "Representatives' Warrants") pursuant to the
Representatives' Warrant Agreement (the "Representatives' Warrant Agreement")
for the purchase of an additional 270,000 shares of Common Stock. The shares of
Common Stock issuable upon exercise of the Representatives' Warrants are
hereinafter referred to as the "Representatives' Shares." The Shares, Option
Shares, the Representatives' Warrants, and the Representatives' 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 and the Option Closing Date, if any, as
follows:
(a) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No. ), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Shares, the Option Shares, the Representatives' Warrants, and the
Representatives' Shares (collectively, hereinafter referred to as the
"Registered Securities") under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Regulations (as defined below) of the Commission under the Act. The Company will
not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein 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, "Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Preliminary Prospectus, the Registration Statement or the Prospectus and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement have been instituted, or, to the Company's knowledge, are threatened.
Each of the Preliminary Prospectus, the Registration Statement and the
Prospectus at the time of filing thereof conformed in all material respects with
the requirements of the Act and Regulations, and none of the Preliminary
Prospectus, the Registration Statement or the 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, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date (as defined in
Section 2(c) hereof) and each Option Closing Date (as defined in Section 2(b)
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, as amended or supplemented as
required, will contain all statements which are required to be stated therein in
accordance with the Act and
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the Regulations, and will conform in all material respects to the requirements
of the Act and the Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information furnished
to the Company in writing by or on behalf of any Underwriter expressly for use
in the Registration Statement or the Prospectus or any amendment thereof or
supplement thereto.
(d) The Company and each of its subsidiaries have been
duly organized and are validly existing as corporations in good standing under
the laws of the respective states of their incorporation. The Company does not
own or control, directly or indirectly, any corporation, partnership, trust,
joint venture or other business entity other than the subsidiaries listed in
Exhibit 21 of the Registration Statement, if any. Each of the Company and its
subsidiaries is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations require such qualification or
licensing. Each of the Company and its subsidiaries has all requisite power and
authority (corporate and other), and has obtained any and all necessary
authorizations, 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 and each of its subsidiaries have been
doing business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; and neither the Company nor any of its
subsidiaries have 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 business affairs,
operations, properties, or results of operations of the Company and its
subsidiaries, taken as a whole. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as contemplated
are correct in all material 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 the headings
"Capitalization" and "Description of Securities" 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 the Company is
not a party to or 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
Registered Securities and all other securities issued or
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issuable by the Company conform or, when issued and paid for, will conform, in
all material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding shares of
capital stock of each subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company and
the related notes thereto included in the Prospectus, neither the Company nor
any subsidiary has outstanding any options to purchase, or any preemptive rights
or other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements and the options or other rights granted and
exercised thereunder as set forth in the Prospectus conforms in all material
respects with the requirements of the Act. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable, and the holders thereof have no rights of rescission with
respect thereto and 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.
(f) The Registered Securities are not and will not be
subject to any preemptive or other similar rights of any stockholder, have been
duly authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and will
conform in all material respects to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Registered Securities has been duly and validly taken; and
the certificates representing the Registered Securities will be in due and
proper form. Upon the issuance and delivery pursuant to the terms hereof of the
Registered Securities to be sold by the Company hereunder, the Underwriters or
the Representatives, as the case may be, will acquire good and marketable title
to such Registered Securities free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect, or other restriction or equity
of any kind whatsoever. No stockholder of the Company has any right which has
not been waived in writing to require the Company to register the sale of any
shares owned by such stockholder under the Act in the public offering
contemplated by this Agreement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Shares, the Option Shares and the Representatives'
Warrants to be sold by the Company as contemplated herein.
(g) The financial statements of the Company, together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present the
financial position, changes in stockholders' equity 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 Regulations,
consistently applied throughout the periods involved. There has been no material
adverse change or development involving a material prospective change in the
condition, financial or otherwise, or in the business, affairs, operations,
properties, or results of operation of the Company and its subsidiaries taken as
a
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whole 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 and its subsidiaries taken as a whole conform in
all material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Financial information set forth in the Prospectus
under the headings "Prospectus Summary - Selected Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(h) The Company (i) has paid all federal, state, local,
franchise, and foreign taxes for which it is liable, including, but not limited
to, withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) 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.
(i) 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 Registered Securities, (ii) the purchase by the
Underwriters of the Registered Securities from the Company and the purchase by
the Representatives of the Representatives' Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Registered Securities in connection with the distribution
contemplated hereby.
(j) There is no action, suit, proceeding, inquiry,
arbitration, mediation, 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
businesses of, the Company which (i) questions the validity of the capital stock
of the Company, this Agreement or the Representatives' Warrant Agreement, or of
any action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representatives' Warrant 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 material respects), or (iii) might materially and adversely
affect the condition, financial or otherwise, or the business, affairs,
position, stockholders' equity, operation, properties, or results of operations
of the Company and its subsidiaries taken as a whole.
(k) The Company has the corporate power and authority
to authorize, issue, deliver, and sell the Registered Securities and to enter
into this Agreement and the Representatives' Warrant Agreement, and to
consummate the transactions provided for in such agreements; and this Agreement
and the Representatives' Warrant Agreement have each been duly and properly
authorized, executed, and delivered by the Company. Each of this Agreement and
the Representatives' Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
respective terms (except as
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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
issue and sale of the Registered Securities, execution, delivery or performance
of this Agreement and the Representatives' Warrant Agreement, its consummation
of the transactions contemplated herein and therein, or the conduct of its
businesses 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, as
amended and restated, (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 its properties or assets (tangible
or intangible) is or may be subject, or any indebtedness, or (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company 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 of any of their activities or properties.
(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 Registered Securities
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement, the Representatives' Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Registered Securities, 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 Registered Securities to be sold by the Company hereunder.
(m) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement to which the Company is a party or by
which it may be bound or to which its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law). The descriptions in
the Registration Statement of such agreements, contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by Form SB-2, and there are
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no contracts or other documents which are required by the Act to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits which have been
filed are complete and correct copies of the documents of which they purport to
be copies.
(n) Since the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as described
in or specifically contemplated by the Prospectus (i) the Company has not
incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or which could
result in a material reduction in the future earnings of the Company; (ii) the
Company has not sustained any material loss or interference with its business or
properties from fire, flood, windstorm, accident or other calamity, whether or
not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock, and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the capital
stock (other than upon the sale of the Shares, the Option Shares and the
Representatives' Shares hereunder and upon the exercise of options and warrants
described in the Registration Statement) of, or indebtedness material to, the
Company (other than in the ordinary course of business); (v) the Company has not
issued any securities or incurred any liability or obligation, primary or
contingent, for borrowed money; and (vi) there has not been any material adverse
change in the condition (financial or otherwise), business, properties, results
of operations, or prospects of the Company.
(o) Except as disclosed in or specifically contemplated
by the Prospectus, (i) the Company has sufficient trademarks, trade names,
patent rights, copyrights, licenses, approvals and governmental authorizations
to conduct its business as now conducted; (ii) the expiration of any trademarks,
trade names, patent rights, copyrights, licenses, approvals or governmental
authorizations would not have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company; (iii) the Company has no knowledge of any infringement by it or its
subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) there is no
claim being made against the Company regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which could have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company.
(p) 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 material agreement or instrument evidencing an obligation for borrowed
money, or any other material agreement or instrument to which the Company is a
party or by which the Company may be bound or to which the property or assets
(tangible or intangible) of the Company is subject or affected.
(q) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency
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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 to its knowledge
threatened against or involving the Company. No representation question exists
respecting the employees of the Company. No collective bargaining agreement, or
modification thereof is currently being negotiated by the Company. No grievance
or arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company. No labor dispute with the employees of the
Company exists or to its knowledge is imminent.
(r) Except as described in the Prospectus, 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
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute to a
defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of Section 406 of ERISA or Section 4975 of the Code, which could
subject the Company to any tax penalty on prohibited transactions and which has
not adequately been corrected. Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the Code and ERISA as
they relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multiemployer plan."
(s) None of the Company, nor any of its employees,
directors, stockholders, or affiliates (within the meaning of the Regulations)
of any of the foregoing has taken or will take directly or indirectly, any
action designed to or which has constituted or which might be expected to cause
or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Registered Securities.
(t) 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 to be owned or leased by it, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, 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.
(u) KPMG Peat Marwick LLP ("Peat Marwick"), 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
Regulations.
(v) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which all persons or entities
that directly or beneficially own Common Stock, as of the effective date of the
Registration Statement, have agreed not to,
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directly or indirectly, offer, offer to sell, sell, grant any option for the
sale of, transfer, assign, pledge, hypothecate or otherwise encumber or dispose
of any shares of Common Stock or securities convertible into Common Stock,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the Regulations
or otherwise) or dispose of any interest therein for a period from the date of
the Prospectus until thirteen (13) months following the date that the
Registration Statement becomes effective, without the prior written consent of
National (the "Lock-up Agreements"). The Company will cause the Transfer Agent
(as defined herein) to place "stop transfer" orders on the Company's stock
ledgers in order to effect the Lock-up Agreements.
(w) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Registered
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company or any of its officers,
directors, stockholders, employees or affiliates that may affect the
Underwriters' compensation as determined by the Commission and the National
Association of Securities Dealers, Inc. (the "NASD").
(x) The Registered Securities have been approved for
quotation on the American Stock Exchange.
(y) Neither the Company nor any of its officers,
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the 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 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). The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(z) 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 Regulations) of any of
the foregoing persons or entities has or has had, either directly or indirectly,
(i) an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a 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 there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any officer,
director, principal shareholder (as such term is used in the Prospectus) of the
Company, or any affiliate or associate of any of the foregoing persons or
entities.
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(aa) The Company is not, and does not intend to conduct
its business in a manner in which it would become an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(ab) Any certificate signed by any officer of the
Company and delivered to the Underwriters or to the Underwriters' Counsel (as
defined in Section 4(d) herein) shall be deemed a representation and warranty by
the Company to the Underwriters as to the matters covered thereby.
(ac) The minute books of the Company have been made
available to the Underwriters and contain a complete summary of all meetings and
actions of the directors and stockholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(ad) The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares in this offering other than the Prospectus,
the Registration Statement and the other materials permitted by the Act. Except
as described in the Prospectus, no holders of any securities of the Company or
of any options, warrants or other convertible or exchangeable securities of the
Company have the right to include any securities issued by the Company as part
of the Registration Statement or to require the Company to file a registration
statement under the Act and no person or entity holds any anti-dilution rights
with respect to any securities of the Company.
(ae) Each of the Company and its subsidiaries maintains
insurance by insurers of recognized financial responsibility of the types and in
the amounts as are prudent, customary and adequate for the business in which it
is engaged, including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect. The Company has no
reason to believe that it will not be able to renew existing insurance coverage
with respect to the Company as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business, in either case, at a cost that would not have a material adverse
effect on the financial condition, operations, business, assets or properties of
the Company. The Company has not failed to file any claims, has no material
disputes with its insurance company regarding any claims submitted under its
insurance policies, and has complied with all material provisions contained in
its insurance policies.
2. Purchase, Sale and Delivery of the Registered Securities.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter, and
each Underwriter, severally and not jointly agrees to purchase from the Company,
at a price equal to [$ ] per share, that number of Shares set forth in Schedule
A opposite the name of such Underwriter, subject to such adjustment as the
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Representatives in their discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional numbers of Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of the
Option Shares at a price equal to [$ ] per share. The option granted
hereby will expire 45 days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the
Regulations, or (ii) the date of this Agreement if the Company has elected to
rely upon Rule 430A under the Regulations, and may be exercised in whole or in
part from time to time (but not on more than two (2) occasions) only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Shares upon notice by the Representatives to
the Company setting forth the number of Option Shares as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Shares. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representatives, but shall not
be later than three full business days after the exercise of said option, nor in
any event prior to the Closing Date, as hereinafter defined, unless otherwise
agreed upon by the Representatives and the Company. Nothing herein contained
shall obligate the Underwriters to exercise the over-allotment option described
above. No Option Shares shall be delivered unless the Shares shall be
simultaneously delivered or shall theretofore have been delivered as herein
provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the offices of [National, at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇], or at such other place as shall
be agreed upon by the Representatives and the Company. Such delivery and payment
shall be made at [ ] _.m. (New York time) on _________, 1997, or at such other
time and date as shall be agreed upon by the Representatives and the Company,
but no more than four (4) business days after the date hereof (such time and
date of payment and delivery being herein called the "Closing Date"). In
addition, in the event that any or all of the Option Shares are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Shares shall be made at the above mentioned office of National
or at such other place as shall be agreed upon by the Representatives and the
Company on each Option Closing Date as specified in the notice from the
Representatives to the Company. Delivery of the certificates for the Shares and
the Option Shares, if any, shall be made to the Underwriters against payment by
the Underwriters, of the purchase price for the Shares and the Option Shares, if
any, to the order of the Company. In the event such option is exercised, each of
the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Shares then being purchased which the
number of Shares set forth in Schedule A hereto opposite the name of such
Underwriter bears to the total number of Shares, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares. Certificates for the Shares and the
Option Shares, 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 Underwriters may request in writing at least three (3) business
days prior to Closing Date or the relevant Option Closing Date, as the case may
be. The
11
certificates for the Shares and the Option Shares, if any, shall be made
available to the Representatives at such office or such other place as the
Representatives 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.
(d) On the Closing Date, the Company shall issue and
sell to the Representatives Representatives' Warrants at a purchase price of
$0.001 per warrant, which warrants shall entitle the holders thereof to purchase
an aggregate of 270,000 shares of Common Stock. The Representatives' Warrants
shall expire five (5) years after the effective date of the Registration
Statement and shall be exercisable for a period of four (4) years commencing one
(1) year from the effective date of the Registration Statement at a price
equaling 135% of the initial public offering price of the Shares. The
Representatives' Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 4.2 to the Registration Statement.
Payment for the Representatives' Warrants shall be made on the Closing Date.
3. Public Offering of the Shares. As soon after the
Registration Statement becomes effective as the Representatives deem advisable,
the Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Representatives may from time to time increase or
decrease the public offering price after distribution of the Shares has been
completed to such extent as the Representatives, in their sole discretion deem
advisable. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and 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 Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representatives shall not previously have been
advised and furnished with a copy, or to which the Representatives shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Regulations.
(b) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Representatives 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 of proceedings for that purpose, (iii)
12
of the issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Registered
Securities 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 use its best efforts to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representatives) in accordance with the
requirements of the Act.
(d) The Company will give the Representatives 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 Registered Securities
which differs from the corresponding prospectus on file at the Commission at the
time the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Regulations),
and will furnish the Representatives 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 amendment or supplement to which the
Representatives or Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP ("Underwriters' Counsel") shall
reasonably object.
(e) The Company shall endeavor in good faith, in
cooperation with the Representatives, at or prior to the time the Registration
Statement becomes effective, to qualify the Registered Securities for offering
and sale under the securities laws of such jurisdictions as the Representatives
may reasonably designate to permit the continuance of sales and dealings therein
for as long as may be necessary to complete the distribution, and shall make
such applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or become subject to service of process in
any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representatives agree 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, as now and hereafter amended,
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Registered Securities in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the Registered
Securities is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any
13
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 or supplement the
Prospectus to comply with the Act, the Company will notify the Representatives
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act, each such amendment or
supplement to be satisfactory to Underwriters' Counsel, and the Company will
furnish to the Underwriters copies of such amendment or supplement as soon as
available and in such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later
than 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 Regulations, and to the Representatives, 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 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 (5) 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 will make available to its stockholders unaudited quarterly
reports of earnings, and will deliver to the Representatives:
(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;
(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 certified public
accountants;
(iii) as soon as they are available, copies of
all reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of
all reports and financial statements furnished to or filed
with the Commission, the American Stock Exchange 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 was released or
prepared by or on behalf of the Company; and
14
(vi) any additional information of a public
nature concerning the Company (and any future subsidiaries) or
its businesses which the Representatives 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 (the
"Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a registrar (which may be the same entity as the transfer agent)
for the Common Stock and the Representatives' Warrants.
(j) The Company will furnish to the Representatives or
on the Representatives' order, without charge, at such place as the
Representatives 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), each Preliminary Prospectus, 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 Representatives may reasonably request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representatives with true copies of
duly executed, legally binding and enforceable Lock-up Agreements. On or before
the Closing Date, the Company shall deliver instructions to the Transfer Agent
authorizing it to place appropriate stop transfer orders on the Company's
ledgers.
(l) The Company shall use its best efforts to cause its
officers, directors, stockholders or affiliates (within the meaning of the
Regulations) not to 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 Registered Securities substantially in the manner, and subject to
the conditions, set forth under "Use of Proceeds" in the Prospectus.
(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 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 Regulations.
15
(o) The Company shall cause the Registered Securities
to be quoted on the American Stock Exchange, and for a period of two (2) years
from the date hereof shall use its best efforts to maintain the quotation of the
Registered Securities to the extent outstanding.
(p) For a period of two (2) years from the Closing
Date, the Company shall furnish to the Representatives, at the Company's sole
expense, daily consolidated transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the effective
date of the Registration Statement the Company shall, at the Company's sole
expense, take all necessary and appropriate actions to further qualify the
Company's securities in all jurisdictions of the United States in order to
permit secondary sales of such securities pursuant to the Blue-Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing for
the registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to 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.
(s) The Company agrees that for a period of thirteen
(13) months following the effective date of the Registration Statement it will
not, without the prior written consent of National, offer, issue, sell, contract
to sell, grant any option for the sale of or otherwise dispose of any Common
Stock, or securities convertible into Common Stock, except for the issuance of
the Option Shares, the Representatives' Warrants, and shares of Common Stock
issued upon the exercise of currently outstanding warrants or options issued
under any stock option plan in effect on the Closing Date, shares of Common
Stock automatically granted pursuant to any stock option plan in effect on the
Closing Date, or shares of Common Stock issued pursuant to any employee stock
purchase plan in effect on the Closing Date.
(t) Until the completion of the distribution of the
Registered Securities, the Company shall not without the prior written consent
of National or Underwriters' Counsel, issue, directly or indirectly any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the Company's business consistent with past practices with
respect to the Company's operations.
(u) For a period equal to the lesser of (i) five (5)
years from the date hereof, and (ii) the sale to the public of the
Representatives' Shares, the Company will not take any action or actions which
may prevent or disqualify the Company's use of Form SB-2 (or other appropriate
form) for the registration under the Act of the Representatives' Shares.
16
(v) The Company agrees that it shall use its best
efforts, which shall include, but shall not be limited to, the solicitation of
proxies, to elect one (1) designee of National to the Company's Board of
Directors for a period of three (3) years following the Closing, provided that
such designees are reasonably acceptable to the Company. The Company shall use
its best efforts to insure that such designee serve from the time of election
until the expiration of such three year period.
(w) The Company agrees that within forty-five (45) days
after the Closing it shall retain a public relations firm which is acceptable to
the Representatives. The Company shall keep such public relations firm, or any
replacement, for a period of three (3) years from the Closing. Any replacement
public relations firm shall be retained only with the consent of the
Representatives.
(x) The Company agrees that any and all future
transactions between the Company and its officers, directors, principal
stockholders and the affiliates of the foregoing persons will be on terms no
less favorable to the Company than could reasonably be obtained in arm's length
transactions with independent third parties, and that any such transactions also
be approved by a majority of the Company's outside independent directors
disinterested in the transaction.
(y) The Company shall prepare and deliver, at the
Company's sole expense, to the Representatives within the one hundred and twenty
(120) day period after the later of the effective date of the Registration
Statement or the latest Option Closing Date, as the case may be, four bound
volumes containing all correspondence with regulatory officials, agreements,
documents and all other materials in connection with the offering as requested
by the Underwriters' Counsel.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the
Closing Date and each Option Closing Date (to the extent not previously paid)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement and the Representatives' Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing, 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 duplication,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreements, the Powers of Attorney, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters and
such dealers as the Underwriters may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the certificates
representing the Registered Securities, (iv) the qualification of the Registered
Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the
17
"Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum," the
"Final Blue Sky Memorandum" and "Legal Investments Survey," if any, and
reasonable disbursements and fees of counsel in connection therewith, (v)
expense of tombstone advertisements and other advertising costs and expenses
(not to exceed $10,000 in the aggregate, (vi) costs and expenses in connection
with the "road show", (vii) costs and expenses in connection with due diligence
investigations, including but not limited to the fees of any independent counsel
or consultant retained, (viii) fees and expenses of the transfer agent and
registrar, (ix) the fees payable to the Commission and the NASD, (x) the fees
and expenses incurred in connection with the listing of the Registered
Securities on the American Stock Exchange and any other market or exchange, and
(xi) applications for assignments of a rating of the Securities by qualified
rating agencies.
(b) If this Agreement is terminated by the Underwriters
in accordance with the provisions of Section 6, Section 10(a) or Section 12, the
Company shall reimburse and indemnify the Representatives for all of their
actual out-of-pocket expenses in an amount not to exceed $50,000, including the
fees and disbursements of Underwriters' Counsel, less any amounts already paid
pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representatives on the Closing Date by certified or bank cashier's check or,
at the election of the Representatives, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Shares, $50,000 of which has been paid to date. In the event the Representatives
elect to exercise the over-allotment option described in Section 2(b) hereof,
the Company further agrees to pay to the Representatives on the Option Closing
Date (by certified or bank cashier's check or, at the Representatives' 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 Shares.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date or each Option Closing Date,
as the case may be; the accuracy on and as of the Closing Date or Option Closing
Date, if any, of the statements of officers of the Company made pursuant to the
provisions hereof; and the performance by the Company on and as of the Closing
Date and each Option Closing Date, if any, of its covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York City time, on the date prior to the
date of this Agreement or such later date and time as shall be consented to in
writing by the Representatives, 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
18
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 Regulations, the price of the Shares 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 Regulations within the
prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Representatives 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 Regulations.
(b) The Representatives shall not have advised the
Company that the Registration Statement, or any amendment thereto, contains an
untrue statement of fact which, in the Representatives' opinion, is material, or
omits to state a fact which, in the Representatives' opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representatives' reasonable opinion, is
material, or omits to state a fact which, in the Representatives' reasonable
opinion, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) On or prior to the Closing Date, the Underwriters
shall have received from Underwriters' Counsel such opinion or opinions with
respect to the organization of the Company, the validity of the Registered
Securities, the Registration Statement, the Prospectus and other related matters
as the Representatives may request and Underwriters' Counsel shall have received
from the Company such papers and information as they request to enable them to
pass upon such matters.
(d) At Closing Date, the Underwriters shall have
received the favorable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇"),
counsel to the Company, dated the Closing Date, addressed to the Underwriters
and in form and substance satisfactory to Underwriters' 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 of incorporation,
(B) is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which
its ownership or leasing of any properties or the
character of its operations requires such qualification
or licensing, and (C) to the best of such counsel's
knowledge, has all requisite corporate power and
authority and has obtained any and all necessary
authorizations, 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.
19
(ii) except as described in the Prospectus, and
to the best of such counsel's knowledge after
reasonable investigation, the Company does not own an
interest in any corporation, limited liability company,
partnership, joint venture, trust or other business
entity;
(iii) the Company has a duly authorized, issued
and outstanding capitalization as set forth in the
Prospectus, and any amendment or supplement thereto,
under "Capitalization" and "Description of Securities,"
and to the knowledge of such counsel, the Company is
not a party to or 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, the Representatives' Warrant
Agreement, and as described in the Prospectus. The
Registered Securities and all other securities issued
or issuable by the Company conform in all material
respects to the 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 and are fully paid and non-assessable; the
holders thereof 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.
The Registered Securities to be sold by the Company
hereunder and under the Representatives' Warrant
Agreement 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 their terms, will be
validly issued, fully paid and non-assessable and
conform in all material respects to the description
thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken
for the authorization, issue and sale of the Registered
Securities has been duly and validly taken; and the
certificates representing the Registered Securities are
in due and proper form. The Representatives' Warrants
constitute valid and binding obligations of the Company
to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the
Company called for thereby (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). Upon the issuance and
delivery pursuant to this Agreement of the Registered
Securities to be sold by the Company, the Company will
convey, against payment therefor as provided herein, to
the Underwriters and the Representatives, respectively,
good and marketable title to the Registered Securities
free and clear of all liens and other encumbrances;
(iv) the Registration Statement is effective
under the Act, and, if applicable, filing of all
pricing information has been timely made in the
20
appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any
thereof or 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 such counsel's
knowledge, threatened or contemplated under the Act;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any
amendments or supplements thereto (other than the
financial statements and other financial and
statistical data included therein as to which no
opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and
the Regulations. Such counsel shall state that such
counsel has participated in conferences with officers
and other representatives of the Company and the
Representatives and representatives of the independent
public accountants for the Company, at which
conferences the contents of the Preliminary Prospectus,
the Registration Statement, the Prospectus, and any
amendments or supplements thereto were discussed, and,
although such counsel is not passing upon and does not
assume any responsibility for the accuracy,
completeness or fairness of the statements contained in
the Preliminary Prospectus, the Registration Statement
and Prospectus, and any amendments or supplements
thereto, on the basis of the foregoing, no facts have
come to the attention of such counsel which lead them
to believe that either the Registration Statement or
any amendment thereto, at the time such Registration
Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or
supplement thereto as of the date of such opinion
contained any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading (it being understood that such counsel need
express no opinion with respect to the financial
statements and schedules and other financial and
statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus,
and any amendments or supplements thereto);
(vi) to the best of such counsel's knowledge
after reasonable investigation, (A) there are no
agreements, contracts or other documents required by
the Act to be described in the Registration Statement
and the Prospectus and filed as exhibits to the
Registration Statement other than those described in
the Registration Statement and the Prospectus and filed
as exhibits thereto; (B) the descriptions in the
Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other
documents to which the Company is a party or by which
it is bound are accurate in all material respects and
fairly represent the information required to be shown
by Form SB-2; (C) there is not pending or threatened
against the Company any action, arbitration, suit,
proceeding, litigation, governmental or other
proceeding (including, without limitation, those having
21
jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against the
Company which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and
such proceedings as are summarized in the Registration
Statement are accurately summarized in all material
respects), (y) questions the validity of the capital
stock of the Company or this Agreement, or the
Representatives' Warrant Agreement, or of any action
taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; and (D) there is
no action, suit or proceeding pending or threatened
against the Company before any court or arbitrator or
governmental body, agency or official in which there is
a reasonable possibility of an adverse decision which
may result in a material adverse change in the
financial condition, business, affairs, stockholders'
equity, operations, properties, business or results of
operations of the Company, which could adversely affect
the present or prospective ability of the Company to
perform its obligations under this Agreement or the
Representatives' Warrant Agreement or which in any
manner draws into question the validity or
enforceability of this Agreement or the Representatives'
Warrant Agreement;
(vii) the Company has the corporate power and
authority to enter into each of this Agreement and the
Representatives' Warrant Agreement and to consummate
the transactions provided for therein; and each of this
Agreement and the Representatives' Warrant Agreement
has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the
Representatives' Warrant Agreement, assuming due
authorization, execution and delivery by each other
party thereto, constitutes a legal, valid and binding
agreement of the Company enforceable against the
Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of
general application relating to or affecting
enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may
be limited by applicable law), and none of the
Company's execution, delivery or performance of this
Agreement and the Representatives' Warrant Agreement,
its consummation of the transactions contemplated
herein or therein, or the conduct of its business as
described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto
conflicts with or results in any breach or violation of
any of the terms or provisions of, or constitutes 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 (A) the articles of incorporation or
by-laws of the Company, as amended, (B) any license,
contract, indenture, mortgage, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument
known to such counsel to
22
which the Company is a party or by which it is bound,
or (C) any federal, state or local statute, rule or
regulation applicable to the Company or any judgment,
decree or order known to such counsel 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 its
activities or properties;
(viii) no consent, approval, authorization or
order, and no filing with, any court, regulatory body,
government agency or other body (other than such as may
be required under federal securities or Blue Sky laws,
as to which no opinion need be rendered) is required in
connection with the issuance of the Registered
Securities pursuant to the Prospectus, and the
Registration Statement, the performance of this
Agreement and the Representatives' Warrant Agreement,
and the transactions contemplated hereby and thereby;
(ix) to the best of such counsel's knowledge
after reasonable investigation, the properties and
business of the Company conform in all material
respects to the description thereof contained in the
Registration Statement and the Prospectus;
(x) to the best knowledge of such counsel, and
except as disclosed in Registration Statement and the
Prospectus, the Company is not in breach of, or in
default under, any term or provision of any license,
contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, 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 is bound or to which the
property or assets (tangible or intangible) of the
Company is subject; and the Company is not in violation
of any term or provision of its articles of
incorporation or by-laws, as amended, and to the best
of such counsel's knowledge after reasonable
investigation, not in violation of any franchise,
license, permit, judgment, decree, order, statute, rule
or regulation;
(xi) the statements in the Prospectus under
"Dividend Policy," "Description of Securities," and
"Shares Eligible for Future Sale" have been reviewed by
such counsel, and insofar as they refer to statements
of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all
material respects;
(xii) the Common Stock has been accepted for
quotation on the American Stock Exchange;
23
(xiii) to the best of such counsel's knowledge
and based upon a review of the outstanding securities
and the contracts furnished to such counsel by the
Company, no person, corporation, trust, partnership,
association or other entity has the right to include
and/or register any securities of the Company in the
Registration Statement, require the Company to file any
registration statement or, if filed, to include any
security in such registration statement;
(xiv) assuming due execution by the parties
thereto other than the Company, each Lock-up Agreement
is a legal, valid and binding obligation of the party
thereto, enforceable against the party and any
subsequent holder of the securities subject thereto 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);
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws, rules and
regulations of the United States and the laws, rules and regulations of the
State of Florida, 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 satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (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
Underwriters' Counsel if requested. The opinion of such counsel shall state that
knowledge shall not include the knowledge of a director or officer of the
Company who is affiliated with such firm in his or her capacity as an officer or
director of the Company. 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.
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, counsel to the
Company, dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel confirming as of such
Option Closing Date the statements made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in their opinion
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the
Option Closing Date, if any, Underwriters' Counsel shall have been furnished
such documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
24
(f) Prior to each of the 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, stockholders' equity or the business activities of the
Company, whether or not in the 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 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 adverse to
the Company; (iii) the Company shall not be in default under any provision of
any instrument relating to any outstanding indebtedness which default has not
been waived; (iv) the Company shall not have issued any securities (other than
the Registered Securities) or declared or paid any dividend or made any
distribution in respect of its capital stock of any class and there has not been
any change in the capital stock, or any material increase in the debt (long or
short term) or liabilities or obligations of the Company (contingent or
otherwise); (v) 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; (vi) no action, suit or proceeding, at law or in equity, shall have
been pending or threatened (or circumstances giving rise to same) against the
Company, or affecting any of its respective properties or businesses 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 (vii) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(g) At each of the Closing Date and each Option Closing
Date, if any, the Underwriters shall have received a certificate of the Company
signed on behalf of the Company by the principal executive officer of the
Company, dated the Closing Date or Option Closing Date, as the case may be, to
the effect that such executive has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, 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 or any part thereof has
been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of each
of such person's knowledge after due inquiry, are
contemplated or threatened under the Act;
(iii) The Registration Statement and the
Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and
information required by the Act to be included therein,
and none of the
25
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 not misleading
and neither the Preliminary Prospectus or any
supplement, as of their respective dates, 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, (a) the Company has not
incurred up to and including the Closing Date or the
Option Closing Date, as the case may be, other than in
the its business, any material liabilities or
obligations, direct or contingent; (b) the Company has
not paid or declared any dividends or other
distributions on its capital stock; (c) the Company has
not entered into any transactions not in the business;
(d) there has not been any change in the capital stock
or material increase in 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, (e) the Company has not
sustained any loss or damage to its property or assets,
whether or not insured, (f) there is no litigation
which is pending or threatened (or circumstances giving
rise to same) against the Company or any affiliated
party of any of the foregoing which is required to be
set forth in an amended or supplemented Prospectus
which has not been set forth, and (g) there has
occurred no 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
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriters will have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters.
(i) At the time this Agreement is executed, the
Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory in all respects (including the
non-material nature of the changes or decreases, if any, referred to in clause
(iii) below) to the Underwriters and Underwriters' Counsel, from Peat Marwick:
(i) confirming that they are independent
certified public accountants with respect to the
Company within the meaning of the Act and the
applicable Rules and Regulations;
26
(ii) stating that it is their opinion that the
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 Regulations
thereunder and that the Representatives may rely upon
the opinion of Peat Marwick 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 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
board of directors of the Company, consultations with
officers and other employees of the Company responsible
for financial and accounting matters and other
specified procedures and inquiries, nothing has come to
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, if any, do not comply as to form in all
material respects with the applicable accounting
requirements of the Act and the 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 material increase in long-term
debt of the Company, or any material decrease in the
stockholders' equity or net current assets or net
assets of the Company as compared with amounts shown in
the ___________, 199_, 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.
(iv) 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 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
27
(v) statements as to such other material matters
incident to the transaction contemplated hereby as the
Representatives may reasonably request.
(j) At the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received from Peat Marwick a letter, dated
as of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of Subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial information
as specified by the Representatives 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).
(k) On each of Closing Date and Option Closing Date, if
any, there shall have been duly tendered to the Representatives for the several
Underwriters' accounts the appropriate number of Registered Securities.
(l) No order suspending the sale of the Registered
Securities in any jurisdiction designated by the Representatives pursuant to
subsection (e) of Section 4 hereof shall have been issued on either the Closing
Date or the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
(m) On or before the Closing Date, the Company shall
have executed and delivered to the Representatives, (i) the Representatives'
Warrant Agreement, substantially in the form filed as Exhibit 4.2, to the
Registration Statement, in final form and substance satisfactory to the
Representatives, and (ii) the Representatives' Warrants in such denominations
and to such designees as shall have been provided to the Company.
(n) On or before Closing Date, the Common Stock shall
have been duly approved for quotation on American Stock Exchange.
(o) On or before Closing Date, there shall have been
delivered to the Representatives all of the Lock-up Agreements in final form and
substance satisfactory to Underwriters' Counsel.
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, the Representatives may
terminate this Agreement or, if the Representatives so elect, they may waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.
28
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each of the Underwriters (for purposes of this Section 7 "Underwriters" shall
include the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented); or
(B) in any application or other document or communication (in this Section 7
collectively called "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company in any
jurisdiction in order to qualify the Registered Securities under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, The American Stock Exchange or any securities exchange; or any omission
or alleged omission to state 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; or (ii) any breach of any representation, warranty, covenant or agreement of
the Company contained in this Agreement. 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 or the Representatives expressly for use in
such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriters in connection with
this Offering. The Company acknowledges that the statements with respect to the
public offering of the Registered Securities set forth under the
29
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 or the
Representatives for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party
under this Section 7 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 7, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure to so notify an indemnifying party shall
not relieve it from any liability which it may have otherwise or which it may
have under this Section 7, except to the extent that it has been prejudiced in
any material respect by such failure). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable 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 the reasonable 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 7 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 7, 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 7 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
30
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 Registered
Securities or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
a contributing party and the Underwriters are the indemnified party, 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 Registered Securities (before deducting
expenses other than underwriting discounts and commissions) 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
Registered Securities purchased by the Underwriters hereunder. No person guilty
of fraudulent misrepresentation (within the meaning of Section 12(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 7, 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.
8. 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 of the Company
at the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter,
31
the Company, any controlling person of either the Underwriter or the Company,
and shall survive termination of this Agreement or the issuance and delivery of
the Registered Securities to the Underwriters and the Representatives, as the
case may be.
9. Effective Date.
(a) This Agreement shall become effective at 10:00
a.m., New York City time, on the date hereof. For purposes of this Section 9,
the Registered Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Representatives of telegrams to
securities dealers releasing such shares for offering or the release by the
Representatives for publication of the first newspaper advertisement which is
subsequently published relating to the Registered Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representatives shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Representatives' reasonable opinion will in the immediate future disrupt the
financial markets; or (ii) any material adverse change in the financial markets
shall have occurred; or (iii) 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 (iv) if the United States shall
have become involved in a war or major hostilities, or if there shall have been
an escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; 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
Representatives' opinion, make it inadvisable to proceed with the delivery of
the Registered Securities; or (viii) if there shall have been such a material
adverse change in the prospects or conditions of the Company, or such material
adverse change in the general market, political or economic conditions, in the
United States or elsewhere as in the Representatives' judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the Registered
Securities.
(b) If this Agreement is terminated by the
Representatives in accordance with any of the provisions of Section 6, Section
10(a) or Section 12, the Company shall promptly reimburse and indemnify the
Underwriters pursuant to Section 5(b) hereof. Notwithstanding any contrary
provision contained in this Agreement, any election hereunder or any termination
of this Agreement (including, without limitation, pursuant to Sections 6, 10, 11
and 12 hereof), and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
32
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Registered Securities which it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representatives shall have the right, within 24 hours
thereafter, to make arrangement 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 Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Shares 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 Shares, this Agreement shall terminate without liability
on the part of any nondefaulting 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 Representatives 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.
12. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Registered Securities 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 Shares to be purchased on an Option Closing Date, the
Underwriters may at the Representatives' option, by notice from the
Representatives to the Company, terminate the Underwriters' obligation to
purchase Option Shares from the Company on such date) without any liability on
the part of any non-defaulting party other than pursuant to Section 5, Section 7
and Section 10 hereof. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representatives, c/o National Securities Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, with a copy,
which shall not constitute notice, to Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. Annex, Esq.
Notices to the Company shall be directed to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.,
▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
33
Florida 33431, Attention: CEO, with a copy, which shall not constitute notice,
to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq.
14. Parties. This Agreement shall inure solely to the benefit
of and shall be binding upon the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Registered Securities from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representatives' Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representatives
and the Company.
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,
AUDIO BOOK CLUB, INC.
By:_______________________________________
Name:
Title:
34
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:
By:__________________________________________________
Name:
Title:
▇▇▇▇▇ SECURITIES CORPORATION
By:
By:__________________________________________________
Name:
Title:
For themselves and as Representatives of the Underwriters named in Schedule A
hereto.
35
SCHEDULE A
Number of
Shares to be
Name of Underwriters Purchased
-------------------- ------------
National Securities Corporation...............................
▇▇▇▇▇ Securities Corporation .................................
TOTAL..................... 2,700,000