NATIONAL LAMPOON, INC. __________ Shares of Common Stock (Par Value $.0001 Per Share) UNDERWRITING AGREEMENT
EXHIBIT
1
NATIONAL
LAMPOON, INC.
__________
Shares of Common Stock
(Par
Value $.0001 Per Share)
______________,
2005
▇▇▇▇▇▇▇▇
Curhan Ford & Co.
▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
As
Representative of the Underwriters
Dear
Sirs:
National
Lampoon, Inc., a Delaware corporation (the “Company”), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the
“Selling Shareholder”) confirm their respective agreements with ▇▇▇▇▇▇▇▇ Curhan
Ford & Co. (“▇▇▇▇▇▇▇▇ or the “Representative”) and The Shemano Group, Inc.
(“Shemano” and collectively with ▇▇▇▇▇▇▇▇, the “Underwriters”, unless the
context is otherwise), pursuant to this underwriting agreement
(the “Agreement”), with respect to (i) the sale of an aggregate of
___________________ (_________) shares of common stock of the Company, par
value
$.0001 per share (the “Common Stock”), of which _____ shares of Common Stock
will be sold by the Company and 200,000 shares of Common Stock will be sold
by
the Selling Stockholder (the “Selling Stockholder Shares”) and (ii) the grant by
the Company to the Underwriters of the option referred to in Section 3(c) hereof
to purchase an aggregate of not more than an additional
___________________________ (_________) shares of Common Stock, for the purpose
of covering over-allotments, if requested by the Underwriters in accordance
with
Section 3(c) hereof. It is understood that the Underwriters propose to offer
the
“Shares” (as hereinafter defined) to be purchased hereunder to the public upon
the terms and conditions set forth in the “Registration Statement” (as
hereinafter defined) after the “Effective Date” (as hereinafter defined) of the
Registration Statement. As used in this Agreement, (a) the term “Firm Shares”
shall mean the ___________________________ (_________) shares of Common Stock
sold by the Company, together with the Selling Stockholder Shares, to be issued
and sold to the Underwriters at the “First Closing Date” (as defined in Section
3(b) below); (b) the term “Option Shares” shall mean any of the additional up to
___________ (_________) shares of Common Stock as are purchased pursuant to
the
option referred to in Section 3(c) hereof; and (c) the term “Shares” shall mean
the Firm Shares and the Option Shares collectively. The Company also proposes,
pursuant to Section 3(h) hereof, to issue and sell to the Representative for
its
own account and the accounts of the Representative’s Designees (as hereinafter
defined)) for an aggregate price of One Hundred Dollars ($100.00), warrants
(the
“Representative’s Warrants”) to purchase up to an aggregate of
___________________________ (_________) shares of Common Stock (the “Warrant
Shares”) at a per share exercise price of 120% of the per share initial public
offering price of the Shares set forth in the Registration Statement and
Prospectus (as hereinafter defined), which purchase shall be consummated in
accordance with the terms and conditions of the Representative’s Warrant
Agreement substantially in the form of Exhibit ___ to the Registration Statement
(the “Representative’s Warrant Agreement”).
1. Representations
and Warranties of the Company.
The
Company represents and warrants to, and agrees with, the Underwriters that,
as
of the Effective Date, the First Closing Date and each Option Closing Date
(as
defined below):
(a) The
conditions for use of a registration statement on Form SB-2, set forth in the
General Instructions to Form SB-2, have been satisfied with respect to the
Company, the transactions contemplated herein and in the Registration Statement
(as defined below). A Registration Statement on Form SB-2 (File No. 333-123238)
relating to the offering of the Shares, Representative’s Warrants, and Warrant
Shares has been prepared by the Company in conformity with the requirements
of
the Securities Act of 1933, as amended (the “Act”), and the rules and
regulations (the “Rules and Regulations”) of the Securities and Exchange
Commission (the “Commission”) promulgated pursuant to the Act, and said
Registration Statement has been filed with the Commission under the Act. One
or
more amendments to said Registration Statement has or have, as the case may
be,
been similarly prepared and filed with the Commission covering the registration
of the Shares under the Act including the related preliminary prospectus or
preliminary prospectuses (each being hereinafter referred to as a “Preliminary
Prospectus” as further defined below), each of which has been furnished to the
Underwriter. Each Preliminary Prospectus was endorsed with the legend required
by Item 501(b) of Regulation S-K and, if applicable, Rule 430A of the Rules
and
Regulations. The Company has prepared and proposes to file on or prior to the
Effective Date (as defined below) of the Registration Statement an additional
amendment thereto which will include the final “Prospectus” (as defined below).
As used in this Agreement and unless the context indicates otherwise, the term
“Registration Statement” refers to and means said Registration Statement,
including any documents incorporated by reference therein, all exhibits,
financial statements and schedules and the Prospectus included therein, as
finally amended and revised on or prior to the Effective Date (as defined below)
and, in the event of any post-effective amendment thereto or if any Rule 462(b)
Registration Statement becomes effective prior to the Closing Date
(as hereinafter defined), shall also mean such registration statement
as so
amended or such Rule 462(b) Registration Statement, as the case may be. The
term
“Registration Statement” shall also include any Rule 430A Information deemed to
be included therein at the Effective Date as provided by Rule 430A. The term
“Effective Date” shall mean each date and time that the Registration Statement,
any post-effective amendment or amendments thereto and any Rule 462(b)
Registration Statement became or becomes effective. The term “Preliminary
Prospectus” refers to and means a preliminary prospectus filed with the
Commission and included in said Registration Statement before the Effective
Date
and any preliminary prospectus included in the Registration Statement at the
Effective Date that omits Rule 430A Information; the term “Rule 430A
Information” shall mean information with respect to the Shares and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A; and, the term “Prospectus” refers to and means
the prospectus relating to Shares that is first filed pursuant to Rule 424(b)
or, if no filing pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Shares included in the Registration Statement
at the Effective Date. If the Registration Statement is amended or such
Prospectus is supplemented after the Effective Date and prior to the Option
Closing Date, then the terms “Registration Statement” and “Prospectus” shall
include such documents as so amended or supplemented. The terms used herein
shall have the same meaning as in the Prospectus unless the context hereof
otherwise requires.
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(b) Neither
the Commission nor any state regulatory authority has issued an order preventing
or suspending the use of any Preliminary Prospectus nor has the Commission
or
any such authority instituted or, to the Knowledge of the Company (as
hereinafter defined), threatened to institute any proceedings with respect
to
such an order. When representations or warranties in this Agreement are
qualified to the “Knowledge of Company,” they are given by the Company to the
extent of and qualified in all respects by the facts known to any of the
executive officers or directors of the Company or any of the key employees
of
the Company identified under the caption “Management” of the Prospectus, with an
obligation of reasonable inquiry on the part of such officers, directors and
such key employees, prior to the date such representations or warranties are
made.
(c) The
Registration Statement, as of the Effective Date, the Prospectus (and any
amendments or supplements thereto) when it is filed with the Commission, and
both documents as of the First Closing Date and any Option Closing Date referred
to below, will contain all statements which are required to be stated therein
in
accordance with the Act and the Rules and Regulations and will conform in all
material respects to the applicable requirements of the Act and the Rules and
Regulations, and at such times, 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 in which they were made, not misleading, except that the
representations and warranties in this Section 1(c) do not apply to statements
or omissions in the Registration Statement or Prospectus made in reliance upon
and in conformity with information furnished herein or in writing to the Company
by or on behalf of an Underwriter for inclusion in the Registration Statement
or
the Prospectus.
(d) The
Company has been duly incorporated and is now, and at the Closing Dates (defined
below) will be, validly existing and in good standing as a corporation under
the
laws of the State of Delaware, and has full corporate power and authority (i)
to
own or lease, as the case may be, its properties, whether tangible or
intangible, and conduct its business as presently conducted and as described
in
the Registration Statement and Prospectus (the “Business”) and (ii) to
execute, deliver and perform this Agreement and the Representative’s Warrant
Agreement and consummate the transactions contemplated hereby and thereby.
The
Company has no subsidiaries other than those subsidiaries set forth on
Schedule
1(d)
(the
“Subsidiaries”). Each of the Subsidiaries has been duly incorporated and is now,
and at the Closing Dates will be, validly existing and in good standing as
a
corporation or other legal entity under the laws of its respective jurisdiction
as set forth on Schedule
1(d).
Unless
the context otherwise requires, all references to the “Company” in this
Agreement shall include the Subsidiaries. Each of the Subsidiaries has full
power and authority, corporate and other, necessary to own or lease, as the
case
may be, and operate its properties, whether tangible or intangible, and to
conduct its business as described in the
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Registration
Statement. Each of the Company and each Subsidiary is duly qualified to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of the business transacted by it or the character or
location of its properties, in each case taken as a whole, makes such
qualification necessary, except where the failure to so qualify could not
reasonably be expected to have a material adverse effect upon the condition
(financial or otherwise), results of operations, income, shareholders’ equity,
net worth, business, assets or properties of the Company and the Subsidiaries,
taken as a whole (a “Material Adverse Effect”). Except as set forth on
Schedule
1(d),
the
Company owns all of the issued and outstanding shares of capital stock or other
equity and ownership and/or voting interests of each of the Subsidiaries, free
and clear of any security interests, liens, encumbrances, claims and charges,
and all of such shares or other interests have been duly authorized and validly
issued and are fully paid and non-assessable. There are no options or warrants
for the purchase of, or other rights to purchase or acquire, or outstanding
securities convertible into or exchangeable for, any capital stock or other
securities or interests of the Subsidiaries. Other than the Subsidiaries, the
Company has no equity interests in any entity. Each of the Company and each
Subsidiary holds, or will hold by the First Closing Date, all permits, licenses,
certifications, registrations, approvals, consents, orders, franchises and
other
authorizations (collectively, “Permits”) from state, federal or other regulatory
authorities necessary for the conduct of its Business and is in compliance
with
all laws and regulations and all orders and decrees applicable to it or to
such
business, except where the failure to hold such Permits or comply with such
laws, regulations, orders or decrees could not reasonably be expected to result
in a Material Adverse Effect, and there are no proceedings pending or, to the
Knowledge of the Company, threatened, seeking to cancel, terminate or limit
such
Permits.
(e) The
financial statements of the Company, including the schedules and related notes
filed as part of the Registration Statement and included in the Prospectus,
are
complete, correct and present fairly in all material respects the financial
position of the Company as of the respective dates thereof and the results
of
operations and changes in financial position of the Company for the respective
periods indicated therein and comply as to form in all material respects with
the applicable accounting requirements included in Regulations S-K and S-X,
as
well as any other applicable Rules and Regulations. Such financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as otherwise stated
in the Registration Statement and the Prospectus, and all adjustments necessary
for a fair presentation of results for such periods have been made. The selected
financial data set forth in the Registration Statement and the Prospectus
present fairly the information shown therein at the respective dates thereof
and
for the respective periods covered thereby and have been presented on a basis
consistent with that of the audited and unaudited financial statements included
in the Registration Statement and the Prospectus.
(f) The
accounting firm of Stonefield ▇▇▇▇▇▇▇▇▇, Inc., which has audited certain of
the
financial statements filed and to be filed with the Commission as part of the
Registration Statement and Prospectus, are registered independent public
accountants with the Public Company Accounting Oversight Board within the
meaning of the Act and the Rules and Regulations.
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(g) Subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus and the Company’s latest financial statements filed
with the Commission as a part thereof, and except as described in the
Registration Statement and the Prospectus, (i) none of the Company nor any
Subsidiary has incurred any material liability or obligation, direct or
contingent, or entered into any material transactions whether or not incurred
in
the ordinary course of business; (ii) none of the Company nor any Subsidiary
has
sustained any material loss or interference with its business from fire, storm,
explosion, flood or other casualty (whether or not such loss is insured
against), or from any labor dispute or court or governmental action, order
or
decree; (iii) there have not been, and through and including the First Closing
Date, there will not be, any changes in the capital stock or any material
increases in the long-term debt or other securities of the Company; (iv) the
Company has not paid or declared any dividend or other distribution on its
Common Stock or its other securities or redeemed or repurchased any of its
Common Stock or other securities, and (v) no adverse change in the condition
(financial or otherwise), results of operations, income, shareholders’ equity,
net worth, business, assets or properties of the Company or any Subsidiary
has
occurred, which could reasonably be expected to result in a Material Adverse
Effect.
(h) This
Agreement and compliance by the Company with the terms hereof, have been duly
and validly authorized by the Company by all necessary corporate action and
upon
execution and delivery hereof by the Company will be duly executed and delivered
by the Company and, when duly executed and delivered by the Company and by
the
Underwriter, will constitute the valid and binding obligations of the Company
enforceable in accordance with its terms, except to the extent enforceability
may be limited by any bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws affecting creditors’ rights generally
and, to the extent that the remedy of specific performance and injunction or
other forms of equitable relief may be subject to equitable defenses and the
discretion of the court before which any proceeding therefore may be brought.
The Representative’s Warrant Agreement and compliance by the Company with the
terms thereof, have been duly and validly authorized by the Company by all
necessary corporate action and upon execution and delivery thereof by the
Company will be duly executed and delivered by the Company and, when duly
executed and delivered by the Company and by the Underwriters will constitute
the valid and binding obligations of the Company enforceable in accordance
with
their respective terms, except to the extent enforceability may be limited
by
any bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or
similar laws affecting creditors’ rights generally and to the extent that the
remedy of specific performance and injunction or other forms of equitable relief
may be subject to equitable defenses and the discretion of the court before
which any proceeding therefor may be brought. None of the Company nor any
Subsidiary is presently in violation of or in default in respect of any of
the
terms or provisions of this Agreement or the Representative’s Warrant Agreement
and the execution, delivery and performance by the Company of this Agreement
and
the Representative’s Warrant Agreement and the consummation of the transactions
herein and therein contemplated, will not, with or without the giving of notice
or the lapse of time or both, (i) result in a breach of or constitute default
under any of the terms, conditions or provisions of the Certificate of
Incorporation (or Articles of Incorporation, Articles of Association or other
charter documents) or by-laws (or operating or similar agreement among the
other
holders of equity ownership and/or voting interests) of the Company or any
Subsidiary; (ii) result in a breach of, conflict with or constitute a default
in
respect of any of the terms or provisions of, or result in a modification or
the
termination of, or the creation or imposition of any lien, security interest,
charge or encumbrance upon any property or asset of the Company or any
Subsidiary, which is necessary for the conduct of the Business, pursuant to
any
note, indenture, mortgage, deed of trust, contract,
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commitment
or other agreement or instrument to which the Company or any Subsidiary is
a
party or by which the Company or any Subsidiary or any of its respective
properties or assets, which are necessary for the conduct of the Business,
may
be bound or affected; (iii) violate any existing law, order, rule, regulation,
writ, injunction or decree of any government, governmental instrumentality,
agency, body or court, domestic or foreign, having jurisdiction over the
Company, any Subsidiary or any of its respective properties or businesses that
are necessary for the conduct of the Business; or (iv) have any effect on any
Permit necessary for the Company or any Subsidiary to own or lease and operate
its respective properties and to conduct the Business or the ability to make
use
thereof, which in any case described in clause (ii), (iii) or (iv) above, could
reasonably be expected to result in a Material Adverse Effect or would
materially adversely affect the ability of the Company to perform its
obligations under this Agreement or the Representative’s Warrant
Agreement.
(i) No
Permits of any government or governmental instrumentality, agency, body or
court, except as may be required under the Act, the “blue sky” or securities
laws of any state or the rules of the National Association of Securities
Dealers, Inc. (“NASD”) (including approval of underwriting compensation) or in
connection with the listings of the Common Stock on the American Stock Exchange,
Inc. (“AMEX”), are required (i) for the valid authorization, issuance, sale and
delivery of the Firm Shares and the Option Shares to the Underwriters pursuant
to this Agreement, and (ii) the consummation by the Company of the
transactions contemplated by this Agreement and the Representative’s Warrant
Agreement.
(j) Except
as
disclosed in the Registration Statement and Prospectus, there is neither pending
nor, to the Knowledge of the Company, threatened, against the Company or any
Subsidiary any claim, action, suit, or proceeding at law or in equity,
arbitration (or circumstances that may give rise to the same), investigation
or
inquiry to which the Company or any of its respective officers, key employees,
directors or 5% or greater securityholders (each hereinafter, a “Principal
Stockholder”) is a party and involving the Company’s or any Subsidiaries’
properties or businesses, which properties or businesses are necessary for
the
conduct of the Business, before or by any court, arbitration tribunal or
governmental instrumentality, agency, or body, which, if determined adversely
to
the Company or such Subsidiary, could, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect or which question
the validity of the capital stock of the Company or seek to prevent consummation
of the transactions contemplated hereby; nor are there any such actions, suits
or proceedings pending or, to the Knowledge of the Company, threatened, against
the Company or any Subsidiary related to consumer protection, distribution,
rental and sales, or environmental matters or matters related to discrimination
on the basis of age, sex, religion or race; and no labor disturbance by the
employees of the Company or any Subsidiary exists or to the Knowledge of the
Company, is threatened, which could reasonably be expected to result in a
Material Adverse Effect.
(k) There
is
no contract or other document which is required by the Act or by the Rules
and
Regulations to be described in the Registration Statement or the Prospectus
or
to be filed as an exhibit to the Registration Statement which has not been
so
described or filed as required and each contract or document which has been
described in the Registration Statement and Prospectus has been described
accurately and presents fairly the information required to be described and
each
such contract or document which is filed as an exhibit to the Registration
Statement is and shall be in full force and effect at the Closing Date or shall
have been terminated in accordance
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with
its
terms or as set forth in the Registration Statement and Prospectus, and no
party
to any such contract has given notice to the Company or any Subsidiary of the
cancellation of or, to the Knowledge of the Company, shall have threatened
to
cancel, any such contract, and except as described in the Registration Statement
and Prospectus, the Company is not in default thereunder. Except as described
in
the Prospectus, there is no voting or other stockholder agreement between the
Company and any of its stockholders or between or by and among any stockholders
of the Company. There are and, as of the Closing Date, there will be, no loans
to the Company from any officers, directors, securityholders or consultants,
or
any affiliates thereof, except the loan from ▇. ▇▇▇▇▇▇▇▇ Family Investments,
L.P. that is described in the Prospectus.
(l) The
Company and the Subsidiaries do not own any real property. Each of the Company
and the Subsidiaries has good title to all of its personal property (tangible
and intangible) and assets that are necessary for the conduct of its Business,
including any licenses, trademarks and copyrights, described in the Registration
Statement and Prospectus as owned by it, free and clear of all security
interests, liens, charges, mortgages, encumbrances and restrictions other than
(i) such security interests, liens, charges, mortgages, encumbrances and
restrictions as are not materially significant in relation to the Business
or
(ii) as described in the Registration Statement and Prospectus. The leases,
subleases and licenses under which the Company or a Subsidiary is entitled
to
lease, hold or use any real or personal property, are valid and enforceable,
except (x) where the invalidity or unenforceability of any of such leases,
subleases or license could not reasonably be expected to have a Material Adverse
Effect or (y) as described in the Registration Statement and Prospectus; and,
except as described in the Registration Statement and Prospectus, all rentals,
royalties or other payments accruing thereunder which became due prior to the
date of this Agreement have been duly paid and none of the Company, any
Subsidiary, or, to the Knowledge of the Company, any other party, is in default
in respect of any of the terms or provisions of any such leases, subleases
and
licenses where such default could reasonably be expected to result in a Material
Adverse Effect, and no claim of any sort has been asserted by anyone against
the
Company or any Subsidiary under any such leases, subleases or licenses affecting
or questioning the rights of the Company or any Subsidiary to the continued
use
or enjoyment of the rights and property covered thereby, where such claim could
reasonably be expected to result in a Material Adverse Effect. Except as set
forth in the Registration Statement and Prospectus, neither the Company nor
any
Subsidiary has received notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or leased
properties. Each of the Company and each Subsidiary owns or leases all such
properties as are necessary to its operations as now conducted and as proposed
to be conducted as set forth in the Registration Statement and
Prospectus.
(m) Each
of
the Company and each Subsidiary has filed with the appropriate federal, state
and local governmental agencies, and all appropriate foreign countries and
political subdivisions thereof, all tax returns, including franchise tax
returns, which are required to be filed by it or has duly obtained extensions
of
time for the filing thereof and has paid all taxes required to be paid by it
as
shown on such returns and all other assessments against it, to the extent that
the same have become due and are not being contested in good faith; and the
provisions for income taxes payable, if any, shown on the financial statements
filed with or as part of the Registration Statement and Prospectus are
sufficient for all accrued and unpaid foreign and domestic taxes, whether or
not
disputed, and for all periods to and including the dates of such consolidated
financial statements. None of the Company nor any Subsidiary has executed or
filed with any taxing authority, foreign or domestic, any agreement extending
the period for assessment or collection of any income taxes and, to the
Knowledge of the Company, is not a party to any pending action or proceeding
by
any foreign or domestic governmental agency for assessment or collection of
taxes; and no claims for assessment or collection of taxes have been asserted
in
writing against the Company.
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(n) Each
of
the Company and each Subsidiary maintains insurance, which is in full force
and
effect as of the Effective Date, of the types set forth on Schedule
1(n)
annexed
hereto. Each of the Company and each Subsidiary maintains such insurance in
amounts as are, to the Knowledge of the Company, usually maintained by companies
engaged in the same or a similar business located in the same geographic area
as
those of the Company or any Subsidiary. To the Knowledge of the Company, there
are no facts or circumstances which would require it or a Subsidiary to notify
its insurers of any claim of which notice has not been made or will not be
made
in a timely manner. To the Knowledge of the Company, there are no facts or
circumstances under any of its or any Subsidiary’s existing insurance policies
which would relieve any insurer of its obligation to satisfy in full any
existing valid claim of the Company or a Subsidiary under any such
policies.
(o) Each
of
the Company and the Subsidiaries owns or otherwise possesses adequate,
enforceable and unrestricted rights to intellectual property that is used or
proposed to be used in the conduct of the Business, as described under the
caption “Our Business -- Intellectual Property” in the Registration Statement
and Prospectus, including all patents, patent rights, inventions, trademarks,
service marks, trade names and copyrights, trade secrets, confidential
information, processes and formulations (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
inventions, designs, works of authorship, computer programs and technical data,
proprietary information and the like (collectively, the “Intangibles”). Except
as otherwise described in the Registration Statement and Prospectus under the
caption “Our Business -- Intellectual Property,” (i) each of the Company and
each Subsidiary is the beneficial and record owner of all right, title and
interest in, to and under the Intangibles, free and clear of all liens, security
interests, charges, encumbrances or other adverse claims and has the right
to
use the Intangibles without payment to a third party; (ii) to the Knowledge
of
the Company, none of the Company nor any Subsidiary has infringed nor is
infringing upon the intellectual property rights of others, (iii) none
of
the Company nor any Subsidiary has received any notice that it has or may have
infringed or is infringing upon the intellectual property rights of others;
(iv)
there is no pending or, to the Knowledge of the Company, threatened action,
suit, proceeding or claim by others challenging the Company’s or any
Subsidiary’s rights in or to, or the validity or scope of, any such Intangibles,
nor, to the Knowledge of the Company, do there exist any facts which would
form
a reasonable basis for any such claim; (v) there is no pending or, to the
Knowledge of the Company, threatened action, suit, proceeding or claim by others
alleging that the Company or any Subsidiary infringes or otherwise violates
any
patent, trademark, copyright, trade secret or other proprietary rights of
others, nor, to the Knowledge of the Company, does there exist any other fact
which would form a reasonable basis for any such claim except where the Company
or any Subsidiary has requested and obtained a non-infringement or right-to-use
opinion from its intellectual property counsel; (vi) to the Knowledge of the
Company, no others have infringed upon the Intangibles of the Company or any
Subsidiary and there is no U.S. patent or published U.S. patent application
which contains claims that dominate any Intangibles described in the Prospectus
as being owned by or
-8-
licensed
to the Company or any Subsidiary, that interferes with the issued or pending
claims of any such Intangibles, or prevents the Company or any Subsidiary from
conducting the Business; and (vii) none of the Company or any Subsidiary is
obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant
to,
intellectual property rights not owned or controlled by the Company or such
Subsidiary or in connection with the conduct of the Business, except such
payments to The Harvard Lampoon, Inc. in connection with the use of the word
“Lampoon,” as described in the Prospectus. Each of the Company and the
Subsidiaries has taken reasonable security measures to protect the secrecy,
confidentiality and value of all its Intangibles in all material
respects.
(p) Except
as
described in the Registration Statement and Prospectus, neither the Company
nor
any officer, director or any other affiliate of the Company (as such term is
defined in Rule 405 promulgated under the Rules and Regulations) has incurred
any liability for or entered into any agreement providing for a finder’s fee or
similar fee in connection with the transactions contemplated by this Agreement.
(q) No
officer or director of the Company, or any affiliate (as such term is defined
in
Rule 405 promulgated under the Rules and Regulations) of any such officer or
director, has taken, and each officer or director has agreed that he will not
take, directly or indirectly, any action designed to constitute or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company or
other violation under Regulation M promulgated under the Securities Exchange
Act
of 1934, as amended (the “1934 Act”) or otherwise, to facilitate the sale or
resale of the Shares.
(r) Except
as
disclosed in the Registration Statement and Prospectus under the caption
“Certain Relationships and Related Party Transactions,” no person related to the
Company as described in Item 404(a) of Regulation S-K promulgated under the
Act
has or has had during the past two (2) years, either directly or indirectly,
(i)
a material interest in any person or entity which (A) furnishes or sells
products which are furnished or sold or are proposed to be furnished or sold
by
the Company or any Subsidiary, or (B) purchases from or sells or furnishes
to
the Company or any Subsidiary any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company or any Subsidiary
is
a party or by which it may be bound or affected. There are no existing
agreements, arrangements, or transactions, between or among the Company or
any
Subsidiary and any officer, director of the Company or any Subsidiary, or any
partner, affiliate or associate of any of the foregoing persons or entities
which are required to be described in the Registration Statement and Prospectus
under the caption “Certain Relationships and Related Party Transactions” and
which are not so described.
(s) The
minute books of the Company have been provided to the Representative through
Underwriters’ Counsel and contain accurate summaries of all meetings and actions
of the directors, all committees of the Board of 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.
-9-
(t) None
of
the Company nor any Subsidiary is involved in any labor disputes with any of
its
employees and, to the Knowledge of the Company, no employee has threatened
the
commencement of any labor disputes with the Company or any Subsidiary, nor
has
the Company or any Subsidiary received any notice of any bankruptcy, labor
disturbance or other event affecting any of its principal suppliers or
customers, which could reasonably be expected to result in a Material Adverse
Effect.
(u) The
Company had at the date or dates indicated in the Registration Statement and
Prospectus a duly authorized and outstanding capitalization as set forth in
the
Registration Statement and the Prospectus. Based on the assumptions stated
in
the Registration Statement and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein. Except as
set
forth in the Registration Statement or the Prospectus, on the Effective Date
and
on the Closing Date, there will be no options to purchase, warrants or other
rights to subscribe for, or any securities or obligations convertible into,
or
any contracts or commitments to issue or sell shares of the Company’s capital
stock or any such warrants, convertible securities or obligations. Except as
set
forth in the Registration Statement or the Prospectus, no holder of any of
the
Company’s securities has any rights, “demand,”“piggyback” or otherwise, to have
such securities registered under the Act, and all holders with any such rights
have agreed not to exercise such rights with respect to the Registration
Statement or during the 12 months following the Closing Date.
(v) The
Shares and the other securities of the Company conform to all statements in
relation thereto in the Registration Statement and Prospectus; the outstanding
shares of Common Stock, including, without limitation, the Selling Stockholder
Shares, and preferred stock of the Company (the “Preferred Stock”) have been
duly authorized and validly issued and are fully paid and non-assessable; the
outstanding options and warrants to purchase Common Stock have been duly
authorized and validly issued and constitute the valid and binding obligations
of the Company, enforceable in accordance with their terms, except to the extent
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting
creditors’ rights generally and to the extent that the remedy of specific
performance and injunction or other forms of equitable relief may be subject
to
equitable defenses and the discretion of the court before which any proceeding
therefor may be brought; and none of such outstanding shares of Common Stock
or
Preferred Stock or outstanding warrants or options to purchase Common Stock
were
issued in violation of the pre-emptive rights of any stockholder of the Company.
The offers and sales of the outstanding Common Stock and Preferred Stock and
outstanding options and warrants to purchase Common Stock were at all relevant
times either registered under the Act and the applicable state securities or
“blue sky” laws or exempt from such registration requirements. None of the
offers and sales of the outstanding Common Stock or Preferred Stock or
outstanding options or warrants to purchase Common Stock are required to be
integrated (within the meaning of the Act) with the offered sale of the Shares.
The holders of the outstanding Common Stock and Preferred Stock are not subject
to personal liability for obligations of the Company solely by reason of being
stockholders. Except as set forth in the Registration Statement and Prospectus,
on the Effective Date and on the Closing Date(s) there will be no outstanding
options or warrants for the purchase of, or other outstanding rights to purchase
or acquire, Common Stock or securities convertible or exchangeable into Common
Stock.
-10-
(w) The
issuance and sale of the Shares have been duly authorized and, upon delivery
against payment therefor as contemplated by this Agreement, the Shares will
be
validly issued, fully paid and non-assessable, and the holders thereof will
not
be subject to personal liability solely by reason of being such holders. The
Shares will not be subject to pre-emptive rights of any securityholder of the
Company.
(x) The
issuance and sale of the Representative’s Warrants has been duly authorized and
when issued and delivered in accordance with the terms hereof and the
Representative’s Warrant Agreement, including, without limitation, delivery
against payment therefor, shall constitute the valid and binding obligations
of
the Company enforceable in accordance with their terms, except to the extent
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting
creditors’ rights generally and to the extent that the remedy of specific
performance and injunction or other forms of equitable relief may be subject
to
equitable defenses and the discretion of the court before which any proceeding
therefor may be brought. The issuance and sale of the Warrant Shares has been
duly authorized, and, when duly delivered against payment therefor as
contemplated by the Representative’s Warrant Agreement, such Warrant Shares will
be validly issued, fully paid and non-assessable, and will conform to the
description thereof contained in the Registration Statement and Prospectus.
Holders of Warrant Shares issuable upon the exercise of the Representative’s
Warrants will not be subject to personal liability solely by reason of being
such holders. Neither the Representative’s Warrants nor the Warrant Shares
issuable upon exercise thereof will be subject to pre-emptive rights of any
securityholder of the Company. The Company has reserved a sufficient number
of
shares of Common Stock from its authorized but unissued Common Stock for
issuance upon exercise of the Representative’s Warrants in accordance with the
provisions of the Representative’s Warrant Agreement.
(y) The
Company has obtained (and delivered copies to the Underwriters) from (i) each
of
its officers and directors, (ii) all Preferred Stockholders and Principal
Stockholders, and (iii) any other securityholder who, between October 14, 2004
and the Effective Date, acquired shares from the Company or from any of the
Company's officers, directors, employees or such securityholders (the persons
referred to in clauses (i), (ii) and (iii) are hereinafter referred to as
“Insiders”), written commitments in form and substance acceptable to the
Underwriters (each, a “Lock-Up Letter Agreement” and collectively, the “Lock-up
Letter Agreements”) in the form attached as Exhibit A hereto.
(z) During
the period commencing on the date hereof and ending twelve (12) months from
the
First Closing Date (the “Initial Lock-Up Period”), the Company shall not offer
for sale, sell, issue or grant any Common Stock or other equity securities
of
the Company without the Representative’s prior written consent (such consent not
to be unreasonably withheld) and the prior consent of a majority of the
Company’s independent directors. Notwithstanding the preceding sentence, during
the period of twelve (12) months from the First Closing Date, the Company may
issue securities in connection with an acquisition, merger or similar
transaction, provided that such securities are not publicly registered and
the
acquirer of the securities is not granted registration rights with respect
thereto which may be exercised prior to twelve (12) months after the First
Closing Date.
-11-
(aa) Neither
the Company, any Subsidiary, nor any officer or director or, to the Knowledge
of
the Company, any other agent of the Company or any Subsidiary, acting on behalf
of the Company, has at any time (i) made any contributions to any candidate
for
political office in violation of law, or failed to disclose fully any such
contributions in violation of law, (ii) made any payment to any state, Federal
or foreign governmental officer or official, or any other person charged with
similar public or quasi-public duties, other than payments required or allowed
by applicable law or (iii) made any payment of funds of the Company
or any
Subsidiary or received or retained any funds in violation of any law, rule
or
regulation and under circumstances requiring the disclosure of such payment,
receipt or retention of funds in the Registration Statement and Prospectus.
The
Company’s and the Subsidiaries’ internal accounting controls and procedures are
sufficient to cause the Company and the Subsidiaries to comply in all material
respects with the Foreign Corrupt Practices Act of 1977, as
amended.
(bb) The
Company is not an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended. After giving effect to the offering and sale of the Shares and
the
application of the proceeds thereof as described in the Registration Statement
and Prospectus, the Company will not be an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.
(cc) No
securities of the Company have been sold by the Company or, to the Knowledge
of
the Company, by or on behalf of, or for the benefit of any person or persons
controlling, controlled by or under common control with, the Company within
the
three (3) years prior to the date hereof, except as disclosed in Part II of
the
Registration Statement or under the caption “Certain Relationships and Related
Party Transactions” in the Registration Statement and Prospectus.
(dd) The
employment, consulting, confidentiality and non-competition agreements between
the Company or the Subsidiaries and their officers, employees and consultants
are binding and enforceable obligations upon the respective parties thereto
in
accordance with their terms, except to the extent enforceability may be limited
by any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or similar laws affecting creditors’ rights generally and to the
extent that the remedy of specific performance and injunction or other forms
of
equitable relief may be subject to equitable defenses and the discretion of
the
court before which any proceeding therefor may be brought.
(ee) Except
as
set forth in the Registration Statement and Prospectus or on Schedule
1(ee)
annexed
hereto, none of the Company or any Subsidiary has employee benefit plans
(including, without limitation, profit sharing and welfare benefit plans) or
deferred compensation arrangements that are subject to the provisions of the
Employee Retirement Income Security Act of 1974. The Company has fulfilled
its
obligations, if any, under the minimum funding standards of ▇▇▇▇▇▇▇ ▇▇▇ ▇▇
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Employee Retirement Income Security Act of 1974 (“ERISA”) and the
regulations and published interpretations thereunder with respect to each “plan”
(as defined in Section 3(3) of ERISA and such regulations and published
interpretations) in which employees of the Company or any Subsidiary are
eligible to participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such regulations
and published interpretations. None of the Company or any Subsidiary has
incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other
than for the payment of premiums in the ordinary course) or to any such plan
under Title IV of ERISA.
-12-
(ff) Upon
the
First Closing Date, there will be no voting or other stockholder agreements
between the Company and any stockholders of the Company or, to the Knowledge
of
the Company, between or by and among any stockholders of the Company, except
for
the agreements set forth on Schedule
1(ff)
annexed
hereto.
(gg) The
Company has filed a registration statement on Form 8-A with respect to its
Common Stock under Section 12(b) of the 1934 Act and such registration statement
has been declared effective by the Commission. The Company has filed listing
applications with respect to its Common Stock with the American Stock Exchange
(“AMEX”), such listing applications have been accepted by, and the Shares have
been approved for listing on, the AMEX, subject to official notices of
issuance.
(hh) Each
of
the Company and each Subsidiary is in compliance in all material respects with
all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. None of the Company nor any Subsidiary has received notice
of
any pending investigations involving the Company or any Subsidiary, by the
U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state, local, or foreign laws and regulations.
There is no unfair labor practice charge or complaint against the Company or
any
Subsidiary pending before the National Labor Relations Board or, to the
Knowledge of the Company, any strike, picketing, boycott, dispute, slowdown
or
stoppage pending or threatened against or involving the Company or any
Subsidiary and none has ever occurred. No collective bargaining representation
question exists respecting the employees of the Company or any Subsidiary,
and
no collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any Subsidiary. None of the Company nor any
Subsidiary has received notice that any grievance or arbitration proceeding
is
pending under any expired or existing collective bargaining agreements of the
Company or any Subsidiary. No labor dispute with the employees of the Company
or
any Subsidiary exists or to, the Knowledge of the Company, is
imminent.
(ii) The
Company has provided to Blank Rome LLP, counsel to the Underwriters
(“Underwriters’ Counsel”), complete and accurate copies of all agreements,
certificates, correspondence and other items, documents and information
requested by such counsel, including in such counsel’s due diligence memorandum
emailed to the Company’s counsel on _____________, 2005.
(jj) Any
certificate signed by an officer of the Company in his capacity as such and
delivered to the Underwriters or Underwriters’ Counsel pursuant to this
Agreement shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters set forth in such certificate.
(kk) Each
of
the Company and each Subsidiary is and has been doing business in compliance
with all Permits and all federal, state, and local laws, rules and regulations,
except where failure to be in such compliance could not reasonably be expected
to result in a Material Adverse Effect; and none of the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation
or
modification of any such Permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could reasonably be
expected to result in a Material Adverse Effect.
-13-
(ll) The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with
management’s general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance
with
management’s general or specific authorization; and (iv) existing assets
are verified at reasonable intervals and appropriate action is taken with
respect to any discrepancies.
(mm) There
is
and has been, and on the Closing Date there will be, no failure on the part
of
the Company and any of the Company’s directors or officers, in their capacities
as such, to comply with any provision of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the
“▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”) and the rules and regulations promulgated in connection
therewith, including Section 402 related to loans and Sections 302 and 906
related to certifications.
(nn) Except
as
set forth in the Registration Statement and Prospectus (exclusive of any
supplement thereto), the Company (A) is in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to
the protection of human health and safety, the environment or hazardous or
toxic
substances or wastes, pollutants or contaminants applicable to its Business
(“Environmental Laws”), (B) has received and is in compliance with all Permits
required under applicable Environmental Laws to conduct its Business, and
(C) has not received notice of any actual or potential liability for
the
investigation or remediation of any disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, except where such
non-compliance with Environmental Laws, failure to receive required Permits,
licenses or other approvals, or liability could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has not received notice and otherwise has no Knowledge that it has been named
as
a “potentially responsible party” under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
(oo) The
Company is subject to the reporting requirements of the Act and 1934 Act and
has
timely filed all reports and statements required under the Act and 1934 Act
on a
timely basis, and each report and statement was true and complete in all
material respects when filed and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(pp) Except
as
set forth on Schedule
1(pp),
none of
the Company or any of its officers, directors or holders of outstanding
securities have any affiliation or association with any NASD member, no
unregistered securities of the Company have been acquired by an NASD-affiliated
or associated person within the 12-month period prior to the filing of the
Registration Statement and (iii) no “key-man” insurance has been provided for
any officer of the Company by an NASD affiliate or associate.
-14-
2. Representations
and Warranties of the Selling Stockholder.
The
Selling Stockholder represents and warrants to, and agrees with, the
Underwriters that, as of the Effective Date, the First Closing Date and each
Option Closing Date:
(a) The
Selling Stockholder has full right, power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement, the Registration Statement and
the
Prospectus. To the extent applicable, this Agreement and the transactions
contemplated by this Agreement, the Registration Statement and the Prospectus
have been duly and validly authorized by the Selling Stockholder. This Agreement
has been duly and validly executed and delivered by the Selling Stockholder.
(b) The
Selling Stockholder has full right, power and authority to execute and deliver
a
Custody Agreement and Power of Attorney substantially in the form of Exhibits
E
and F hereto (the Selling Stockholder's "Custody Agreement" and "Power of
Attorney", respectively), to perform its obligations thereunder and to
consummate the transactions contemplated by thereby. The Custody Agreement,
Power of Attorney and the transactions contemplated by thereby have been duly
and validly authorized by the Selling Stockholder. The Custody Agreement and
Power of Attorney have each been duly and validly executed and delivered by
the
Selling Stockholder, and constitute the legal, valid and binding obligation
of
the Selling Stockholder, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Counterparts of the Selling Stockholder's Custody Agreement,
duly signed by _________________ as custodian (in such capacity, the
"Custodian") and as the Selling Stockholder’s attorney-in-fact (in such
capacity, the "Attorney-In-Fact") have been delivered to the Company on or
prior
to the date of this Agreement.
(c) The
Selling Stockholder agrees that the Selling Stockholder Shares to be sold,
whether or not on deposit with the Custodian, are subject to the interests
of
the Attorney-In-Fact, the Company and the Underwriters, that the arrangements
made for such custody are to that extent irrevocable, and that the obligations
of the Selling Stockholder hereunder shall not be terminated, except as provided
in this Agreement or in the Custody Agreement and Power of Attorney, by any
act
of the Selling Stockholder, by operation of law or by the occurrence of any
other event. If the Selling Stockholder should die or become incapacitated,
or
if any other event should occur affecting the legal status or capacity of the
Selling Stockholder before the delivery of the Selling Stockholder Shares the
documents evidencing the Selling Stockholder Shares to be sold by the Selling
Stockholder then on deposit with the Custodian shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as
if
such event had not occurred, regardless of whether or not the Custodian shall
have received notice thereof.
(d) The
Selling Stockholder has, and on the First Closing Date and the Option Closing
Date, if any, will have good and valid title to and is the lawful owner of
the
Selling Stockholder Shares to be sold by the Selling Stockholder hereunder,
and
upon sale and delivery of, and payment for, the Selling Stockholder will convey
to the Underwriters good and marketable title to the Selling Stockholder Shares
free and clear of all liens, security interests, encumbrances, charges, claims,
restrictions on transfer or other defects whatsoever. Certificates for all
of
the Selling Stockholder Shares to be sold by the Selling Stockholder pursuant
to
this Agreement, in suitable form for transfer by delivery or accompanied by
duly
executed instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian with irrevocable
conditional instructions to deliver such Selling Stockholder Shares to the
Underwriters pursuant to this Agreement.
-15-
(e) No
Permits of any government or governmental instrumentality, agency, body or
court
or any third party, foreign or domestic, except as may be required under the
Act, the “blue sky” or securities laws of any state or the rules of the NASD
(including approval of underwriting compensation) or in connection with the
listings of the Common Stock on the AMEX, is required for the execution,
delivery and performance by the Selling Stockholder of this Agreement or, its
Custody Agreement and Power of Attorney, or consummation by the Selling
Stockholder of the transactions contemplated herein or therein.
(f) The
execution, delivery and performance of this Agreement by the Selling Stockholder
and the execution, delivery and performance of the Power of Attorney and the
Custody Agreement by the Selling Stockholder and the consummation of any of
the
other transactions contemplated herein and therein by the Selling Stockholder
or
the fulfillment of the terms hereof by the Selling Stockholder will not (A)
conflict with, result in a breach or violation of, or constitute a default
(or
an event that with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of such Stockholder pursuant to, any
law, statute, rule or regulation or the terms of any indenture or other
agreement or instrument to which the Selling Stockholder is party or bound,
or
to which any of the property or assets of the Selling Stockholder is subject,
except as such could not reasonably be expected to have a Material Adverse
Effect or (B) result in any violation or breach of any judgment, order, decree
statute, rule or regulation applicable to the Selling Stockholder of any court
or any public, governmental or regulatory agency or body, administrative agency
or arbitrator having jurisdiction over the Selling Stockholder; provided,
however, no representation is made with respect to this clause (B) as to the
NASD or AMEX in connection with the purchase and distribution of the Selling
Stockholder Shares by the Underwriters.
(g) The
Selling Stockholder does not have any registration or other similar rights
to
have any equity or debt securities registered for sale by the Company under
the
Registration Statement or included in the offering of the Shares except for
such
rights as have been waived or which are described in the Prospectus (and which
have been complied with).
(h) The
Selling Stockholder does not have, or has waived prior to the date hereof,
any
preemptive right, co-sale right or right of first refusal or other similar
right
to purchase any of the Shares that are to be sold by the Company to the
Underwriters pursuant to this Agreement; and the Selling Stockholder does not
own any warrants, options or similar rights to acquire, and does not have any
right or arrangement to acquire, any capital stock, right, warrants, options
or
other securities from the Company, other than those described in the
Registration Statement and the Prospectus.
-16-
(i) Except
as
disclosed in the Prospectus, there are no contracts, agreements or
understandings between the Selling Stockholder and any person that would give
rise to a valid claim against the Company or any Underwriter for a brokerage
commission, finder's fee or other like payment in connection with this offering
or, to the Selling Stockholder's knowledge, any other arrangements, agreements,
understandings, payments or issuance with respect to the Company or any of
its
officers, directors, stockholders, partners, employees, subsidiaries or
affiliates that may affect the Underwriters' compensation as determined by
the
NASD.
(j) The
information in the Registration Statement and the Prospectus which specifically
relates to the Selling Stockholder does not, and will not on the First Closing
Date, 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 the light of the circumstances under which they were made, not
misleading. In the event there is any change in the information in the
Prospectus or Registration Statement which specifically relates to the Selling
Stockholder from the first business day after the date of this Agreement and
from time to time thereafter for such period as in the opinion of the
Underwriters’ Counsel a prospectus is required by law to be delivered in
connection with sales by the Underwriters or a dealer, the Selling Stockholder
will immediately notify the Underwriters of such change.
(k) The
Selling Stockholder has not taken and will not take, directly or indirectly,
any
action designed to, or that could be reasonably expected to, cause or result
in
stabilization or manipulation of the price of the Common Stock to facilitate
the
sale or resale of the Shares.
(l) The
Selling Stockholder has not distributed and will not distribute any offering
materials in connection with the offering and sale of the Shares.
(m) The
representations and warranties of the Selling Stockholder in its Custody
Agreement and Power of Attorney are, and on the First Closing Date, and any
Option Closing Date, will be, true and correct.
(n) The
sale
of the Selling Stockholder Shares by the Selling Stockholder pursuant to this
Agreement is not prompted by any material information concerning the Company
known by the Selling Stockholder which is not set forth in the
Prospectus.
Any
certificate signed by or on behalf of the Selling Stockholder and delivered
to
the Representative or to the Underwriters’ Counsel shall be deemed to be a
representation and warranty by the Selling Stockholder to each of the
Underwriters as to the matters covered thereby.
3. Purchase,
Delivery and Sale of the Shares and the Representative’s
Warrants.
(a) Subject
to the terms and conditions of this Agreement, and on the basis of the
representations, warranties and agreements herein contained, the Company and
the
Selling Stockholder hereby agree to sell to the Underwriters, and the
Underwriters agree to purchase from the Company and the Selling Stockholder,
the
Firm Shares at a purchase price of $____ per share (less discounts and
commissions of 7% of the purchase price per share) as follows:
|
▇▇▇▇▇▇▇▇
Curhan Ford & Co.
|
_________
Firm Shares
|
|||
|
The
Shemano Group, Inc.
|
_________
Firm Shares
|
|||
|
Total
|
_________
Firm Shares
|
-17-
On
the
“First Closing Date” (defined below in Section 3(b)), definitive certificates in
negotiable form for the Firm Shares will be delivered by the Company to the
Underwriters or, if proper arrangements have been made, an electronic “fast”
transfer of the Firm Shares from the Company’s Transfer Agent (as defined
herein) to Depository Trust Company (“DTC”) will be made, against payment of the
purchase price by the Underwriters, at the Representative’s option, by wire
transfer or certified or official bank check or checks in same-day funds,
payable to the order of the Company.
(b) Delivery
of the Firm Shares (either by regular way or by a “fast” transfer) against
payment therefor shall take place at the offices of Blank Rome LLP, at 10:00
a.m., local New York Time, on the third business day following the Effective
Date (the fourth business day following the Effective Date in the event that
trading of the Firm Shares commences on the day following the Effective Date)
or
at such other location as the Underwriters and the Company may agree, with
such
time and date of payment and delivery for the Firm Shares being herein called
the “First Closing Date.”
(c) Subject
to the terms and conditions of this Agreement, and on the basis of the
representations, warranties and agreements contained herein, for the purposes
of
covering any over-allotments in connection with the distribution and sale of
the
Firm Shares as described in the Registration Statement and Prospectus, the
Representative is hereby granted an option to purchase all or any part of the
Option Shares from the Company. The purchase price to be paid per share for
the
Option Shares will be the same price as the price per Firm Share set forth
in
Section 3(a) hereof. The option granted hereby may be exercised by notice from
the Representative to the Company in accordance with Section 3(d) hereof solely
by the Representative as to all or any part of the Option Shares at any time
within [thirty (30)] [forty five (45)] days after the Effective Date. The
Representative will not be under any obligation to purchase any Option Shares
prior to the exercise by the Representative of such option in accordance with
Section 3(d) hereof.
(d) The
option granted pursuant to Section 3(c) may be exercised by the Representative
giving oral notice to the Company, which must be confirmed by a letter or
facsimile setting forth the number of Option Shares to be purchased by the
Representative, the date and time for delivery of and payment for the Option
Shares to be purchased and stating that the Option Shares referred to therein
are to be used for the sole purpose of covering over-allotments in connection
with the distribution and sale of the Firm Shares by the Representative. If
such
notice is given prior to the First Closing Date, the date set forth therein
for
such delivery and payment will not be earlier than either two (2) full business
days thereafter or the First Closing Date, whichever occurs later. If such
notice is given on or after the First Closing Date, the date set forth therein
for such delivery and payment will not be earlier than two (2) full business
days thereafter. In either event, the date so set forth will not be more than
fifteen (15) full business days after the date of such notice. The date and
time
set forth in such notice is herein called the “Option Closing Date.” Upon
exercise of such option, through the Representative’s delivery of the
aforementioned notice, the Company will become obligated to convey to the
Representative, and, subject to the terms and conditions set forth in this
Section 3(c) hereof, the Representative will become obligated to purchase,
the
number of Option Shares specified in such notice.
-18-
(e) Payment
for any Option Shares purchased will be made to the Company, at the
Representative’s option, by wire transfer or certified or official bank check or
checks payable to its order in same-day funds, against delivery of the Option
Shares purchased to the Representative at the offices of Blank Rome LLP (or
at
such other location as the Representative and the Company may agree).
(f) The
obligation of the Representative to purchase and pay for any of the Option
Shares is subject to the accuracy and completeness (as of the date hereof and
as
of the Option Closing Date) of and compliance in all material respects with
the
representations and warranties of the Company herein, to the accuracy and
completeness of the statements of the Company or its officers made in any
certificate or other document to be delivered by the Company pursuant to this
Agreement, to the performance in all material respects by the Company of its
obligations hereunder, to the satisfaction by the Company of the conditions,
as
of the date hereof and as of the Option Closing Date, set forth in this Section
3, and to the delivery to the Representative of opinions, certificates and
letters dated the Option Closing Date substantially similar in scope to those
specified in Sections 8(d), (e), (f) and (g) hereof, but with each reference
to
“Firm Shares” and “First Closing Date” to be changed, respectively, to the
“Option Shares” and the “Option Closing Date.”
(g) The
Selling Stockholder hereby agrees that (i) it will pay all stock transfer taxes,
stamp duties and other similar taxes, if any, payable upon the sale or delivery
of the Firm Shares to be sold by the Selling Stockholder to the Underwriters,
or
otherwise in connection with the performance of the Selling Stockholder’s
obligation hereunder and (ii) the Custodian is authorized to deduct for such
payment any such amounts from the proceeds to the Selling Stockholder hereunder
and to hold such amounts for the account of the Selling Stockholder with the
Custodian under the Custody Agreement and Power of Attorney. Unless the Shares
are to be delivered by a “fast” transfer, the Company will make the certificates
for the Shares to be purchased by the Underwriters hereunder available to the
Underwriters for inspection, checking and packaging at the office of the
Company’s transfer agent or correspondent in New York City, U.S. Stock Transfer
Corporation, [address], not less than one (1) full business day prior to the
First Closing Date and the Option Closing Date, as the case may be (both of
which are collectively referred to herein as the “Closing Dates”). The
certificates representing the Shares shall be in such names and denominations
as
the Underwriters may request at least two (2) full business days prior to the
respective Closing Dates. In the event that the Representative determines to
utilize DTC, the parties will use their best efforts to make the offering of
the
Shares “DTC eligible” and to comply with the procedures thereof.
-19-
(h) On
the
First Closing Date, the Company will issue and sell the Representative’s
Warrants (in the form of, and in accordance with, the provisions of the form
of
Representative’s Warrant substantially in the form filed as Exhibit ____ to the
Registration Statement) to the Representative and Shemano and/or to their
respective designees (limited to officers and partners of the Underwriters,
members of the selling group and/or their officers or partners, collectively,
“Representative’s Designees”), as set forth in instructions by the
Representative to the Company, pursuant to the Representative’s Warrant
Agreement that shall be executed and delivered by the Company and the
Representative on the First Closing Date. The aggregate purchase price for
the
Representative’s Warrants is One Hundred Dollars ($100.00). The Representative’s
Warrants and the Warrant Shares issuable upon exercise thereof will be
restricted from sale, transfer, assignment or hypothecation pursuant to
Corporate Financing Rule 2710 (currently a period of 180 days from the Effective
Date), except to the Representative’s Designees who agree in writing not to
further transfer any Representative’s Warrants or Warrant Shares during such
period, unless otherwise permitted by Rule 2710. Payment for the
Representative’s Warrants will be made to the Company by check or checks payable
to its order on the First Closing Date against delivery of the certificates
representing the Representative’s Warrants in accordance with the terms and
conditions of the Representative’s Warrant Agreement. The certificates
representing the Representative’s Warrants will be in such denominations and
such names as the Representative may request prior to the First Closing
Date.
(i) The
information set forth (i) on the cover page of the Prospectus concerning the
Underwriters relating to the delivery of the Shares, and (ii) under the caption
“Underwriting” in the Prospectus with respect to concessions and reallowances
and passive market making and stabilization activities by the Underwriters
constitute the only information furnished by or on behalf of the Underwriters
to
the Company for inclusion therein, and the Underwriters severally represent
and
warrant to the Company that the statements made therein are correct and do
not
include any untrue statement of a material fact or omit to state a material
fact
required to be stated therein, or necessary to make the statements therein,
in
light of the circumstances under which they were made, not
misleading.
4. Public
Offering by the Underwriters.
The
Underwriters agree to cause the Shares to be offered to the public initially
at
the price and under the terms set forth in the Registration Statement and
Prospectus as soon, on or after the effective date of this Agreement, as the
Underwriters deem advisable, but no more than five (5) full business days after
such effective date. The Underwriters may allow such concessions and discounts
upon sales to other dealers as set forth in the Registration Statement and
Prospectus. The Representative agrees to notify the Company in writing when
the
offering is first made and when it is completed. After the completion of the
initial public offering, the public offering price, the concessions and the
reallowance may be changed by the Underwriters.
5. Agreements
of the Company and the Selling Stockholder.
| A. |
The
Company covenants and agrees with the Underwriters
that:
|
(a) If
the
Registration Statement has not been declared effective prior to the time of
execution of this Agreement, the Company will use its best efforts to cause
the
Registration Statement to become effective as promptly as possible, and will
not
at any time, whether before or after the Effective Date, file any amendment
or
supplement to the Registration Statement, (i) which shall not have been
previously submitted to, and approved by, the Underwriters or the Underwriters’
Counsel within a reasonable time prior to the filing thereof, (ii) to which
the
Underwriters or the Underwriters’ Counsel shall have reasonably objected in
writing as not being in compliance with the Act or the Rules and Regulations
or
(iii) which is not in compliance with the Act or the Rules and
Regulations.
-20-
(b) The
Company will notify the Underwriters, promptly after it shall have received
notice of the effectiveness of the Registration Statement or any amendment
or
supplement thereto, of the receipt of any comments of the Commission with
respect thereto, and of the time when the Registration Statement or any
post-effective amendment thereto has become effective or any supplement to
the
Prospectus has been filed.
(c) The
Company will advise the Underwriters promptly of any request of the Commission
for an amendment or supplement to the Registration Statement or the Prospectus,
or for any additional information, or of the issuance by the Commission of
any
stop order suspending the effectiveness of the Registration Statement, or of
any
judgment, order, injunction or decree preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, or of the institution of any
proceedings for any of such purposes, of which it has Knowledge, and will use
its best efforts to prevent the issuance of any stop order, and, if issued,
to
obtain as promptly as possible the lifting thereof.
(d) If
at any
time when a Prospectus relating to the Shares is required to be delivered under
the Act by the Underwriters or dealer, any event shall have occurred as a result
of which, in the reasonable opinion of counsel for the Company or the
Underwriters’ Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein,
in
the light of the circumstances under which they were made, not misleading,
or if
it is necessary at any time to amend the Prospectus to comply with the Act,
the
Company will notify the Underwriters promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section
10
of the Act, each such amendment or supplement to be reasonably satisfactory
to
the Underwriters’ Counsel, and the Company will furnish to the Underwriters
copies of such amendment or supplement as soon as available and in such
quantities as the Underwriters may reasonably request.
(e) Within
the time during which the Prospectus is required to be delivered under the
Act,
or pursuant to the undertakings of the Company in the Registration Statement,
the Company, at its own expense, will comply in all material respects with
all
requirements imposed upon it by the Act, the Rules and Regulations, the 1934
Act
or the rules and regulations of the Commission promulgated under the 1934 Act,
each as now or hereafter amended or supplemented, and by any order of the
Commission so far as necessary to permit the continuance of sales of, or
dealings in, the Shares.
(f) The
Company will furnish to the Underwriters, without charge, a signed copy of
the
Registration Statement and of any amendment or supplement thereto which has
been
filed prior to the date of this Agreement, together with two (2) copies of
each
exhibit filed therewith, and three (3) conformed copies of such Registration
Statement and as many amendments thereto (unsigned and exclusive of exhibits)
as
the Underwriters may reasonably request. The signed copies of the Registration
Statement so furnished to the Underwriters will include signed copies of any
and
all consents and reports of the independent public auditors as to the financial
statements included in the Registration Statement and Prospectus, and signed
copies of any and all consents and certificates of any other person whose
profession gives authority to statements made by them and who are named in
the
Registration Statement or Prospectus as having prepared, certified or reviewed
any parts thereof.
-21-
(g) The
Company will deliver to the Underwriters, without charge, (i) prior to the
Effective Date, copies of each Preliminary Prospectus filed with the Commission
bearing in red ink the statement required by Item 501 of Regulation S-K of
the
Rules and Regulations; (ii) on and from time to time after the Effective
Date, copies of the Prospectus; and (iii) as soon as they are available, and
from time to time thereafter, copies of each amended or supplemented Prospectus,
and the number of copies to be delivered in each such case will be such as
the
Underwriters may reasonably request. The Company has consented and hereby
consents to the use of each Preliminary Prospectus for the purposes permitted
by
the Act and the Rules and Regulations. The Company authorizes the Underwriters
and dealer to use the Prospectus in connection with the sale of the Shares,
for
such period as, in the opinion of the Underwriters’ Counsel, delivery of the
Prospectus is required to comply with the applicable provisions of the Act
and
the Rules and Regulations. Notwithstanding the foregoing, the Underwriters
shall
not use any Preliminary Prospectus or the Prospectus if the Company has given
the Underwriters written notice of the occurrence, or imminently potential
occurrence, of any development that could cause such Preliminary Prospectus
or
Prospectus, as the case may be, to include an untrue statement of a material
fact or to omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances,
not
misleading.
(h) The
Company will take such action as may be necessary to qualify the Shares for
offer and sale under (or obtain exemptions from the application of) the state
securities or “blue sky” laws of such states or other jurisdictions as is
required and as the Underwriters or the Underwriters’ Counsel may designate and
to continue such qualifications in effect so long as the Underwriters may
request for the purposes of the distribution of the Shares; provided, however,
that with respect to any such jurisdiction the Company shall not be required
to
qualify as a foreign corporation or to take any action that would subject it
to
general service of process or to taxation as a foreign corporation. In each
state or jurisdiction where the Company shall qualify the Shares as above
provided, the Company will prepare and file such statements or reports as may
be
required by the laws of such state or jurisdiction, and the Underwriters shall,
upon the written request of the Company, supply the Company with all information
known to the Underwriters and required to be included in such statements or
reports.
(i) During
the period of two (2) years from the Effective Date, the Company, at its
expense, shall furnish the Underwriters with (i) copies of each annual report
of
the Company; (ii) by the date that such information is required to be filed
in
an annual report on Form 10-K (or Form 10-KSB) pursuant to the 1934 Act, a
financial report of the Company, which will include a balance sheet as of the
end of such fiscal year, a statement of operations, a statement of stockholders'
equity (deficit) and a statement of cash flows covering such fiscal year, such
report being in reasonable detail and audited by independent public auditors;
(iii) for each fiscal quarter of the Company other than the last fiscal quarter
in any fiscal year, by the date that such information is required to be filed
in
a quarterly report on Form 10-Q (or Form 10-QSB) pursuant to the 1934 Act,
a
financial report of the Company, which will include a balance sheet as of the
end of such fiscal quarter, a statement of operations, a statement of
stockholders' equity (deficit) and a statement of cash flows covering such
fiscal
-22-
quarter,
together with notes thereto, for such fiscal quarter and for the fiscal year
to
date, setting forth in each case in comparative form the corresponding figures
for the preceding year, such report being in reasonable detail and to fairly
present the financial condition of the Company at the date thereof and the
results of operations for the period then ending and to have been prepared
in
accordance with generally accepted accounting principles consistently applied,
except for normal year end adjustments; (iv) a copy of any Schedule 13D, 13G,
14D-1, 13E-3 or 13E-4 received or filed by the Company from time to time; (v)
a
copy of each report or document, including, without limitation, reports on
Form
8-K, 10-K (or 10-KSB), 10-Q (or 10-QSB) and exhibits thereto, filed or furnished
by the Company, pursuant to the 1934 Act, to the Commission, any securities
exchange or the NASD on the date each such report or document is so filed or
furnished; (v) quarterly shareholder lists prepared by the Company's transfer
agent; (vi) weekly reports prepared by DTC; and (vii) such additional
information concerning the business and financial condition of the Company
as
the Underwriters may from time to time reasonably request.
(j) For
a
period of three (3) years from the First Closing Date, the Company shall
continue to retain Stonefield ▇▇▇▇▇▇▇▇▇, Inc. (or a nationally recognized
accounting firm) as the Company’s independent certified public accountants. For
a period of two (2) years from the First Closing Date, the Company shall
promptly submit to the Underwriters copies of all accountants’ management
reports and similar correspondence between the Company and its independent
public accountants.
(k) For
a
period of five (5) years from the First Closing Date, or such shorter period
as
may be consented to by the Representative in writing, the Company, at its
expense, shall cause its then independent certified public accountants, as
described in Section 5(j) above, to review (but not audit) the Company’s
financial statements for each of the first three fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company’s
quarterly report on Form 10-Q (or other equivalent report) and any mailing
of
quarterly financial information to stockholders.
(l) As
soon
as practicable, but in any event not later than forty five (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 will make generally available
to its security holders (within the meaning of Section 11 (a) of the Act) an
earnings statement of the Company meeting the requirements of Rule 158(a) under
the Act covering a period of at least twelve (12) months beginning after the
Effective Date, and advise the Underwriters that such statement has been so
made
available.
(m) The
Company will apply the net proceeds (“Proceeds”) it realizes from the sale of
the Shares substantially in the manner set forth under the caption “Use of
Proceeds” in the Prospectus. For a period of two (2) years following the
Effective Date, the Company will provide the Underwriters with the report on
the
use of proceeds from the issuance of the Shares that is required to be included
in the Company’s quarterly reports on Form 10-Q (or Form 10-QSB) in accordance
with Rule 463 under the Securities Act.
-23-
(n) The
Company, on the First Closing Date, will sell to the Representative the
Representative’s Warrants according to the terms specified in Section 3(h)
hereof. The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon exercise of the
Representative’s Warrants; and (ii) the Representative shall be entitled to one
demand and customary “piggy-back” registration rights to register the Common
Stock underlying the Representative’s Warrants. Such demand and “piggy-back”
registration rights shall continue for a period of four and one-half years
and
seven years, respectively, from the Effective Date.
(o) For
the
period of three (3) years following the Effective Date, the Representative
and
its successors will have the right to designate an advisor (who need not be
the
same person for each meeting) to attend each meeting of the Board of Directors
of the Company and each meeting of any committee thereof and to participate
in
all discussions of each such meeting, to the extent permitted by applicable
law,
rule, regulation or ordinance of any state, federal or other regulatory
authority, including without limitation, the AMEX or any other stock exchange
or
market on which the Shares are listed; provided, however, that such advisor
shall enter into a written confidentiality and nondisclosure agreement with
the
Company in form and substance reasonably satisfactory to the Company and the
advisor. The Company reserves the right to exclude such advisor from any meeting
or portion thereof, and deny such access to any written material, if the Board
of Directors reasonably determines in good faith and upon advice of counsel
that
disclosure of any information or the content of any discussion to be undertaken
at such time (i) would inhibit the free discourse of the Board of Directors,
or
(ii) would result in the advisor obtaining information the disclosure of which
to a person who is not a director or officer of the Company would either (x)
violate applicable law or Company policy, (y) defeat the establishment of
attorney-client privilege, or (z) cause the Company to publicly disclose
information, the disclosure of which, the Board of Directors determines, in
its
good faith, to be detrimental to the Company. Such advisor shall be entitled
to
receive 50% of the cash compensation, and reimbursement of all reasonable
expenses, as the Company affords its directors who are not also officers or
employees of the Company and to receive all copies of all notices and other
documents distributed to the members of the Company’s Board of Directors
(including, but not limited to, any unanimous consents prepared and advance
notices of all proposed Board actions or consents), as if such advisor were
a
member of the Company’s Board of Directors. The Company agrees to indemnify and
hold such advisor harmless against any and all claims, actions, awards and
judgments arising out of his service and in the event the Company maintains
a
liability insurance policy affording coverage for the acts of its officers
and
directors, to use its best efforts to include such advisor as an insured under
such policy. The Company agrees to use its best efforts to obtain, as promptly
as practicable but in any event not later than thirty (30) days following the
Effective Date, such a liability insurance policy in an amount not less than
twenty-five (25%) of the gross proceeds of this offering. The rights and
benefits of such indemnification and the benefits of such insurance shall,
to
the extent possible, extend to the Representative in so far as it may be, or
be
alleged to be, responsible for such advisor. During such three (3) year period,
the Company will cause (i) its Board of Directors to meet, either in person
or
telephonically, at least four (4) times per year and (ii) its Board of Directors
to be comprised of independent directors in accordance with the rules and
regulations of the Commission and the AMEX or other principal market on which
the Common Stock is traded.
-24-
(p) For
a
period of three (3) years from the Effective Date, the Company agrees that
it
will maintain insurance in full force and effect of the types and in the amounts
which are customary for similarly situated companies, including but not limited
to, personal injury and product liability insurance and insurance covering
all
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against.
(q) During
the course of the distribution of the Shares, the Company will not and the
Company will cause its officers, directors and Principal Stockholders 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 the Shares. During the so-called “quiet period” in
which delivery of a Prospectus is required, if applicable, the Company will
not
issue press releases or engage in any other publicity without the
Representative’s prior written consent, which consent shall not be unreasonably
withheld.
(r) The
Company will use its best efforts, at its cost and expense, to take all
necessary and appropriate action to list the Shares on the AMEX and maintain
such listing for as long as the Shares are so qualified.
(s) In
the
event that the Company shall, within five (5) years of the Effective Date,
receive notice that its securities are no longer qualified for listing on the
AMEX, the Company shall prepare and file an application for listing on the
NASDAQ SmallCap Market, on the NASDAQ Electronic Bulletin Board, in Standard
& Poor’s Corporation Records Service (including annual report information)
or ▇▇▇▇▇’▇ Industrial Manual and shall use its best efforts to have the Company
listed in such manual and shall maintain such listing until the later of the
fifth anniversary of the Effective Date and three (3) years from the date on
which the Company’s securities are delisted from the AMEX.
(t) The
Company has filed with the Commission a registration statement on Form 8-A
and
will, concurrently with the Effective Date, register the class of equity
securities of which the Shares are a part under Section 12(b) or 12(g) of the
1934 Act. The Company will use its best efforts to maintain its registration
under the 1934 Act in effect for a period of five (5) years from the Effective
Date.
(u) The
Company agrees that the Company will promptly obtain and will maintain or cause
to be maintained in full force and effect for a period of three (3) years from
the Effective Date, from an insurer rated “A” or better (General Policyholders
Rating) in the most recent edition of “Best Life Reports,” term life insurance
in the amount of at least $1,000,000 on the life of each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Each such policy shall be owned by the Company and all
benefits thereunder shall be payable to the Company.
(v) On
the
Closing Dates, all transfer or other taxes (other than income taxes) which
are
required to be paid in connection with the sale and transfer of the Shares
will
have been fully paid by the Company and all laws imposing such taxes will have
been fully complied with.
-25-
(w) The
Company shall retain a transfer agent for the Shares, reasonably acceptable
to
the Representative, for a period of five (5) years from the Effective Date,
and
will not, during such period change its transfer agent for the Common Stock
without the prior written consent of the Representative. In addition, for a
period of two (2) years from the Effective Date, the Company, at its own
expense, shall cause such transfer agent to provide to the Underwriters on
a
monthly basis copies of the Company’s daily stock transfer sheets and shall
cause DTC to provide Representative on a daily basis a security position listing
with respect to the Company’s securities.
(x) Subsequent
to the dates as of which information is given in the Registration Statement
and
Prospectus and prior to the Closing Dates, except as disclosed in or
contemplated by the Registration Statement and Prospectus, (i) the Company
will
not have incurred any liabilities or obligations, direct or contingent, or
entered into any material transactions other than in the ordinary course of
business; (ii) there shall not have been any change in the capital stock, funded
debt (other than regular repayments of principal and interest on existing
indebtedness) or other securities of the Company (except as contemplated in
the
Registration Statement), any adverse change in the condition (financial or
other), business, operations, prospects, income, net worth or properties,
including any loss or damage to the properties of the Company (whether or not
such loss is insured against), which could reasonably be expected to have a
Material Adverse Effect; and (iii) the Company shall not have paid or declared
any dividend or other distribution on its Common Stock or its other securities
or redeemed or repurchased any of its Common Stock or other
securities.
(y) For
the
period of two (2) years following the Effective Date, the Company shall not
repurchase or redeem any of its securities, except for securities held by
departing employees or purchased by the Company in accordance with Rule 10b-18
under the 1934 Act; provided, however, that the amount of such purchases are
not
in excess of the amount of the Company's current or retained earnings derived
after the Effective Date to the date of such repurchase, and shall not pay
any
dividends or make any other cash distribution in respect of its securities
in
excess of the amount of the Company's current or retained earnings derived
after
the Effective Date without obtaining the Representative’s prior written consent
which shall not be unreasonably withheld; and provided, further, that all such
redemptions or distributions shall not be made without the prior approval of
a
majority of the Company’s independent directors. The Representative shall either
approve or disapprove such contemplated redemption of securities or dividend
payment or distribution within five (5) business days from the date it receives
written notice of the Company's proposal with respect thereto; a failure of
the
Representative to respond within the five (5) business day period shall be
deemed approval of the transaction.
(z) The
Company maintains and will continue to maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain asset accountability; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and
(iv) existing assets are verified at reasonable intervals and appropriate
action is taken with respect to any discrepancies.
-26-
(aa) The
Company will comply with all applicable securities and other applicable laws,
rules and regulations, including, without limitation, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
and
the rules and regulations promulgated therewith, and to use all commercially
reasonable efforts to cause the Company’s directors and officers, in their
capacities as such, to comply with such laws, rules and regulations, including,
without limitation, the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(bb) For
a
period of five (5) years from the First Closing Date, management of the Company
shall provide the Board of Directors, on an annual basis, with an internal
budget for the next fiscal year, which budget must be approved by the Board
of
Directors.
(cc) Prior
to
the Effective Date and for a period of three (3) years thereafter, the Company
shall retain a financial public relations firm reasonably acceptable to the
Representative.
(dd) The
Company shall not publicly disparage the Underwriters or their employees or
make
any negative statements concerning or related to the offering of the Firm Shares
or the Option Shares at any time; provided that this limitation will not apply
to any statements or information required to be disclosed pursuant to any
statutes, laws, regulations or orders of any governmental body or in the context
of any legal proceedings involving the Company.
(ee) Except
as
set forth under the caption “Use of Proceeds” in the Prospectus or otherwise
consented to in writing by the Representative, no proceeds from the sale of
the
Shares will be used to pay outstanding loans from officers, directors or
shareholders or to pay any accrued salaries or accrued bonuses to any current
or
former employees or consultants or any affiliates thereof or to pay off any
other outstanding debt other than as described in the Prospectus.
(ff) For
a
period of five (5) years from the Effective Date, the Company shall not issue
any shares of Preferred Stock without the prior approval of the majority of
the
Company’s independent directors.
(gg) For
a
period of two (2) years from the Effective Date, the Company will not offer
or
sell any of its securities (i) pursuant to Regulation S, or similar regulations
governing offshore securities distributions, promulgated under the Act, or
(ii)
at a discount to market or in a discounted transaction or with a variable or
adjustable price or a price subject to reset, without the prior written consent
of the Underwriters and the approval of the majority of the Company’s
independent directors, other than the issuance of Common Stock upon exercise
of
(I) options and warrants outstanding on the First Closing Date and described
in
the Prospectus or (II) options and warrants (each having an exercise price
not
less than fair market value per share on the date of grant or issuance) granted
or issued after the First Closing Date.
(hh) The
Company agrees that for so long as the Common Stock is registered under the
1934
Act, the Company will hold an annual meeting of stockholders for the election
of
directors and will provide the Company’s stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by applicable rules
under the 1934 Act and shall be included in an annual report pursuant to the
requirements thereof.
-27-
(ii) The
Company will not, for a period of three (3) years from the Effective Date of
the
Registration Statement, increase or authorize an increase in the compensation
of
its five (5) most highly paid employees greater than those increases provided
for in their employment agreements with the Company in effect as of the
Effective Date and disclosed in the Registration Statement, without the prior
consent of a majority of the independent directors on the compensation committee
of the Board of Directors of the Company (which committee must satisfy all
requirements of the Commission and AMEX or other principal market on which
the
Common Stock is then traded).
(jj) With
respect to any securities underlying any option issued by the Company or to
be
issued by the Company pursuant to any equity incentive plan, the Company agrees
to require the holder of such option to comply with the transfer restrictions
with respect to any securities issued upon the exercise of any such option
in
accordance with the terms of the Lock-Up Letter Agreement set forth in Exhibit
A
attached hereto.
| B. |
The
Selling Stockholder covenants and agrees with the Underwriters to:
|
(a) Deliver
to the Representative prior to the First Closing Date, a properly completed
and
executed United States Treasury Department Form W-8 (if the Selling Stockholder
is a non-United States Person) or Form W-9 (if the Selling Stockholder is a
United States Person);
(b) Promptly
notify the Company and the Representative if, at any time prior to the date
on
which the distribution of the Shares as contemplated herein and in the
Prospectus has been completed, as determined by the Representative, the Selling
Stockholder has knowledge of the occurrence of any event as a result of which
the Prospectus or the Registration Statement, in each case as then amended
or
supplemented, would include an untrue statement of a material fact or omit
to
state any material fact necessary to make the statements therein, in light
of
the circumstances under which they were made, not misleading;
(c) Cooperate
to the extent necessary to cause the Registration Statement or any
post-effective amendment thereto to become effective at the earliest possible
time;
(d) Pay
or to
cause to be paid all transfer taxes, stamp duties and other similar taxes with
respect to the Shares, if any, to be sold by the Selling Stockholder;
(e) Deliver
on or prior to the date of this Agreement a Lock-Up Letter Agreement in the
form
referenced in Section 8(m) hereof; and
(f) During
the course of the distribution of the Shares, not 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 the
Shares.
-28-
6. Indemnity
and Contribution by the Company and the Underwriters.
(a) The
Company shall indemnify, defend and hold harmless the Underwriters and any
person who controls either of the Underwriters within the meaning of Section
15
of the Act or Section 20 of the 1934 Act, from and against any loss, expense,
liability, damage or claim (including the reasonable cost of investigation)
which the Underwriters or any such controlling person may incur under the Act,
the 1934 Act or otherwise, insofar as such loss, expense, liability, damage
or
claim arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact, in light of the circumstances in which they were
or are made, contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the Company)
or
the Prospectus (the term Prospectus for the purpose of this Section 6 being
deemed to include any Preliminary Prospectus, the Prospectus and any Prospectus
supplements, in each case as amended or supplemented by the Company), (ii)
any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf
of
the Company filed in any jurisdiction (domestic or foreign) in order to qualify
the Shares under the securities or “blue sky” laws thereof or filed with the
Commission or any securities association or securities exchange (each an
“Application”), or (iii) any omission or alleged omission to state a material
fact required to be stated in any such Registration Statement, Prospectus or
Application or necessary to make the statements made therein, in the light
of
the circumstances under which they were or are made, not misleading; except
to
the extent that any such loss, expense, liability, damage or claim arises out
of
or is based upon any such untrue statement or omission of a material fact
contained in and in conformity with information furnished in writing by or
on
behalf of the Underwriters to the Company expressly for use in such Registration
Statement or such Prospectus as specified in the last sentence Section 6(c)
hereof; provided, however, that the indemnity agreement contained in this
subsection (a) with respect to the Preliminary Prospectus or Prospectus shall
not inure to the benefit of the Underwriters (or to the benefit of any person
controlling the Underwriters) with respect to any person asserting any such
loss, expense, liability, damage or claim which is the subject thereof if copies
of the Prospectus were timely delivered to the Underwriters and a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf
of
the Underwriters to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, expense, liability, damage or
claim.
(b) The
Selling Stockholder shall indemnify and hold harmless each of the Underwriters
and each person, if any, who controls any of the Underwriters within the meaning
of Section 15 of the Securities Act or Section 20 of the 1934 Act, against
any
and all losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to reasonable attorneys' fees and other expenses
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim, and any and all amounts paid in
settlement of any claim or litigation in accordance with the terms of this
Agreement), joint or several, to which they or any of them may become subject
under the Act, the 1934 Act or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of or
are
based upon (i) any untrue statement or alleged untrue statement of a material
fact relating to the Selling Stockholder contained in the Registration
Statement, as originally filed or any amendment thereof, or any related
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
-29-
omission
to state therein a material fact required to be stated therein or necessary
to
make the statements therein not misleading or (ii) any action taken by a Selling
Stockholder in connection with the offering and sale of the Selling Stockholder
Shares; provided, however, that the indemnity agreement contained in this
subsection (a) with respect to the Preliminary Prospectus or Prospectus shall
not inure to the benefit of the Underwriters (or to the benefit of any person
controlling the Underwriters) with respect to any person asserting any such
loss, expense, liability, damage or claim which is the subject thereof if copies
of the Prospectus were timely delivered to the Underwriters and a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf
of
the Underwriters to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, expense, liability, damage or
claim.
(c) Each
of
the Underwriters shall, severally and jointly, indemnify, defend and hold
harmless the Company and the Company’s directors, officers, employees and agents
and the Selling Stockholder and each person who controls the Company or the
Selling Stockholder within the meaning of Section 15 of the Act or Section
20 of
the 1934 Act from and against any loss, expense, liability, damage or claim
(including the reasonable cost of investigation) which, jointly or severally,
the Company or any such person and the Selling Stockholder may incur under
the
Act, the 1934 Act or otherwise, but only insofar as such loss, expense,
liability, damage or claim arises out of or is based upon (i) any untrue
statement statement of a material fact contained in the Registration Statement
(or in the Registration Statement as amended by any post-effective amendment
thereof by the Company) or the Prospectus in reliance upon and in conformity
with information furnished in writing by such Underwriter to the Company and
the
Selling Stockholder expressly for use in the Registration Statement (or in
the
Registration Statement as amended by any post-effective amendment thereof by
the
Company) or the Prospectus, as specified in the last sentence of this Section
6(c), or (ii) any omission to state a material fact regarding such Underwriter
required to be stated in such Registration Statement or the Prospectus or
necessary to make such statement, in light of the circumstances under which
it
was made, not misleading. The obligation of each of the Underwriters to
indemnify the Company (including any director, officer, employee, agent or
control person thereof) and the Selling Stockholder shall only relate to any
untrue statement or omission which applies to the Underwriter. The Company
and
the Underwriters acknowledge that the information set forth (x) on the cover
page of the Prospectus concerning the Underwriters, relating to the delivery
of
the Shares and (y) under the caption “Underwriting” in the Prospectus with
respect to concessions and reallowanced passive market and stabilization
activities by the Underwriter constitute the only information furnished by
or on
behalf of the Underwriters to the Company for purposes of this Section 6.
(d) Promptly
after receipt by an indemnified party under subsection, (a), (b) or (c) above
of
notice of any claims or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify in writing each party against whom
indemnification is to be sought of the claim or the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve the
indemnifying party from any liability which it may have under this Section
6 to
the extent that it is not materially prejudiced as a result thereof and in
any
event shall not relieve it from any liability that such
-30-
indemnifying
party may have otherwise than on account of the indemnity agreement hereunder).
In case any such claim or action is brought against any indemnified party,
and
it notifies an indemnifying party of the commencement thereof, an indemnifying
party may participate in the defense of such action at its own expense, 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,
the
indemnifying party may assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, that counsel to
the
indemnifying party shall not (except with the written consent of the indemnified
party) also be counsel to the 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 one of the indemnifying
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed satisfactory counsel to have charge of the
defense of such action within a reasonable time after notice of commencement
of
the action, (iii) the indemnifying party does not diligently defend the action
after assumption of the defense, or (iv) 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 fees and expenses of one counsel selected
by all of the indemnified parties to represent them all (in addition to one
local counsel selected by all of the indemnified parties to represent them
all
in each applicable jurisdiction) shall be borne by the indemnifying parties.
No
indemnifying party shall, without the prior written consent of the indemnified
parties, which consent shall not be unreasonably withheld, effect any settlement
or compromise of, or consent to the entry of judgment with respect to, any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could have been sought under this Section 6
(whether or not the indemnified parties are actual or potential parties
thereto), unless (x) such settlement, compromise or consent (I) includes an
unconditional release of the indemnified party from all liability arising out
of
such litigation, investigation, proceeding or claim and (II) does not include
a
statement as to, or an admission of, fault, culpability or a failure to act,
by
or on behalf of the indemnified party and (y) the indemnifying party reaffirms
its indemnification obligations pursuant to this Agreement. For purposes of
this
Section 6(d), it shall be deemed unreasonable for an indemnified party to
withhold consent to settlement if the conditions in subsections 6(d)(x) and
6(d)(y) are satisfied.
(e) If
the
indemnification provided for in this Section 6 is unavailable to an indemnified
party under subsections (a), (b) and (c) of this Section 6 in respect of any
losses, expenses, liabilities, damages or claims referred to therein, then
each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as
a
result of such losses, expenses, liabilities, damages or claims (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if (but only if) the allocation provided by clause (i)
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 the Company on the one hand and the Underwriters
on
the other with
-31-
respect
to the statements or omissions which resulted in such losses, expenses,
liabilities, damages or claims, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other with respect to such offering shall be deemed
to be in the same proportion as the total proceeds (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
from the Shares sold under this Agreement, on the one hand, and the total
underwriting discounts and commissions received by the Underwriters with respect
to the Shares purchased under this Agreement, on the other hand, bear to the
total gross proceeds from the offering of the Shares under this Agreement,
in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company on the one hand and the Underwriters on the other
shall be determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission relates to information supplied by the Company or by the Underwriters,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other
fees
or expenses reasonably incurred by such party in connection with investigating
or defending any claim or action.
(f) The
Company, the Selling Stockholder and the Underwriters agree that it would not
be
just and equitable if contribution pursuant to this Section 6(e) were determined
by pro rata allocation or by any other method of allocation which does not
take
account of the equitable considerations referred to in Section 6(e)(i) and,
if
applicable Section 6(e)(ii), above. Notwithstanding the provisions of this
Section 6, (i) none of the Underwriters shall be required to contribute any
amount in excess of the underwriting discounts and commissions applicable to
the
Shares purchased by the Underwriters and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. Survival
of Agreements etc.
All
statements contained in any schedule, exhibit or other instrument delivered
by
or on behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf
of
the parties to this Agreement, all representations, warranties, indemnities
and
agreements made by the parties to this Agreement or pursuant hereto shall remain
in full force and effect and will survive delivery of and the payment for the
Shares. The provisions of Sections 6, 10, 11 and 15 shall survive the
termination or cancellation of this Agreement.
8. Conditions
of Underwriters’ Obligations.
The
several obligations of the Underwriters to purchase and pay for the Firm Shares
and the Option Shares, as provided herein, will be subject to the following
conditions:
(a) (i)
The
Registration Statement shall have become effective not later than 10:00 a.m.,
New York City time, on the day following execution of this Agreement, or at
such
later time or on such later date as shall be consented to in writing by the
Representative; provided, if the Company shall have elected to rely upon Rule
430A of the Rules and Regulations, (A) the Registration Statement shall have
been filed with the Commission in a timely fashion in accordance with Section
5(A)(a) hereof; (B) a form of the Prospectus containing
-32-
information
relating to 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 filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations within the prescribed time period; and (C) prior to the First
Closing Date, the Company shall have provided evidence satisfactory to the
Underwriters of such timely filing, or a post-effective amendment providing
such
information shall have been promptly filed and declared effective in accordance
with the requirements of Rule 430A of the Rules and Regulations; and (ii) prior
to the First Closing Date or any Option Closing Date, no stop order suspending
the effectiveness of the Registration Statement or any post-effective amendment
thereof shall have been issued and no proceeding for that purpose shall have
been initiated or be pending or, to the Knowledge of the Company or the
Underwriters, threatened by the Commission or under the securities laws of
any
state.
(b) No
amendment to the Registration Statement, any Preliminary Prospectus or the
Prospectus to which the Underwriters or the Underwriters’ Counsel shall have
reasonably objected, after having received reasonable notice of a proposal
to
file the same, shall have been filed.
(c) The
Underwriters shall not have discovered and disclosed to the Company prior to
the
respective Closing Dates that the Registration Statement or the Prospectus,
or
any amendment or supplement thereto, contains an untrue statement of fact which,
in the reasonable opinion of the Underwriters’ Counsel, is material, or omits to
state a fact which, in the opinion of such counsel, is material and is required
to be stated therein or is necessary to make the statements therein not
misleading.
(d) The
Underwriters shall have received from Stonefield ▇▇▇▇▇▇▇▇▇, Inc., two signed
certificates or letters, one dated and delivered on the Effective Date and
one
dated and delivered on the First Closing Date, in form and substance
satisfactory to the Underwriters, stating that:
(i) they
are
an independent registered public accounting firm with respect to the Company
within the meaning of the Act and the Rules and Regulations;
(ii) the
financial statements included in the Registration Statement and the Prospectus
were examined by them and, in their opinion, comply as to form in all material
respects with the applicable requirements of the Act, the Rules and Regulations
and instructions of the Commission with respect to Registration Statements
on
Form SB-2 and that the Underwriters may rely upon the opinion of such firm
with
respect to the financial statements and supporting schedules included in the
Registration Statement;
(iii) on
the
basis of inquiries and procedures conducted by them (not constituting an
examination in accordance with generally accepted auditing standards), including
a reading of the latest available unaudited interim financial statements or
other financial information of the Company (with an indication of the date
of
the latest available unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for financial and accounting
matters, reviews of minutes of all meetings of the shareholders, the Board
of
Directors and any committees of the Board of Directors of the Company, as set
forth in the minute books of the Company, and other specified inquiries and
procedures, nothing has come to their attention as a result of the foregoing
inquiries and procedures that causes them to believe that:
-33-
(A) during
the period from the date of the latest financial statements of the Company
appearing in the Registration Statement and Prospectus to a specified date
not
more than three (3) business days prior to the date of such letter, there has
been any decreases in net current assets or net assets, change in the Common
Stock or other securities of the Company (except as specifically disclosed
in
such certificates or letters), any decreases in shareholders equity or working
capital or any increases in net current liabilities, net liabilities or
long-term debt, in each case as compared with amounts shown in such financial
statements; and any decrease in revenues or in the total or per share amounts
of
income before extraordinary items or net income or loss, or any other material
change in each case as compared with the corresponding period in the preceding
year, except in each case for increases, changes or decreases which the
Prospectus discloses have occurred or will or may occur; and
(B) the
unaudited interim financial statements of the Company, if any, appearing in
the
Registration Statement and the Prospectus, 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 and practices on a basis substantially consistent with
the
audited financial statements included in the Registration Statement or the
Prospectus.
(iv) On
the
basis of certain procedures specified by the Underwriters and described in
their
letter, they have compared specific dollar amounts, numbers of shares and other
information (to the extent they are contained in or derived from the accounting
records of the Company, and excluding any questions of legal interpretations)
included in the Registration Statement and Prospectus with the accounting
records and other appropriate data of the Company and have found them to be
in
agreement.
(e) At
the
First Closing Date, the Underwriters shall have received from ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇ LLP, counsel for the Company (“Company Counsel”), a signed opinion dated
as the First Closing Date, reasonably satisfactory to the Underwriters’ Counsel,
in the form and substance of Exhibit B annexed hereto.
(f) At
the
First Closing Date, the Underwriters shall have received from
____________________ patent and trademark counsel for the Company (“IP Company
Counsel”), a signed opinion dated as the First Closing Date, reasonably
satisfactory to the Underwriters’ Counsel, in the form and substance of Exhibit
C annexed hereto.
(g) At
the
First Closing Date, the Underwriters shall have received from [
],
counsel
for the Selling Stockholder (“Selling Stockholder Counsel”), a signed opinion
dated as the First Closing Date, reasonably satisfactory to the Underwriters’
Counsel, in the form and substance of Exhibit D annexed hereto.
-34-
(h) The
Underwriters shall have received a certificate, dated and delivered as of the
First Closing Date, of the Chief Executive Officer and President of the Company
stating that:
(i) The
Company has complied with all the agreements and satisfied all the conditions
to
be performed or satisfied by it hereunder at or prior to such date, including
but not limited to the agreements and covenants of the Company set forth in
Section 5 hereof.
(i) No
stop
order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or are pending
or threatened under the Act.
(ii) Such
officer has carefully examined the Registration Statement and the Prospectus
and
any supplement or amendment thereto, each of which contains all statements
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances in which they were made, not misleading, and does
not
contain any untrue statement of a material fact, and since the Effective Date
there has occurred no event required to be set forth in the amended or
supplemented Prospectus which has not been set forth.
(iii) As
of the
date of such certificate, the representations and warranties contained in
Section 1 hereof are true, complete and correct as if such representations
and
warranties were made in their entirety on the date of such certificate, and
the
Company has complied with all its agreements herein contained as of the date
hereof and certifying as to the matters referred to in Sections 8(i) and 8(j).
(iv) Subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus and the Company’s latest financial statements filed
with the Commission as a part thereof, and except as described in the
Registration Statement and the Prospectus, (i) the Company has not incurred
any
material liability or obligation, direct or contingent, or entered into any
material transactions whether or not incurred in the ordinary course of
business; (ii) the Company has not sustained any material loss or interference
with its business from fire, storm, explosion, flood or other casualty (whether
or not such loss is insured against), or from any labor dispute or court or
governmental action, order or decree; (iii) there have not been any changes
in
the capital stock or any material increases in the long-term debt or other
securities of the Company; (iv) the Company has not paid or declared any
dividend or other distribution on its Common Stock or its other securities
or
redeemed or repurchased any of its Common Stock or other securities, and (v)
no
adverse change in the condition (financial or otherwise), results of operations,
income, shareholders’ equity, net worth, business, assets or properties of the
Company has occurred, which could reasonably be expected to result in a Material
Adverse Effect as defined in Section 1(d).
(v) No
officer or director of the Company, or any affiliate (as such term is defined
in
Rule 405 promulgated under the Rules and Regulations) of any such officer or
director, has taken, and each officer or director has agreed that he will not
take, directly or indirectly, any action designed to constitute or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company or
other violation of Regulation M promulgated under the 1934 Act or otherwise
to
facilitate the sale or resale of the Shares.
-35-
(vi) Except
as
described in the Registration Statement and the Prospectus no action, suit
or
proceeding, at law or in equity shall be pending or, to the Knowledge of the
Company, threatened in writing against the Company before or by any commission,
board or other administrative agency, which (A) may result in the imposition
of
damages or penalties against, or payments by, the Company in excess of $25,000
or (B) could reasonably be expected to result in a Material Adverse
Effect.
(vii) The
Company is the sole owner of all intellectual property and proprietary
information described in the Registration Statement and Prospectus.
(i) Subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company
has not been advised by any regulatory authority that its products may not
be
used for the purposes described in the Registration Statement and Prospectus
nor
has the Company been advised by any customer or any potentially significant
customer that it will not utilize the Company’s products as described in the
Registration Statement and Prospectus as a result of issues or concerns with
the
management or personnel of the Company or the quality, performance or pricing
of
the Company’s products.
(j) On
the
First Closing Date, the Company shall not be a party to, or be involved in,
any
arbitration, litigation or governmental proceeding (except as set forth in
the
Registration Statement), which is then pending, or, to the Knowledge of the
Company, threatened of a character which could reasonably be expected to result
in a Material Adverse Effect or which is required to be disclosed in the
Registration Statement and Prospectus and is not so disclosed.
(k) Subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company shall not have sustained any loss
on
account of fire, flood, accident, or other calamity, whether or not covered
by
insurance, which, in the reasonable judgment of the Representative adversely
affects the Business.
(l) All
of
the certificates representing the Shares, including the Selling Stockholder
Shares, shall have been tendered for delivery in accordance with the terms
and
provisions of this Agreement.
(m) The
Representative shall have received the Lock-Up Letter Agreements referred to
in
paragraph (y) of Section 1 hereof.
(n) On
the
Effective Date, the First Closing Date and the Option Closing Date, if any,
(i)
each of the representations and warranties of the Company contained in this
Agreement shall be (A) true and correct in all respects, to the extent that
said
representation or warranty is herein qualified by a Material Adverse Effect
requirement or otherwise subject to a ‘materiality’ qualifier (“Materiality
Qualifier”), or (B) true and correct in all material respects, to the
extent that said representation or warranty is not herein qualified by a
Material Adverse Effect requirement or otherwise subject to a Materiality
Qualifier, with the same effect as if made on and as of each of the Effective
Date, the First Closing Date and the Option Closing Date, if any; (ii) the
Company shall have complied in all material respects with all agreements of
the
-36-
Company
herein, provided, however, that notwithstanding the foregoing Materiality
Qualifier, such compliance shall be unqualified to the extent that any said
agreement is already subject to a Materiality Qualifier in accordance with
its
terms; (iii) the Company shall have performed in all material respects all
of
its obligations due to be performed prior thereto, provided, however, that
notwithstanding the foregoing Materiality Qualifier, such performance shall
be
unqualified to the extent that any said obligation is already subject to a
Materiality Qualifier in accordance with its terms; (iv) the Registration
Statement, the final Prospectus when it is filed with the Commission, and both
documents as of the First Closing Date and any Option Closing Date referred
to
below, will contain all statements which are required to be stated therein
in
accordance with the Act and the Rules and Regulations and will conform in all
material respects to the applicable requirements of the Act and the Rules and
Regulations, and at such times, 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 in which they were made, not misleading, except that this
condition shall not apply to statements or omissions in the Registration
Statement or Prospectus made in reliance upon and in conformity with information
described in Section 3(i) above and furnished herein or in writing to the
Company by or on behalf of the Underwriters for inclusion in the Registration
Statement or the Prospectus; (v) there shall have been, since the date as of
which information is given, no material adverse change in the condition,
business, operations, properties, business prospects, securities, long-term
or
short-term debt or general affairs of the Company which could reasonably be
expected to result in a Material Adverse Effect, except as described in the
Registration Statement and the Prospectus, and the Company shall not have
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transaction, contract or agreement not in the ordinary
course of business other than as referred to in the Registration Statement
and
the Prospectus which could reasonably be expected to result in a Material
Adverse Effect; and (vi) except as set forth in the Registration Statement
and
Prospectus, no action, suit or proceeding, at law or in equity, shall be pending
or, to the Knowledge of the Company, threatened against the Company which is
required to be set forth in the Registration Statement, and no proceedings
shall
be pending or, to the Knowledge of the Company, threatened against the Company
before or by any commission, board or administrative agency in the United States
or elsewhere, wherein an unfavorable decision, ruling or finding could
reasonably be expected to result in a Material Adverse Effect.
(o) The
NASD
shall have indicated that it has no objection to the underwriting arrangements
pertaining to the sale of the Shares by the Underwriters.
(p) No
action
shall have been taken by the Commission or the NASD the effect of which would
make it improper, at any time prior to the Closing Date or the Option Closing
Date, as the case may be, for any member firm of the NASD to execute
transactions (as principal or as agent) in the Shares, and no proceedings for
the purpose of taking such action shall have been instituted or shall be
pending, or, to the knowledge of the Underwriters or the Knowledge of the
Company, shall be contemplated by the Commission or the NASD.
(q) The
Company shall meet the criteria for inclusion for listing of the Shares on
the
AMEX.
-37-
(r) All
proceedings taken at or prior to the First Closing Date or the Option Closing
Date, as the case may be, in connection with the authorization, issuance and
sale of the Shares shall be reasonably satisfactory in form and substance to
the
Underwriters and to Underwriters’ Counsel, and such counsel shall have been
furnished with all such documents, certificates and opinions as they may
reasonably request for the purpose of enabling them to pass upon the matters
referred to in this Section 8 and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company, or the compliance
by
the Company with any of the conditions herein contained.
(s) The
Company shall have issued the Representative’s Warrants in accordance with
Section 3(h) hereof.
(t) Upon
exercise of the option provided for in Section 3(c) hereof, the obligations
of
the Underwriters to purchase and pay for the Option Shares will be subject
to
the following additional conditions:
(i) The
Registration Statement shall remain effective at the Option Closing Date, and
no
stop order suspending the effectiveness thereof shall have been issued and
no
proceedings for that purpose shall have been instituted or shall be pending,
or,
to the knowledge of the Underwriters or the Company, shall be contemplated
by
the Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
the
Underwriters’ Counsel.
(ii) At
the
Option Closing Date there shall have been delivered to the Underwriters the
signed opinions of Company Counsel, Selling Stockholder Counsel and IP Company
Counsel, respectively, in form and substance reasonably satisfactory to the
Underwriters’ Counsel, which opinions shall be substantially the same in scope
and substance as the opinions furnished to the Underwriters by Company Counsel,
Selling Stockholder Counsel and IP Company Counsel at the First Closing Date
pursuant to Sections 8(e) and 8(f), respectively.
(iii) At
the
Option Closing Date, there shall have been delivered to the Underwriters a
certificate of the Chief Executive Officer and the Secretary of the Company
dated the Option Closing Date, in form and substance satisfactory to the
Underwriters’ Counsel, substantially the same in scope and substance as the
certificates furnished to the Underwriters at the First Closing Date pursuant
to
Section 8(g).
(iv) At
the
Option Closing Date there shall have been delivered to the Underwriters a
certificate or letter in form and substance reasonably satisfactory to the
Underwriters from Stonefield ▇▇▇▇▇▇▇▇▇, Inc. dated the Option Closing Date
and
addressed to the Underwriters, confirming the information in its certificate
or
letter referred to in Section 8(d) hereof and stating that nothing has come
to
their attention during the period from the ending date of their review referred
to in said certificate or letter to a date not more than three (3) business
days
prior to the Option Closing Date which would require any change in said
certificate or letter if it were required to be dated the Option Closing Date.
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(v) All
proceedings taken at or prior to the Option Closing Date in connection with
the
sale and transfer of the Option Shares shall be reasonably satisfactory in
form
and substance to the Underwriters, and the Underwriters and the Underwriters’
Counsel shall have been furnished with all such documents, certificates,
affidavits and opinions as the Underwriters and the Underwriters’ Counsel may
reasonably request in connection with this transaction in order to evidence
the
accuracy and completeness of any of the representations, warranties or
statements of the Company or its compliance with any of the covenants or
conditions contained herein.
The
opinions and certificates mentioned above or elsewhere in this Agreement will
be
deemed to be in compliance with the provisions hereof only if they are
reasonably satisfactory to the Underwriters and to the Underwriters’ Counsel.
Any
certificate signed by an officer of the Company delivered to the Underwriters
or
to the Underwriters’ Counsel, will be deemed a representation and warranty by
the Company to the Underwriters as to the statements made therein.
9. Effective
Date.
This
Agreement will become effective upon the later of when (i) the Underwriters
and the Company shall have received notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement.
10. Termination.
The
Representative shall have the right by written notice to the Company (which
may
be delivered electronically through email or facsimile) to terminate this
Agreement at any time prior to the First Closing Date or the obligations of
the
Underwriters to purchase the Option Shares at any time prior to the Option
Closing Date, as the case may be, if (i) the Company shall have failed or
refused to fully perform or comply with any of the provisions of this Agreement
on its part to be performed and complied with by it prior to the applicable
Closing Date, (ii) any of the conditions of Underwriters’ obligations as set
forth in Section 8 herein shall not have been satisfied on or prior
to____________, 2005; (iii) trading in securities generally on the New York
Stock Exchange or the AMEX will have been suspended; (iv) minimum or maximum
prices will have been established on either such exchange by the Commission
or
the NASD; (v) a general banking moratorium will have been declared either by
federal or New York State authorities; (vi) any other restrictions on
transactions in securities materially affecting the free market for securities
or the payment for such securities or adversely affecting the distribution
of
the Firm Shares or the Option Shares, as the case may be, will be established
by
either of such exchanges, by the Commission, by any other federal or state
agency, by action of the Congress or by Executive Order; (vii) the Company
will
have sustained a material loss, whether or not insured, by reason of fire,
flood, accident or other calamity of such character as in the reasonable
judgment of the Representative may interfere materially with the conduct of
the
Business and operations of the Company or make it impracticable to proceed
with
the offering, sale and delivery of the Firm Shares or the Option Shares, as
the
case may be, on the terms contemplated by the Prospectus; (viii) any action
has
been taken by the Government of the United States or any department or agency
thereof which, in the sole judgment of the Representative, has had a material
adverse effect upon the general market for securities and has made it
impracticable to proceed with the offering, sale and delivery of the Firm Shares
or the Option Shares, as the case may be, on the terms set forth in the
Prospectus; (ix) there shall have occurred the outbreak of any war or any other
event or calamity, including without limitation as a result of
-39-
terrorist
activities,
which,
in the sole judgment of the Representative, materially disrupts the financial
markets of the United States and makes it impracticable to proceed with the
offering, sale and delivery of the Firm Shares or the Option Shares, as the
case
may be, on the terms set forth in the Prospectus; (x) the general market for
securities or political, legal or financial conditions should deteriorate so
materially from that in effect on the date of this Agreement that, in the sole
judgment of the Representative, it becomes impracticable for the Underwriters
to
commence or proceed with the public offering of the Shares and with the payment
for or acceptance thereof; (xi) if trading of any securities of the Company
shall have been suspended, halted or delisted on any exchange or in any
over-the- counter market or by the Commission; or (xii) any change that could
reasonably be expected to result in a Material Adverse Effect shall have
occurred in the sole judgment of the Representative, since the date as of which
information is given in the Registration Statement and the Prospectus.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement, and whether or not this
Agreement is otherwise carried out, the provisions of Sections 6, 10, 11 and
15
shall not be in any way affected by such election or termination or failure
to
carry out the terms of this Agreement or any part hereof.
11. Expenses.
(a) Whether
or not the offering of the Shares is consummated, the Company will pay all
costs
and expenses incident to the performance of the obligations of the Company
hereunder, including without limiting the generality of the foregoing, (i)
the
preparation, printing, filing with the Commission, and copying of the
Registration Statement, each Preliminary Prospectus, Prospectus, this Agreement
and other underwriting documents, if any, and any drafts, amendments or
supplements thereto, including the cost of all copies thereof supplied to the
Underwriters in such quantities as reasonably requested by the Underwriters
and
the costs of mailing Prospectuses to offerees and purchasers of the Shares;
(ii)
the printing, engraving, issuance and delivery of certificates representing
the
Shares and Representative’s Warrants, including any transfer or other taxes
payable thereon; (iii) the reasonable fees, expenses and other costs related
to
the registration or qualification of the Shares under state securities or “blue
sky” laws, in accordance with the provisions of Section 11(c) below; (iv) the
reasonable fees, costs and disbursements of Underwriters’ Counsel in connection
with the review and analysis of certain “blue sky” matters related to the
offering; (v) all reasonable fees and expenses of the Company’s counsel and
accountants; (vi) all NASD and AMEX filing fees, costs and expenses incurred
in
connection with the offering and all fees and disbursements of Underwriters’
Counsel in connection with obtaining clearance of the offering with the NASD
or
AMEX; (vii) all costs and expenses of any listing of the Shares on the AMEX
or
any other stock exchange or over-the-counter market, or in Standard and Poor’s
Corporation Reports or any other securities manuals; (viii) all costs and
expenses of four (4) bound volume provided to the Underwriters and Underwriters’
Counsel of all documents, paper exhibits, correspondence and records forming
the
materials included in the offering; (ix) the cost of “tombstone” advertisements
to be placed in one or more daily or weekly periodicals as the Representative
may request; (x) travel expenses of the Company in connection with the “road
show” presentations; and (xi) all other costs and expenses incident to the
performance of the Company’s obligations hereunder which are not otherwise
specifically provided for in this Section 11(a). The obligations of the Company
under this subsection (a) shall survive any termination or cancellation of
this
Agreement.
-40-
(b) In
addition to the Company’s responsibility for payment of the foregoing expenses,
the Company shall pay to Shemano a non-accountable expense allowance equal
to
three percent (3%) of the gross proceeds of the offering of the Shares,
including in such amount the proceeds from any exercise of the Underwriters’
over-allotment option. The non-accountable expense allowance due shall be paid
at the First Closing Date and any Option Closing Date, as applicable. Shemano
hereby acknowledges prior receipt from the Company of Fifty Thousand Dollars
($50,000), which amount shall be applied to the non-accountable expense
allowance due when, and if, such offering is closed. If the sale of the Shares
provided for herein is not consummated because the Underwriters elect to
terminate this Agreement in accordance with clauses (i) or (ii) Section 10
hereof, then the Company shall reimburse the Underwriters in full for their
actual accountable out-of-pocket expenses incurred in connection with the
proposed purchase and sale of the Shares (including, without limitation, the
fees and disbursements of its counsel) inclusive of the Fifty Thousand Dollars
($50,000) previously paid on account. Notwithstanding the foregoing, in the
event the offering is terminated, each Underwriter will not be entitled to
retain or receive more than an amount equal to its actual accountable
out-of-pocket expenses and shall reimburse the Company for the remainder, if
any. The Underwriters hereby acknowledge and agree that their expenses in
connection with the “road show” presentations shall be paid from the
non-accountable expense allowance.
(c) The
Representative shall determine in which states or jurisdictions the Shares
shall
be registered or qualified for sale.
12. Notices.
Any
notice hereunder shall be in writing, unless otherwise expressly provided
herein, and if to the respective persons indicated, will be sufficient if mailed
by certified mail, return receipt requested, postage prepaid, delivered by
national overnight courier service or hand delivered, addressed as respectively
indicated or to such other address as will be indicated by a written notice
similarly given, to the following persons:
(a) If
to the
Underwriters - addressed to each of The Shemano Group; ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ___________, and ▇▇▇▇▇▇▇▇ Curhan
Ford
& Co.; ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇
▇▇▇▇▇, Vice President, with a copy to Blank Rome LLP, The Chrysler Building,
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.; provided, however, that such copy to Blank Rome LLP
shall not constitute notice delivered to the Underwriters.
(b) If
to the
Company - addressed to National Lampoon, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief
Executive Officer, with a copy to ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
Esq.; provided, however, that such copy to ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP shall not
constitute notice delivered to the Company.
(c) If
to the
Selling Stockholder - addressed to the Custodian, _________________, Attention:
] with a copy to [________________,
Attention: _______ ];
provided, however, that such copy to [ ]
shall
not constitute notice delivered to the Selling Stockholder.
-41-
Notice
shall be deemed delivered upon receipt.
13. Successors.
This
Agreement will inure to the benefit of and be binding upon the Underwriters,
the
Company and the Selling Stockholder and their respective successors and assigns.
Nothing expressed or mentioned in this Agreement is intended, or will be
construed, to give any person, corporation or other entity other than the
controlling persons, directors, officers, employees and agents referred to
in
Section 6 hereof (to the extent provided for in Section 6), and their respective
successors and assigns, any legal or equitable right, remedy, or claim under
or
in respect to this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for
the
sole and exclusive benefit of such persons and for the benefit of no other
persons. Notwithstanding anything contained herein to the contrary, no purchaser
of any of the Shares from the Underwriters will be deemed a successor or assign
solely because of such purchase.
14. Finders
and Holders of First Refusal Rights.
(a) The
Company and the Selling Stockholder each hereby represents and warrants to
the
Underwriters that it has not paid any compensation for services as a finder
in
connection with any prior financing of the Company during the twelve-month
period immediately preceding the date hereof and that no person is entitled,
directly or indirectly, to compensation for services as a finder in connection
with the proposed transactions. The Company and the Selling Stockholder further
represents and warrants that no person holds a right of first refusal or similar
right in connection with the proposed offering which has not been waived, and
each of the Company and the Selling Stockholder hereby agrees, severally and
jointly, to indemnify and hold harmless the Underwriters, their officers,
directors, agents and each person, if any, who controls such Underwriters within
the meaning of Section 15 of the Act, from and against any loss, liability,
claim, damage or expense whatsoever arising out of a claim by an alleged finder
or alleged holder of a right of first refusal or similar right in connection
with the proposed offering, insofar as such loss, liability, claim, damage
or
expense arises out of any action or alleged action of the Company or the Selling
Stockholder, as the case may be.
(b) Each
of
the Underwriters hereby represents and warrants to the Company that no person
is
entitled, directly or indirectly, to compensation for services as a finder
in
connection with the proposed transactions contemplated by this Agreement; and
the Underwriters hereby agrees to indemnify and hold harmless, severally and
not
jointly, the Company, its officers, directors and agents, from and against
any
loss, liability, claim, damage or expense whatsoever arising out of a claim
by
an alleged finder in connection with the proposed offering, insofar as such
loss, liability, claim, damage or expense arises out of any action or alleged
action of the Underwriters.
15. Applicable
Law.
This
Agreement shall be a deemed to be a contract made under the laws of the State
of
New York and for all purposes shall be governed by and construed in accordance
with the laws of said State applicable to contracts made and to be performed
entirely within such State. Each of the Company, the Selling Stockholder and
the
Underwriters (i) agrees that any legal suit, action or proceeding arising out
of
or relating to this Agreement shall be instituted exclusively in New York State
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (ii) waives any objection which the Company
or the Underwriters,
-42-
as
the
case may be, may have now or hereafter to the venue of any such suit, action
or
proceeding, and (iii) irrevocably consents to the jurisdiction of the New York
State Supreme Court, County of New York and the United States District Court
for
the Southern District of New York in any such suit, action or procedure. Each
of
the Company, the Selling Stockholder and the Underwriters further agrees to
accept and acknowledge service of any and all process which may be served in
any
suit, action or proceeding in the New York State Supreme Court, County of New
York and the United States District Court for the Southern District of New
York,
and agrees that service of process upon the Company or the Underwriters, as
the
case may be, mailed by certified mail to such party’s address as set forth in
Section 12 hereof shall be deemed in every respect effective service of process
upon such party in any such suit, action or proceeding. In the event of
litigation between the parties arising hereunder, the prevailing party shall
be
entitled to costs and reasonable attorney’s fees.
16. Confidential
Information.
Each of
the Underwriters acknowledges that it has and will receive non-public and other
valuable Confidential Information from the Company in connection with the
performance of this Agreement and its relationship as Underwriter hereunder.
Each of the Underwriters shall at all times keep documents or other materials
containing Confidential Information in a secure place, shall not use
Confidential Information for any purpose other than its performance under this
Agreement, except as otherwise agreed to in a writing signed by the Company
and
shall not disclose any of the Confidential Information in any manner whatsoever,
in whole or in part, to any Person for any reason or purpose whatsoever except
(i) if such Underwriter is required by a court of competent jurisdiction to
so
disclose after notice has been given to the Company and the Company has had
an
opportunity to oppose such disclosure or seek a protective order to the extent
practicable, (ii) to employees and representatives of such Underwriter who
need
to know such information in connection with the Underwriter’s performance under
this Agreement (“Necessary
Agents”),
provided that such Underwriter shall inform each such Necessary Agent of the
confidential nature of such information, obtain their agreement (the
“Necessary
Agent Confidentiality Agreement”)
to
hold all Confidential Information in strict confidence and not to use it for
any
purpose other than as permitted hereunder and ensure the performance by each
Necessary Agent of such Necessary Agent Confidentiality Agreement. As used
herein, “Confidential Information” shall mean any and all information provided
to the Underwriters by or on behalf of the Company in connection with the
transactions contemplated by this Agreement or after the date hereof pursuant
to
this Agreement or otherwise except for information which the Underwriters can
establish (1) is generally known to the public other than as a result of the
breach by either of the Underwriters or any affiliate, employee, officer, or
agent of the Underwriters of an obligation of confidentiality to the Company,
(2) was known by either of the Underwriters (as evidenced by written records)
prior to its receipt from the Company, (3) was disclosed to either of the
Underwriters by a third party under no obligation of confidence or (4) was
developed by either of the Underwriters independently of any disclosure made
by
the Company to the Underwriters, provided that the Underwriters shall have
the
burden of showing that such Confidential Information was developed independently
of any disclosure by the Company.
17. Headings.
The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect any of the terms or provisions hereof.
-43-
18. Counterparts.
This
Agreement may be executed in any number of counterparts which, taken together,
shall constitute one and the same instrument.
19. Entire
Agreement.
This
Agreement sets forth the entire agreement and understanding between the
Underwriters, the Company and the Selling Stockholder with respect to the
subject matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between them.
20. Terminology.
All
personal pronouns used in this Agreement, whether used in the masculine,
feminine or neuter gender, shall include all other genders and the singular
shall include the plural, and vice versa.
[SIGNATURE
PAGE FOLLOWS]
-44-
If
the
foregoing correctly sets forth our understanding, please indicate the
Underwriters’ acceptance thereof, as of the day and year first above written, in
the spaces provided below for that purpose, whereupon this letter with the
Underwriters’ acceptance shall constitute a binding agreement among
us.
Very
truly yours,
NATIONAL
LAMPOON, INC.
By:
______________________________
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
Chief Executive Officer
THE
SELLING STOCKHOLDER
By:
______________________________
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
Confirmed
and accepted on the
day
and
year first above written.
THE
UNDERWRITERS:
▇▇▇▇▇▇▇▇
CURHAN FORD & CO.
By:
______________________________
Name:
Title:
THE
SHEMANO GROUP, INC.
By:
______________________________
Name:
Title:
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