Exhibit 1.0
OH&S DRAFT
11/03/99
500,000 UNITS, EACH UNIT CONSISTING OF
TWO SHARES OF COMMON STOCK AND
ONE REDEEMABLE COMMON STOCK PURCHASE WARRANT
TRUEVISION INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
New York, New York
___________, 1999
▇▇▇▇▇ & COMPANY, INC.
As Representative of the
Several Underwriters listed
on Schedule A hereto
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
TrueVision International, Inc., a Delaware corporation (the
"Company") confirms its agreement with ▇▇▇▇▇ & Company, Inc. ("▇▇▇▇▇") and each
of the several underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 11) for whom ▇▇▇▇▇ is acting as representative
(in such capacity, ▇▇▇▇▇ shall hereinafter be referred to as "you" or the
"Representative"), with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective number of
units ("Units") set forth in Schedule A hereto, each Unit consisting of two (2)
shares of the Company's Common Stock, $0.001 par value ("Common Stock") and one
(1) redeemable common stock purchase warrant (the "Redeemable Warrants"). Each
Redeemable Warrant is exercisable for one share of Common Stock. The Common
Stock and Redeemable Warrants comprising the Units will be separately tradable
upon thirty (30) days from the effective date of this offering and are
hereinafter referred to as the "Firm Securities." Each Redeemable Warrant is
exercisable commencing on [____________], 2000 [twelve months after the date of
the Prospectus] until [______________], 2004 [five years after the date of the
Prospectus], unless previously redeemed by the Company, at an initial exercise
price of $9.60 per share [120% of the initial public offering price of the
Common Stock]. The Redeemable Warrants may be redeemed by the Company, in whole
but not in part, at a redemption price of $.10 per warrant at any time
commencing [__________],
2000 [twelve months after the date of the Prospectus] on thirty (30) days' prior
written notice, provided that the average closing sale price of the Common Stock
as reported on the American Stock Exchange equals or exceeds $16.00 [200% of the
IPO price of the Common Stock] per share, for any twenty (20) days within a
period of thirty (30) consecutive trading days ending on the fifth (5th) trading
day prior to the date of the notice of redemption, all in accordance with the
terms and conditions of the Warrant Agreement (herein defined).
Upon the Representative's request, as provided in Section 2(b)
of this Agreement, the Company shall also issue and sell to the Underwriters up
to an additional 150,000 shares of Common Stock and/or 75,000 additional
Redeemable Warrants for the purpose of covering over-allotments, if any (the
"Option Securities"). The shares of Common Stock issuable upon exercise of the
Redeemable Warrants are hereinafter referred to as the "Warrant Securities." The
Company also proposes to issue and sell warrants to the Representative (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of an additional
100,000 Shares of Common Stock and/or 50,000 Redeemable Warrants. The redeemable
Common Stock purchase warrants issuable upon exercise of the Representative's
Warrants are hereinafter sometimes referred to herein as the "Representative's
Redeemable Warrants." The Representative's Redeemable Warrants are identical to
the Redeemable Warrants. The shares of Common Stock issuable upon exercise of
the Representative's Warrants and the shares of Common Stock issuable upon
exercise of the Representative's Redeemable Warrants and the Representative's
Redeemable Warrants are sometimes collectively referred to herein as the
"Representative's Securities." The Firm Securities, the Option Securities, the
Representative's Warrants, the Representative's Redeemable Warrants, the
Representative's Securities (collectively, hereinafter referred to as the
"Securities") are more fully described in the Registration Statement and the
Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with,
the Representative as of the date hereof, and as of the Closing Date
(hereinafter defined) and the Option Closing Date (hereinafter defined), if any,
as follows:
(i) The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No. 333-86981),
including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Firm Securities and the
Option Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of
the Act, and the rules and regulations (the "Regulations") of the
Commission under the Act. The Company will not file any other
amendment to said registration statement which the Representative
shall have objected to in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the
prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein (including,
but not limited to those documents or
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information incorporated by reference therein) and all information
deemed to be a part thereof as of such time pursuant to paragraph (b)
of Rule 430(A) of the Regulations), is hereinafter called the
"Registration Statement", and the form of prospectus in the form
first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Rules and Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(ii) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of
any Preliminary Prospectus, the Registration Statement or the
Prospectus or any part of any thereof and no proceedings for a stop
order suspending the effectiveness of the Registration Statement or
any of the Company's securities have been instituted or are pending
or to the Company's knowledge, threatened. Each of the Preliminary
Prospectus, Registration Statement and Prospectus at the time of
filing thereof conformed with the requirements of the Act and the
Rules and Regulations, and none of the Preliminary Prospectus,
Registration Statement or Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein and necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation and
warranty does not apply to statements made in reliance upon and in
conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus. The Company has filed all reports, forms or
other documents required to be filed under the Act or the Exchange
Act and the respective Rules and Regulations thereunder, and all such
reports, forms or other documents, when so filed or as subsequently
amended, complied in all material respects with the Act and the
Exchange Act and the respective rules and regulations thereunder.
(iii) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date and each
Option Closing Date, if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales
by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all statements which are required to be
stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the
Rules and Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of
any Underwriters expressly for use in the Preliminary Prospectus,
Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
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(iv) Each of the Company, the Company's majority owned
subsidiary, TrueVision Laser Center of Albuquerque, Inc., a New
Mexico Corporation ("TVLCA"), and the Company's wholly-owned
subsidiary TrueVision of Nevada, Inc., a Nevada Corporation ("TVN"
and together with TVLCA are hereinafter referred to individually as a
"Subsidiary" and collectively as the "Subsidiaries"), has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of its incorporation. Each of the Company
and the Subsidiaries is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its
operations requires such qualification or licensing. The Company
owns, directly or indirectly, eighty-four percent (84%) of the
outstanding capital stock of TVLCA and one-hundred percent (100%) of
the outstanding capital stock of TVN, and all of such shares have
been validly issued, are fully paid and non-assessable, were not
issued in violation of any preemptive rights, and except as set forth
in the Prospectus, are owned free and clear of any liens, charges,
claims, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever. Each of the Company
and the Subsidiaries has all requisite corporate power and authority,
and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its
business as described in the Prospectus; each of the Company and the
subsidiaries is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, state and local laws, rules
and regulations; and each of the Company and the Subsidiaries has not
received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company or the
Subsidiaries. The disclosures in the Registration Statement
concerning the effects of federal, state and local laws, rules and
regulations on the Company's and the Subsidiaries' businesses as
currently conducted and as contemplated are correct in all material
respects and do not omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances in
which they were made, not misleading.
(v) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization" and "Description of Securities" and will have the
adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth
therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue
any capital stock, rights, warrants, options or other securities,
except for this Agreement, the Representative's Warrant Agreement and
the Warrant Agreement (as defined in Section 1(a)(xxxiii) of this
Agreement) and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform or, when
issued and paid for, will conform, in all respects to all statements
with respect thereto contained in the Registration Statement and the
Prospectus. All issued
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and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable and the
holders thereof have no rights of rescission with respect thereto,
and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company. The Securities to
be sold by the Company hereunder and pursuant to the Representative's
Warrant Agreement and the Warrant Agreement are not and will not be
subject to any preemptive or other similar rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid
and non-assessable and will conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject
to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the
Securities has been duly and validly taken; and the certificates
representing the Securities will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof and the
Representative's Warrant Agreement of the Securities to be sold by
the Company hereunder, the Underwriters will acquire good and
marketable title to such Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever asserted against
the Company or any affiliate of the Company.
(vi) The consolidated financial statements of the Company
and the Subsidiaries, together with the related notes and schedules
thereto, included in the Registration Statement, each Preliminary
Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity, and
the results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods to which they apply
and the pro forma and the as-adjusted financial information included
in the Registration Statement and Prospectus presents fairly on a
basis consistent with that of the audited financial statements
included therein, what the Company's pro forma and as-adjusted
capitalization would have been for the respective periods and as of
the respective dates to which they apply after giving effect to the
adjustments described therein. Such financial statements have been
prepared in conformity with generally accepted accounting principles
and the Rules and Regulations, consistently applied throughout the
periods involved. There has been no adverse change or development
involving a material prospective change in the condition, financial
or otherwise, or in the earnings, position, prospects, stockholders'
equity, value, operation, properties, business, or results of
operations of the Company and the Subsidiaries, whether or not
arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company and the Subsidiaries
conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings
"Prospectus Summary," "Selected Consolidated Financial Data,"
"Capitalization," "Dilution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," fairly
presents, on the basis stated in the Prospectus, the information set
forth therein, have been derived from or compiled on a basis
consistent with that of the audited financial statements included in
the Prospectus.
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(vii) Each of the Company and the Subsidiaries (i) has
paid all federal, state, local, and foreign taxes for which it is
liable, including, but not limited to, withholding taxes and amounts
payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information
returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and
payable, and (iii) does not have any tax deficiency or claims
outstanding, proposed or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i)
the issuance by the Company of the Securities, (ii) the purchase by
the Underwriters of the Firm Securities and Option Securities from
the Company, and the purchase by the Representative of the
Representative's Warrants from the Company, (iii) the consummation by
the Company of any of its obligations under this Agreement or the
Representative's Warrant Agreement, or (iv) resales of the Firm
Securities and the Option Securities in connection with the
distribution contemplated hereby.
(ix) Each of the Company and the Subsidiaries maintains
insurance policies, including, but not limited to, general liability
and property insurance, which insures the Company, the Subsidiaries
and their respective employees, against such losses and risks
generally insured against by comparable businesses. None of the
Company nor the Subsidiaries (A) has not failed to give notice or
present any insurance claim with respect to any matter, including but
not limited to the Company's business, property or employees, under
the insurance policy or surety bond in a due and timely manner, (B)
does not have any disputes or claims against any underwriter of such
insurance policies or surety bonds or has not failed to pay any
premiums due and payable thereunder, or (C) has not failed to comply
with all conditions contained in such insurance policies and surety
bonds. There are no facts or circumstances under any such insurance
policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company or any
Subsidiary.
(x) There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or
threatened against (or circumstances that may give rise to the same),
or involving the properties or business of, the Company or the
Subsidiaries which (i) questions the validity of the capital stock of
the Company, this Agreement, the Representative's Warrant Agreement
or the Warrant Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, the
Representative's Warrant Agreement or the Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all material
respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties,
business or results of operations of the Company and the Subsidiaries
taken as a whole.
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(xi) The Company has full legal right, power and authority
to authorize, issue, deliver and sell the Securities, enter into this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement and to consummate the transactions provided for in such
agreements; and this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
except (i) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally,
(ii) as enforceability of any indemnification or contribution
provisions may be limited under applicable laws or the public
policies underlying such laws and (iii) that the remedies of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court
before which any proceedings may be brought. None of the Company's
issue and sale of the Securities, execution or delivery of this
Agreement, the Representative's Warrant Agreement or the Warrant
Agreement, its performance hereunder and thereunder, its consummation
of the transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement and the
Prospectus, and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of
the Company pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or other
agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which any of its properties
or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
(xii) No consent, approval, authorization or order of, and
no filing with, any arbitrator, court, regulatory body,
administrative agency, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, this Agreement, the
Representative's Warrant Agreement and the Public Warrant Agreement,
the performance of this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement and the transactions contemplated
hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person
may have for the issue and/or sale of any of the Securities, except
such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws and the rules of
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the National Association of Securities Dealers, Inc. (the "NASD") in
connection with the Underwriters' purchase and distribution of the
Securities and the Representative's Warrants to be sold by the
Company hereunder.
(xiii) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other
documents filed as exhibits to the Registration Statement to which
the any of the Company or the Subsidiaries is a party or by which it
may be bound or to which any of its assets, properties or business
may be subject have been duly and validly authorized, executed and
delivered by the Company or the Subsidiaries, and constitute the
legal, valid and binding agreements of the Company or the
Subsidiaries, enforceable against each of them in accordance with
their respective terms. The descriptions in the Registration
Statement of agreements, contracts and other documents are accurate
in all material respects and fairly present the information required
to be shown with respect thereto by Form SB-2, and there are no
agreements, contracts or other documents which are required by the
Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or
filed as required, and the exhibits which have been filed are in all
material respects complete and correct copies of the documents of
which they purport to be copies.
(xiv) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and the
Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, neither the Company nor the Subsidiaries has (i)
issued any securities or incurred any liability or obligation, direct
or contingent, for borrowed money, (ii) entered into any transaction
other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or in respect of
its capital stock of any class, and there has not been any change in
the capital stock, or any material change in the debt (long or short
term) or liabilities or material adverse change in or affecting the
condition, financial or otherwise, earnings, prospects, stockholders'
equity, value, operations, properties, business or results of
operations of the Company or the Subsidiaries.
(xv) No default exists in the due performance and
observance of any term, covenant or condition of any license,
contract, indenture, mortgage, installment sale agreement, lease,
deed of trust, voting trust agreement, stockholders agreement,
partnership agreement, note, loan or credit agreement, purchase
order, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other material agreement or instrument to
which any of the Company or the Subsidiaries is a party or by which
any of the Company or the Subsidiaries may be bound or to which the
property or assets (tangible or intangible) of any of the Company or
the Subsidiaries is subject or affected.
(xvi) Each of the Company and the Subsidiaries has
generally enjoyed a satisfactory employer-employee relationship with
its employees and is in compliance with all federal, state, local,
and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours.
There are no pending investigations involving any of the Company or
the Subsidiaries by the U.S. Department of Labor, or any other
governmental agency
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responsible for the enforcement of such federal, state, local, or
foreign laws and regulations. There is no unfair labor practice
charge or complaint any of the Company or the Subsidiaries pending
before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against
or involving any of the Company or the Subsidiaries or any
predecessor entity, and none has ever occurred. No representation
question exists respecting the employees of any of the Company or the
Subsidiaries, and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company. No grievance or
arbitration proceeding is pending under any expired or existing
collective bargaining agreements any of the Company or the
Subsidiaries. No labor dispute with the employees of the Company
exists, or is imminent.
(xvii) None of the Company nor any of the Subsidiaries
maintains, sponsors or contributes to any program or arrangement that
is an "employee pension benefit plan," an "employee welfare benefit
plan," or a "multiemployer plan" as such terms are defined in
Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). None of the Company nor any of the Subsidiaries maintains or
contributes, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any
trust created thereunder) has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the
Code, which could subject the Company or the Subsidiaries to any tax
penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all reporting,
disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a), stating
that such ERISA Plan and the attendant trust are qualified
thereunder. None of the Company nor any of the Subsidiaries has never
completely or partially withdrawn from a "multiemployer plan."
(xviii) None of the Company, the Subsidiaries, nor any of
its or their respective employees, directors, stockholders, partners,
or affiliates (within the meaning of the Rules and Regulations) of
any of the foregoing has taken or will take, directly or indirectly,
any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or
otherwise.
(xix) None of the patents, patent applications,
trademarks, service marks, service names, trade names and copyrights
and none of the licenses and rights to the foregoing presently owned
or held by any of the Company or the Subsidiaries, are in dispute or
are in any conflict with the right of any other person or entity.
Each of the Company and the Subsidiaries (i) owns or has the right to
use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, patent applications,
trademarks, service marks, service names, trade names and copyrights,
technology and licenses and rights
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with respect to the foregoing, used in the conduct of its business as
now conducted or proposed to be conducted without infringing upon or
otherwise acting adversely to the right or claimed right of any
person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability
whatsoever to make any payment by way of royalties, fees or otherwise
to any owner or licensee of, or other claimant to, any patent, patent
application, trademark, service mark, service names, trade name,
copyright, know-how, technology or other intangible asset, with
respect to the use thereof or in connection with the conduct of its
business or otherwise. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or threatened (or
circumstances that may give rise to the same) against the Company
which challenges the exclusive rights of the Company and the
Subsidiaries with respect to any trademarks, trade names, service
marks, service names, copyrights, patents, patent applications or
licenses or rights to the foregoing used in the conduct of its
business, or which challenge the right of the Company and the
Subsidiaries to use any technology presently used or contemplated to
be used in the conduct of its business.
(xx) Each of the Company and the Subsidiaries owns and has
the unrestricted right to use all trade secrets, know-how (including
all other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), inventions, technology, designs,
processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") that
are material to the development, manufacture, operation and sale of
all products and services sold or proposed to be sold by any of the
Company or the Subsidiaries, free and clear of and without violating
any right, lien, or claim of others, including without limitation,
former employers of its employees; provided, however, that the
possibility exists that other persons or entities.
(xxi) Each of the Company and the Subsidiaries has good
and marketable title to, or valid and enforceable leasehold estates
in, all items of real and personal property stated in the Prospectus,
to be owned or leased by it free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and
payable.
(xxii) Pannel ▇▇▇▇ ▇▇▇▇▇▇▇, Certified Public Accountants,
A Professional Corporation ("Pannel ▇▇▇▇ ▇▇▇▇▇▇▇"), whose report is
filed with the Commission as a part of the Registration Statement,
are independent certified public accountants as required by the Act
and the Rules and Regulations.
(xxiii) The Company has caused to be duly executed legally
binding and enforceable agreements ("Lock-Up Agreement") pursuant to
which all of the officers and directors of the Company, holders of
Common Stock and holders of securities exchangeable or exercisable
for or convertible into shares of Common Stock have agreed (i) not
to, directly or indirectly, offer, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate, distribute or
otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or
10
evidencing any right to purchase or subscribe for any shares of
Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest
therein for a period of not less than twelve (12) months following
the effective date of the Registration Statement without the prior
written consent of the Representative and the Company, and, (ii) for
a period extending twenty-four (24) months following the effective
date of the Registration Statement, that all sales of such securities
issued by the Company shall be made through the Underwriter in
accordance with its customary brokerage policies. In addition, the
Company shall not sell or offer for sale any of its securities for a
period of twelve (12) months from the effective date of the
Registration Statement without the consent of the Representative
except pursuant to options and warrants issued on the effective date
of the Registration Statement. The Company will cause the Transfer
Agent, as defined below, to mark an appropriate legend on the face of
stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
(xxiv) There are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the
Company, the Subsidiaries, or any of its or their respective
officers, directors, stockholders, partners, employees or affiliates
that may affect the Underwriters' compensation, as determined by the
NASD.
(xxv) The Units, the Common Stock and the Redeemable
Warrants have been approved for quotation on the Nasdaq SmallCap
Stock Market.
(xxvi) None of the Company, the Subsidiaries, nor any of
its or their respective directors, officers, employees, agents, or
any other person acting on behalf of the Company or the Subsidiaries,
has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee
of any governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business of any of
the Company or the Subsidiaries (or assist any of the Company or the
Subsidiaries in connection with any actual or proposed transaction)
which (a) might subject any of the Company of the Subsidiaries, or
any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (b)
if not given in the past, might have had a materially adverse effect
on the assets, business or operations of any of the Company or the
Subsidiaries, or (c) if not continued in the future, might adversely
affect the assets, business, operations or prospects of any of the
Company of the Subsidiaries. The Company's and each Subsidiary's
internal accounting controls are sufficient to cause each of the
Company and the Subsidiaries to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
11
(xxvii) Each of the Company and the Subsidiaries confirms
as of the date hereof that it is in compliance with all provisions of
Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to
Disclosure of Doing Business with Cuba, and each of the Company and
the Subsidiaries further agrees that if it or any affiliate commences
engaging in business with the government of Cuba or with any person
or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with
the Florida Department of Banking and Finance (the "Department"),
whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the
Company's, or any affiliate's, business with Cuba or with any person
of affiliate located in Cuba changes in any material way, each of the
Company and the Subsidiaries will provide the Department notice of
such business or change, as appropriate, in a form acceptable to the
Department.
(xxviii) Except as set forth in the Prospectus, no
officer, director or stockholder of any of the Company or the
Subsidiaries, or any "affiliate" or "associate" (as these terms are
defined in Rule 405 promulgated under the Rules and Regulations) of
any of the foregoing persons or entities has, either directly or
indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold
or are proposed to be furnished or sold by any of the Company or the
Subsidiaries, or (B) purchases from or sells or furnishes to any of
the Company or the Subsidiaries any goods or services, or (ii) a
beneficial interest in any contract or agreement to which any of the
Company or the Subsidiaries is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain
Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company or any
Subsidiary, and any officer, director, or Principal Stockholder (as
such term is defined in the Prospectus) of the Company or any
Subsidiary, or any partner, affiliate or associate of any of the
foregoing persons or entities.
(xxix) Any certificate signed by any officer of the
Company or any Subsidiary, and delivered to the Representative or to
Underwriters' Counsel (as defined herein) shall be deemed a
representation and warranty by the Company to the Representative as
to the matters covered thereby.
(xxx) The minute books of each the Company and the
Subsidiaries have been made available to the Representative and
contain a complete summary of all meetings and actions of the
directors, stockholders, audit committee, compensation committee and
any other committee of the Board of Directors of each of the Company
and the Subsidiaries, respectively, since the time of its
incorporation, and reflects all transactions referred to in such
minutes accurately in all material respects.
(xxxi) Except and to the extent described in the
Prospectus, no holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of
the Company have the right to include any securities issued by the
Company in the Registration Statement or any registration statement
to be filed by the Company or to require the Company to file a
registration statement under the Act and
12
no person or entity holds any anti-dilution rights with respect to
any securities of the Company.
(xxxii) The Company has as of the effective date of the
Registration Statement (i) entered into employment an agreement with
▇▇▇▇ ▇. ▇▇▇▇▇ in the form filed as an Exhibit to the Registration
Statements, and (ii) purchased term key-man insurance on the like of
▇▇▇▇ ▇. ▇▇▇▇▇ in the amount of $1,000,000, which policy names the
Company as sole beneficiary thereof.
(xxxiii) Each of the Company and the Subsidiaries has
entered into a warrant agreement, substantially in the form filed as
Exhibit 1.3 to the Registration Statement (the "Warrant Agreement"),
with Continental Stock Transfer & Trust Company, in form and
substance satisfactory to the Underwriter, with respect to the
Redeemable Warrants and providing for the payment of warrant
solicitation fees. The Warrant Agreement has been duly and validly
authorized by the Company and, assuming due execution by the parties
thereto other than the Company, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
obligations to indemnify or contribute to losses may be limited by
applicable law).
(xxxiv) The Company is not, and upon the issuance and sale
of the Securities as herein contemplated and the application of the
net proceeds therefrom as described in the Prospectus under the
caption "Use of Proceeds" will not be, an "investment company" or an
entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act of 1940, as amended (the "1940
Act").
(xxxv) Each of the Company and the Subsidiaries 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 preparations of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorizations; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(xxxvi) Each of the Company and the Subsidiaries has
reviewed its operations and that of any third parties with which the
Company or the Subsidiaries has a material relationship to evaluate
the extent to which the business or operations of the Company or the
Subsidiaries will be affected by the Year 2000 Problem. As a result
of such review, the disclosure in the Registration Statement under
Year 2000 is accurate and complies in all material respects with the
rules and regulations of the Act. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval,
13
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND REPRESENTATIVE'S
WARRANTS.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter
agrees to purchase from the Company at a price of $______ per Unit [90% of the
initial public offering price], that number of Firm Securities set forth in
Schedule A opposite the name of such Underwriter, subject to adjustment as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional number of Firm Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any part of an additional 75,000 Units at a
price of $______ per Unit [90% of the initial public offering price]. The option
granted hereby will expire 45 days after (i) the date the Registration Statement
becomes effective, if the Company has elected not to rely on Rule 430A under the
Rules and Regulations, or (ii) the date of this Agreement if the Company has
elected to rely upon Rule 430A under the Rules and Regulations, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which Representative
is then exercising the option and the time and date of payment and delivery for
any such Option Securities. Any such time and date of delivery (an "Option
Closing Date") shall be determined by the Representative, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Date, as hereinafter defined, unless otherwise agreed
upon by the Representative and the Company. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of ▇▇▇▇▇ &
Company, Inc. at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, or at such other
place as shall be agreed upon by the Representative and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
__________, 1999 or at such other time and date as shall be agreed upon by the
Representative and the Company, but not less than three (3) nor more than seven
(7) full business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called "Closing Date").
In addition, in the event that any or all of the Option Securities are purchased
by the Underwriters, payment of the purchase price for, and delivery of
certificates for, such Option Securities shall be made at the above-mentioned
office of the Representative or at such other place as shall be agreed upon by
the Representative and the Company on each Option Closing Date as specified in
the notice from the Representative to the Company.
14
Delivery of the certificates for the Firm Securities and the Option Securities,
if any, shall be made to the Underwriters against payment by the Underwriters of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company for the Firm Securities and the Option Securities, if
any, by New York Clearing House funds. Certificates for the Firm Securities and
the Option Securities, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Representative may request in writing at least
two (2) business days prior to the Closing Date or the relevant Option Closing
Date, as the case may be. The certificates for the Firm Securities and the
Option Securities, if any, shall be made available to the Representative at such
office or such other place as the Representative may designate for inspection,
checking and packaging no later than 9:30 a.m. on the last business day prior to
Closing Date or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell the
Representative's Warrants to the Representative at a purchase price of $.0001
per warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 100,000 shares of Common Stock and/or 50,000 Redeemable Warrants.
The Representative's Warrants shall be exercisable for a period of four (4)
years commencing one (1) year from the effective date of the Registration
Statement at a price equaling one hundred twenty percent (120%) of the initial
public offering price of the shares of Common Stock and Redeemable Warrants. The
Representative's Redeemable Warrants are identical to the Redeemable Warrants.
The Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 1.2 to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. PUBLIC OFFERING OF THE UNITS. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Firm Securities and such Option
Securities as the Representative may determine (other than to residents of or in
any jurisdiction in which qualification of the Units is required and has not
become effective) at the price and upon the other terms set forth in the
Prospectus. The Representative may from time to time increase or decrease the
public offering price after distribution of the Units has been completed to such
extent as the Representative, in its discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Units by
the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
15
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities regulatory authority shall enter a
stop order or suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Representative,
pursuant to Rule 424(b)(4)) not later than the Commission's close of business on
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifteenth business day after the effective date
of the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Representative in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP ("Underwriters'
Counsel"), shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may designate to
permit the continuance of sales and dealings therein for as long as may be
necessary to complete the distribution, and shall make such applications, file
such documents and furnish such information as may be required for such purpose;
provided, however, the Company shall not be required to qualify as a foreign
corporation or file a general or limited consent to service of process in any
such jurisdiction. In each jurisdiction where such
16
qualification shall be effected, the Company will, unless the Representative
agrees that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times as
are or may reasonably be required by the laws of such jurisdiction to continue
such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Representative copies
of such amendment or supplement as soon as available and in such quantities as
the Representative may request.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve (12) consecutive months after the effective
date of the Registration Statement.
(h) During a period of seven (7) years after the date hereof,
the Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
(i) concurrently with furnishing such quarterly reports to
its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and
certified by the Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to
its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the
17
Company for such fiscal year, accompanied by a copy of the
certificate thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports
and financial statements furnished to or filed with the Commission,
the NASD or any securities exchange;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company, or its affairs which was released or prepared by or on
behalf of the Company; and
(vi) any additional information of a public nature
concerning the Company, its subsidiaries (and any future subsidiary)
or its businesses which the Representative may request.
(vii) During such seven-year period, if the Company has an
active subsidiary, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the Company and
its subsidiary(ies) are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is
not so consolidated.
(i) The Company will maintain a Transfer Agent and Warrant
Agent ("Transfer Agent") and, if necessary under the jurisdiction of
incorporation of the Company, a Registrar (which may be the same entity as the
Transfer Agent) for its Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Representative or on
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Underwriter with originally-executed
copies of duly executed, legally binding and enforceable Lock-Up Agreements
which are in form and substance satisfactory to the Underwriter. On or before
the Closing Date, the Company shall deliver instructions to its transfer agent
authorizing such transfer agent to place appropriate legends on the certificates
representing the securities of the Company subject to the Lock-Up Agreements and
to place appropriate stop transfer orders on the Company's ledgers.
18
(l) The Company agrees that, for a period of twelve (12)
months commencing on the effective date of the Registration Statement, and
except as contemplated by this Agreement, it and its present and future
Subsidiaries will not, without the prior written consent of the Underwriter
issue, sell, contract or offer to sell, grant an option for the purchase or sale
of, assign, transfer, pledge, distribute or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any option, right or warrant with
respect to any shares of Common Stock or any type of capital stock having voting
or dividend rights on a parity with or superior to the Common Stock, except
pursuant to stock options or warrants issued on the date hereof, for cash at
less than the greater of the initial public offering price of shares of Common
Stock or the then market value of such shares.
(m) None of the Company, the Subsidiaries, nor any of its or
their officers, directors, stockholders, nor any of their respective affiliates
(within the meaning of the Rules and Regulations) will take, directly or
indirectly, any action designed to, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company.
(n) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. Except as described in the Prospectus, no
portion of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(o) The Company shall timely file all such reports, forms or
other documents as may be required from time to time, under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(p) The Company shall furnish to the Representative as early
as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date of the Registration Statement) which have been read by
the Company's independent public accountants, as stated in its letter to be
furnished pursuant to Section 6(j) hereof.
(q) The Company shall cause the Units, the Common Stock and
the Redeemable Warrants to be quoted on the Nasdaq SmallCap Stock Market and for
a period of seven (7) years from the date hereof, use its best efforts to
maintain the Nasdaq SmallCap Stock Market listing of the Units, if the
securities underlying the Units are not separately tradable, the Common Stock
and the Redeemable Warrants to the extent outstanding.
(r) For a period of five (5) years from the Closing Date, the
Company shall furnish to the Representative at the Representative's request and
at the Company's sole expense, (i) daily consolidated transfer sheets relating
to the Units, the Common Stock and the Redeemable Warrants (ii) the list of
holders of all of the Company's securities and (iii) a Blue
19
Sky "Trading Survey" for secondary sales of the Company's securities prepared by
counsel to the Company.
(s) As soon as practicable, but in no event more than thirty
(30) days from the effective date of the Registration Statement, the Company
agrees to take all necessary and appropriate actions to be included in Standard
and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual and to continue such
inclusion for a period of not less than seven (7) years. (t) Until the
completion of the distribution of the Firm Securities and the Option Securities,
the Company shall not without the prior written consent of the Representative
and Underwriters' Counsel, issue, directly or indirectly, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering contemplated hereby, other than trade releases
issued in the ordinary course of the Company's business consistent with past
practices with respect to the Company's operations.
(u) Commencing one year from the date hereof, to pay the
Underwriter a warrant solicitation fee equal to five percent (5%) of the
exercise price of the Redeemable Warrants, payable on the date of the exercise
thereof on terms provided in the Public Warrant Agreement. The Company will not
solicit the exercise of the Redeemable Warrants through any solicitation agent
other than the Underwriter. The Underwriter will not be entitled to any warrant
solicitation fee unless the Underwriter provides bona fide services in
connection with any warrant solicitation and the investor designates, in
writing, that the Underwriter is entitled to such fee.
(v) For a period equal to the lesser of (i) three (3) years
from the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form SB-2 or Form S-1 (or other appropriate
form) for the registration under the Act of the Representative's Securities.
(w) For a period of five (5) years after the effective date of
the Registration Statement, the Representative shall have the right to designate
for election one (1) individual to the Company's Board of Directors (the
"Board"). Such person shall be mutually acceptable to the Company and the
Representative. In the event the Representative elects not to exercise such
right, then it may designate one (1) individual to attend meetings of the
Company's Board. The Company shall notify the Representative of each meeting of
the Board and the Company shall send to such individual all notices and other
correspondence and communications sent by the Company to members of the Board.
Such individual shall be reimbursed for all out-of-pocket expenses incurred in
connection with his attendance of meetings of the Board.
(x) For a period of twenty-four (24) months after the
effective date of the Registration Statement, the Company shall not restate,
amend or alter any term of any written employment, consulting or similar
agreement entered into between the Company and any officer, director or key
employee as of the effective date of the Registration Statement in a manner
which is more favorable to such officer, director or key employee, without the
prior written consent of the Representative.
20
(y) For a period of twenty-four (24) months after the
effective date of the Registration Statement, all holders of shares Common Stock
and Securities exercisable, convertible or exchangeable for shares of Common
Stock, shall agree to make any sale of the Securities of the Company owned by
them through the Representative.
(z) For a period of three (3) years after the effective date
of the Registration Statement, the Company, any subsidiaries and any affiliates
hereby grant a thirty-day (30) right of first refusal for any sale of securities
to be made by the Company, any affiliates and any subsidiaries.
(aa) The Company will use its best efforts to maintain the
effectiveness of the Registration Statement for a period of five years after the
date hereof.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing
Date and the Option Closing Date (to the extent not paid at the Closing Date)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, the Representative's Warrant Agreement and the
Warrant Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing, (including mailing and
handling charges) filing, delivery and mailing (including the payment of
postage, overnight delivery or courier charges with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing (including the payment of postage with respect
thereto) and delivery of this Agreement, the Representative's Warrant agreement,
the Warrant Agreement, agreements with selected dealers, and related documents,
including the cost of all copies thereof and of the Preliminary Prospectuses and
of the Prospectus and any amendments thereof or supplements thereto supplied to
the Underwriters and such dealers as the Underwriters may request, in quantities
as hereinabove stated, (iii) the printing, engraving, issuance and delivery of
the Securities including, but not limited to, (x) the purchase by the
Underwriters of the Firm Securities and the Option Securities and the purchase
by the Representative of the Representative's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement and
the Representative's Warrant Agreement, and (z) resale of the Firm Securities
and the Option Securities by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and "tomb-stone" advertisement expenses, (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel or consultant retained, (vii) fees and expenses
of the transfer agent and registrar, (viii) applications for assignments of a
rating of the Securities by qualified rating agencies, (ix) the fees payable to
the
21
Commission and the NASD, and (x) the fees and expenses incurred in connection
with the quotation of the Securities on the Nasdaq SmallCap Stock Market and any
other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6 or Section 11, (i) the Company shall
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriters' Counsel, less
any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Firm Securities, twenty-five thousand dollars ($25,000) of which has been paid
to date. In the event the Representative elects to exercise the overallotment
option described in Section 2(b) hereof, the Company agrees to pay to the
Representative on the Option Closing Date (by certified or bank cashier's check
or, at the Representative's election, by deduction from the proceeds of the
Option Securities) a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the Option
Securities.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if it had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 Noon, New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representative,
and, at Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Shares and
any price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Representative of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
22
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Representative's Warrants, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the
favorable opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) each of the Company and the Subsidiaries (A) has been
duly organized and is a validly existing corporation in good standing
under the laws of its jurisdiction of incorporation, (B) is duly
qualified and licensed and in good standing as a foreign corporation
in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires such
qualification or licensing, and (C) has all requisite power and
authority (corporate and other) and has obtained any and all
necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease
its properties and conduct its business as described in the
Prospectus; each of the Company and the Subsidiaries is and has been
doing business in compliance in with all such authorizations,
approvals, orders, licenses, certificates and permits obtained by it
from governmental or regulatory officials and agencies and all
federal, state, local and foreign laws, rules and regulations to
which it is subject; and, none of the Company nor the Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license,
certificate, franchise or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the
Company and the Subsidiaries taken as a whole. The disclosure in the
Registration Statement concerning the effects of federal, state,
local and foreign laws, rules and regulations on each of the
Company's and the Subsidiaries businesses as currently conducted and
as contemplated is correct in all respects and does
23
not omit to state a 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;
(ii) the Company owns, directly or indirectly, eighty-four
percent (84%) of the outstanding capital stock of TVLCA and
one-hundred percent (100%) of the outstanding capital stock of TVN,
and all of such shares have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive
rights, and except as set forth in the Prospectus, are owned free and
clear of any liens, charges, claims, encumbrances, pledges, security
interests, defects or other restrictions or equities of any kind
whatsoever;
(iii) except as described in the Prospectus, none of the
Company nor the Subsidiaries owns an interest in any other
corporation, partnership, joint venture, trust or other business
entity;
(iv) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization" and
"Description of Securities" and except as set forth in the
Prospectus, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform, or when
issued and paid for, will conform, in all respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason
of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of
the Company or any similar contractual right granted by the Company.
The Securities to be sold by the Company hereunder and under the
Representative's Warrant Agreement and the Warrant Agreement are not
and will not be subject to any preemptive or other similar rights of
any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof and thereof, will
be validly issued, fully paid and non-assessable and conform to the
descriptions thereof contained in the Prospectus; the holders thereof
will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue
and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities are in due and proper form.
The Redeemable Warrants and Representative's Warrants constitute
valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the issuance and
delivery pursuant to this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement of the Securities to be sold by
the Company hereunder and thereunder, the Underwriters will acquire
good and marketable title to such Securities, free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever. No transfer
tax is
24
payable by or on behalf of the Underwriters in connection with (A)
the issuance by the Company of the Securities, (B) the purchase by
the Underwriters of the Securities from the Company, (C) the
consummation by the Company of any of its obligations under this
Agreement, the Representative's Warrant Agreement or the Warrant
Agreement, or (D) resales of the Securities in connection with the
distribution contemplated hereby;
(v) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the Registration
Statement or the Prospectus or any part of any thereof or suspending
the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act;
(vi) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and schedules and other
financial and statistical data included therein, as to which no
opinion need be rendered) comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations;
(vii) (A) there are no agreements, contracts or other
documents required by the Act to be described in the Registration
Statement (or required to be filed under the Exchange Act if upon
such filing they would be incorporated, in whole or in part, by
reference therein) and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits thereto, and the
exhibits which have been filed are correct copies of the documents of
which they purport to be copies; (B) the descriptions in the
Registration Statement and the Prospectus and any supplement or
amendment thereto of agreements, contracts and other documents to
which the Company or any Subsidiary is a party or by which it is
bound are accurate and fairly represent the information required to
be shown by Form SB-2; (C) there is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental
proceeding (including, without limitation, those pertaining to
environmental or similar matters), domestic or foreign, pending or
threatened against (or circumstances that may give rise to the same)
or involving the properties or business of, any of the Company or the
Subsidiaries which (I) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), or (II) questions the
validity of the capital stock of the Company or of this Agreement,
the Representative's Warrant Agreement or the Warrant Agreement or of
any action taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; (D) no statute or regulation or
legal or governmental proceeding required to be described in the
Prospectus is not described as required; and (E) there is no action,
suit or proceeding pending or threatened against or affecting any of
the Company or the Subsidiaries before any court, arbitrator or
governmental body, agency or official (or any basis thereof known to
such counsel) in which there is a reasonable possibility of a
decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, prospects,
stockholders' equity, value, operation, properties, business or
results of
25
operations of any of the Company or the Subsidiaries, which could
adversely affect the present or prospective ability of the Company to
perform its obligations under this Agreement, the Representative's
Warrant Agreement or the Warrant Agreement or which in any manner
draws into question the validity or enforceability of this Agreement,
the Representative's Warrant Agreement or the Warrant Agreement;
(viii) the Company has full legal right, power and
authority to enter into each of this Agreement, the Representative's
Warrant Agreement and the Warrant Agreement and to consummate the
transactions provided for herein and therein; and each of this
Agreement, the Representative's Warrant Agreement and the Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of the Representative's Warrant Agreement and the
Warrant Agreement certain provisions of this Agreement assuming due
authorization, execution and delivery by each other party thereto,
constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as obligations to indemnify or
contribute to losses may be limited by applicable law). None of the
Company's execution or delivery of this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement, its
performance hereunder and thereunder, its consummation of the
transactions contemplated herein and therein, or the conduct of its
business as described in the Registration Statement and the
Prospectus and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of
the Company or the Subsidiaries pursuant to the terms of (A) the
certificate of incorporation or bylaws of the Company, (B) any
license, contract, indenture, mortgage, lease, deed of trust, voting
trust agreement, stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument
to which any of the Company or the Subsidiaries is a party or by
which it is or may be bound or to which its properties or assets
(tangible or intangible) are or may be subject, (C) any statute
applicable to any of the Company or Subsidiaries or (D) any judgment,
decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic
or foreign, having jurisdiction over any of the Company or the
Subsidiaries or any of their activities or properties;
(ix) no consent, approval, authorization or order of, and
no filing with, any arbitrator, court, regulatory body,
administrative agency, government agency or other body, domestic or
foreign (other than such as may be required under "blue sky" laws and
the rules of the NASD, as to which no opinion need be rendered), is
required in connection with the issuance of the Securities pursuant
to the Prospectus, the Registration
26
Statement, this Agreement, the Representative's Warrant Agreement and
the Warrant Agreement, or the performance of this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement and the
transactions contemplated hereby and thereby;
(x) the properties and business of each of the Company and
the Subsidiaries conform to the description thereof contained in the
Registration Statement and the Prospectus; and each of the Company
and the Subsidiaries has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, in
each case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, other than those referred to in the
Prospectus and liens for taxes not yet due and payable;
(xi) none of the Company nor the Subsidiaries is not in
breach of, or in default under, any term or provision of any license,
contract, indenture, mortgage, lease, deed of trust, voting trust
agreement, stockholders' agreement, note, loan or credit agreement or
any other agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to which any of
the Company or the Subsidiaries is a party or by which it is or may
be bound or to which its property or assets (tangible or intangible)
are or may be subject; and none of the Company nor the Subsidiaries
is in violation of any term or provision of (A) its certificate of
incorporation or by-laws, (B) any authorization, approval, order,
license, certificate, franchise or permit of any governmental or
regulatory official or body, or (C) any judgement, decree, order,
statute, rule or regulation to which it is subject;
(xii) the Units, the Common Stock and the Redeemable
Warrants have been accepted for quotation on the Nasdaq SmallCap
Stock Market;
(xiii) the statements in the Prospectus under "Prospectus
Summary," "Risk Factors," "Business," "Management," "Principal
Stockholders," "Certain Transactions," "Shares Eligible For Future
Sale," and "Description of Securities" have been reviewed by such
counsel, and insofar as they refer to statements of law, descriptions
of statutes, licenses, rules or regulations or legal conclusions, are
correct in all material respects;
(xiv) the persons listed under the caption "Principal
Stockholders" in the Prospectus are the respective "beneficial
owners" (as such phrase is defined in Rule 13d-3 under the Exchange
Act) of the securities set forth opposite their respective names
thereunder as and to the extent set forth therein;
(xv) each of the Company and the Subsidiaries owns or
possesses, free and clear of all liens or encumbrances and right
thereto or therein by third parties, the requisite licenses or other
rights to use all trademarks, service marks, copyrights, service
names, tradenames, patents, patent applications and licenses
necessary to conduct its business (including without limitation any
such licenses or rights described in the Prospectus as being owned or
possessed by the any of the Company or the Subsidiaries)
27
and there is no claim or action by any person pertaining to, or
proceeding, pending or threatened, which challenges the exclusive
rights of any of the Company or the Subsidiaries with respect to any
trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the
Company's and the Subsidiaries' businesses (including, without
limitation, any such licenses or rights described in the Prospectus
as being owned or possessed by any of the Company or the
Subsidiaries);
(xvi) none of the Company, the Subsidiaries nor any of
their respective directors, officers, stockholders, employees, agents
or any other person acting on behalf of the Company or the
Subsidiaries has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or any
official or employee of any governmental agency or instrumentality of
any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is or may be in a position to help or hinder the business of the
Company or the Subsidiaries (or assist it in connection with any
actual or proposed transaction) which (A) might subject any of the
Company or the Subsidiaries or any such person to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (B) if not given in the past, might
have had material and adverse effect on the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of the
Company taken as a whole, or (C) if not continued in the future,
might materially and adversely affect the condition, financial or
otherwise, or the earnings, prospects, stockholders' equity, value,
operations, properties, business or results of operations of each of
the Company and the Subsidiaries taken as a whole;
(xvii) there are no claims, payments, issuances,
arrangements or understandings, whether oral or written, for services
in the nature of a finder's or origination fee with respect to the
sale of the Securities hereunder or financial consulting arrangement
or any other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation, as
determined by the NASD;
(xviii) the minute books of each of the Company and the
Subsidiaries contain a complete summary of all meetings and actions
of the directors and stockholders of each of the Company and the
Subsidiaries since the time of its incorporation and reflect all
transactions referred to in such minutes accurately in all material
respects;
(xix) no person, corporation, trust, partnership,
association or other entity has the right to include and/or register
any securities of the Company in the Registration Statement, require
the Company to file any registration statement or, if filed, to
include any security in such registration statement;
(xx) assuming due authorization, execution and delivery by
the parties thereto, the Lock-Up Agreements are legal, valid and
binding obligations of the parties thereto, enforceable against such
parties and any subsequent holder of the securities subject thereto
in accordance with their terms;
28
(xxi) except as described in the Prospectus, the none of
the Company nor the Subsidiaries (A) maintains, sponsors or
contributes to an ERISA Plans, (B) maintain or contribute, now or at
any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA, and (C) has never completely or partially withdrawn
from a "multiemployer plan"; and
(xxii) none of the Company or any of the Subsidiaries or
any of its or their affiliates shall be subject to the requirements
of or shall be deemed an "Investment Company," pursuant to and as
defined under, respectively, the Investment Company Act.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and the
Subsidiaries and representatives of the independent public accountants for the
Company at which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus, and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Preliminary Prospectus, the Registration Statement and
Prospectus, on the basis of the foregoing, no facts have come to the attention
of such counsel which lead them to believe that either the Registration
Statement or any amendment thereto, at the time such Registration Statement or
amendment became effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement or
Prospectus), or any supplements or amendments thereto.
Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991), or any
comparable State bar accord.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of each of the
Company and the Subsidiaries, and certificates or other written statements of
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company and the
Subsidiaries, provided that copies of any such statements or certificates shall
be delivered to Underwriters' Counsel if requested. The opinion shall also state
that the Underwriters' Counsel is entitled to rely thereon. The opinion of such
counsel for the Company and the Subsidiaries shall state that the opinion of any
such other counsel is in form satisfactory to such counsel and that the
Underwriters and they are justified in relying thereon.
29
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., counsel to the
Company and the Subsidiaries dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel,
confirming as of Option Closing Date the statements made by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
in his opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
(f) Prior to the Closing Date and each Option Closing Date, if
any, (i) there shall have been no material adverse change or development
involving a prospective adverse change in the condition, financial or otherwise,
or the earnings, stockholders' equity, value, operations, properties, prospects,
business or results of operations of any of the Company and the Subsidiaries,
whether or not in the ordinary course of business, from the latest dates as of
which such matters are set forth in the Registration Statement and the
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by any of the Company or the Subsidiaries from
the latest date as of which the financial condition of the Company is set forth
in the Registration Statement and the Prospectus; (iii) none of the Company nor
the Subsidiaries shall be in default under any provision of any instrument
relating to any outstanding indebtedness; (iv) none of the Company nor the
Subsidiaries shall have issued any securities (other than the Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class and there shall not have been any change in the capital
stock, debt (long or short term) or liabilities or obligations of any of the
Company or the Subsidiaries (contingent or otherwise) from the latest dates as
of which such matters are set forth in the Registration Statement and the
Prospectus; (v) no material amount of the assets of any of the Company or the
Subsidiaries shall have been pledged or mortgaged, except as set forth in the
Registration Statement and the Prospectus; (vi) no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against any of the Company or the
Subsidiaries or affecting any of its properties or business before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may materially and
adversely affect the condition, financial or otherwise, or the earnings,
stockholders' equity, value, operations, properties, business or results of
operations of the any of the Company or the Subsidiaries, except as set forth in
the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act with respect to the Registration Statement and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission.
(g) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing
30
Date or Option Closing Date, as the case may be, to the effect that each of such
persons has carefully examined the Registration Statement, the Prospectus and
this Agreement, and that:
(i) The representations and warranties of the Company and
the Subsidiaries in this Agreement are true and correct, as if made
on and as of the Closing Date or the Option Closing Date, as the case
may be, and the Company and the Subsidiaries have each complied with
all agreements and covenants and satisfied all conditions contained
in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may
be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and,
if any, each amendment and each supplement thereto, contain all
statements and information required to be included therein, and none
of the Registration Statement, the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and neither
the Preliminary Prospectus or any supplement thereto included any
untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) none of the Company nor the Subsidiaries has incurred
up to and including the Closing Date or the Option Closing Date, as
the case may be, other than in the ordinary course of its business,
any material liabilities or obligations, direct or contingent; (b)
none of the Company nor the Subsidiaries has paid or declared any
dividends or other distributions on its capital stock; (c) none of
the Company nor the Subsidiaries has entered into any transactions
not in the ordinary course of business; (d) there has not been any
change in the capital stock of any of the Company or the Subsidiaries
or any material change in the debt (long or short-term) of any of the
Company or the Subsidiaries; (e) none of the Company nor the
Subsidiaries has sustained any material loss or damage to its
property or assets, whether or not insured; (g) there is no
litigation which is pending or threatened (or circumstances giving
rise to same) against any of the Company or the Subsidiaries, or any
affiliated party of any of the foregoing which is required to be set
forth in an amended or supplemented Prospectus which has not been set
forth; and (h) there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
31
(h) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from Pannel ▇▇▇▇ ▇▇▇▇▇▇▇,
Certified Public Accountants, A Professional Corporation;
(i) confirming that they are independent certified public
accountants with respect to the Company and the Subsidiaries within
the meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company and the
Subsidiaries included in the Registration Statement comply as to form
in all material respects with the applicable accounting requirements
of the Act and the Rules and Regulations thereunder and that the
Underwriters may rely upon the opinion of Pannel ▇▇▇▇ ▇▇▇▇▇▇▇,
Certified Public Accountants, A Professional Corporation, with
respect to such financial statements and supporting schedules
included in the Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
financial statements of the each of the Company and the Subsidiaries,
a reading of the latest available minutes of the stockholders and
board of directors and the various committees of the boards of
directors each of the Company and the Subsidiaries, consultations
with officers and other employees each of the Company and the
Subsidiaries responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the pro forma and
as-adjusted financial information contained in the Registration
Statement and Prospectus does not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or is not fairly presented in conformity
with generally accepted accounting principles applied on a basis
consistent with that of the audited financial statements of the
Company and the Subsidiaries or the unaudited pro forma or
as-adjusted financial information included in the Registration
Statement, (B) the unaudited financial statements and supporting
schedules of the Company and the Subsidiaries included in the
Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements of the Company and the Subsidiaries included in the
Registration Statement, or (C) at a specified date not more than five
(5) days prior to the effective date of the Registration Statement,
there has been any change in the capital stock of any of the Company
or the Subsidiaries, any change in the long-term debt of any of the
Company
32
or the Subsidiaries, or any decrease in the stockholders' equity of
any of the Company or the Subsidiaries or any decrease in the net
current assets or net assets of any of the Company or the
Subsidiaries as compared with amounts shown in the June 30, 1999
balance sheets included in the Registration Statement, other than as
set forth in or contemplated by the Registration Statement, or, if
there was any change or decrease, setting forth the amount of such
change or decrease, and (D) during the period from June 30, 1999 to a
specified date not more than five (5) days prior to the effective
date of the Registration Statement, there was any decrease in net
revenues or net earnings of any of the Company or the Subsidiaries or
increase in net earnings per common share of any of the Company or
the Subsidiaries, in each case as compared with the corresponding
period beginning June 30, 1998 other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5) days
prior to the effective date of the Registration Statement, the amount
of liabilities of any of the Company or the Subsidiaries (including a
break-down of commercial paper and notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the Company
and the Subsidiaries set forth in the Prospectus in each case to the
extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records,
including work sheets, of the Company and the Subsidiaries and
excluding any questions requiring an interpretation by legal counsel,
with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may request.
(j) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from Pannel ▇▇▇▇ ▇▇▇▇▇▇▇, Certified Public
Accountants, A Professional Corporation, a letter, dated as of the Closing Date
or the Option Closing Date, as the case may be, to the effect that they reaffirm
the statements made in the letter furnished pursuant to SUBSECTION (j) of this
Section hereof except that the specified date referred to shall be a date not
more than five days prior to the Closing Date or the Option Closing Date, as the
case may be, and, if the Company has elected to rely on Rule 430A of the Rules
and Regulations, to the further effect that they have carried out procedures as
specified in clause (v) of SUBSECTION (j) of this Section with respect to
certain amounts, percentages and financial information as specified by the
Underwriters and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(k) The Company shall have delivered to the Representative a
letter from Pannel ▇▇▇▇ ▇▇▇▇▇▇▇ addressed to the Company stating that they have
not during the immediately preceding two year period brought to the attention of
the Company's management any
33
"weakness" as defined in Statement of Auditing Standards No. 60 "Communication
of Internal Control Structure Related Matters Noted in an Audit," in any of the
Company's internal controls.
(l) On each of the Closing Date and Option Closing Date, if
any, there shall be duly tendered to the Representative the appropriate number
of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
(n) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement substantially in the form filed as Exhibit 1.2 to the Registration
Statement in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(o) On or before the Closing Date, the Units, the Common Stock
and the Redeemable Warrants shall have been duly approved for quotation on the
Nasdaq SmallCap Stock Market, subject to official notice of issuance.
(p) On or before the Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements, in form and
substance satisfactory to Representative's Counsel.
(q) On or before the effective date of the Registration
Statement, the Company and Continental Stock Transfer & Trust Company shall have
executed and delivered to the Underwriter the Warrant Agreement, substantially
in the form filed as Exhibit 1.3 to the Registration Agreement.
(r) At least two (2) full business days prior to the date
hereof, the Closing Date and each Option Closing Date, if any, the Company shall
have delivered to the Underwriter the unaudited interim financial statements
required to be so delivered pursuant to SECTION 4(p) of this Agreement.
If any condition to the Representative's obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may terminate
this Agreement or, if the Representative so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
7. INDEMNIFICATION.
(a) The Company, agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7, "Underwriters" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if
34
any, who controls the Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any
and all losses, claims, damages, expenses or liabilities, joint or several (and
actions, proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue statement
or alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this Section 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the Nasdaq SmallCap Stock Market or any other securities exchange, (B) the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the Prospectus, in the light of the circumstances under which they were
made), or (C) any breach of any representation, warranty, covenant or agreement
of the Company contained herein or in any certificate by or on behalf of the
Company or any of its officers delivered pursuant hereto unless, in the case of
clause (A) or (B) above, such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company with respect
to any Underwriter by or on behalf of such Underwriters expressly for use in any
Preliminary Prospectus, the Registration Statement or any Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be.
The indemnity agreement in this subsection (a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriter but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any application made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
any Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriter expressly
35
for use therein and constitute the only information furnished in writing by or
on behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in
addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action, investigation, inquiry, suit or proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action, investigation,
inquiry, suit or proceeding or separate but similar or related actions,
investigations, inquiries, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party form all
liability arising out of such claim, action, suit or proceeding and
36
(ii) doe snot include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof) (A)
in such proportion as is appropriate to reflect the relative benefits received
by each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions, investigations, inquiries,
suits or proceedings in respect thereof) referred to above in this subdivision
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall
37
not relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. EFFECTIVE DATE.
(a) This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. TERMINATION.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representative's opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Commission or any other government authority having
jurisdiction; or (iv) if trading of any of the securities of the Company shall
have been suspended, or any of the securities of the Company shall have been
delisted, on any exchange or in any over-the-counter market; or (v) if the
United States shall have become involved in a war or major hostilities, or if
there shall have been an escalation in an existing war or major hostilities or a
national emergency shall have been declared in the United States; or (vi) if a
banking moratorium has been declared by a state or federal authority; or (vii)
if a moratorium in foreign exchange trading has been declared; or (viii) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or
38
other calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Representative's opinion, make it inadvisable to proceed
with the delivery of the Securities; or (viii) if there shall have occurred any
outbreak or escalation of hostilities or any calamity or crisis or there shall
have been such a material adverse change in the conditions or prospects of the
Company, or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) the Company shall promptly
reimburse and indemnify the Representative for all of its actual out-of-pocket
expenses, including the fees and disbursements of counsel for the Underwriters
(less amounts previously paid pursuant to Section 5(c) above). Notwithstanding
any contrary provision contained in this Agreement, if this Agreement shall not
be carried out within the time specified herein, or any extension thereof
granted to the Representative, by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied (including, without limitation, pursuant to
Section 6 or Section 12) then, the Company shall promptly reimburse and
indemnify the Underwriter for all of their actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriter (less
amounts previously paid pursuant to Section 5(c) above). In addition, the
Company shall remain liable for all Blue Sky counsel fees and expenses and
filing fees. Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 6, 10 and 12 hereof), and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 and Section 7
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail otherwise than for a reason sufficient to justify the
termination of this Agreement (under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Firm Securities, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
39
In the event of any such default which does not result in a termination
of this Agreement, the Representative shall have the right to postpone the
Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at their option, by notice from the Underwriters or the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
13. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at ▇▇▇▇▇ & Company, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to the Company at
TrueVision International, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive
Officer, with a copy to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from the Underwriters shall be deemed to
be a successor by reason merely of such purchase.
15. CONSTRUCTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
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If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
TRUEVISION INTERNATIONAL, INC.
By: ________________________________
Name:
Title:
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇ & COMPANY, INC.
By:___________________________________
Name:
Title:
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SCHEDULE A
Underwriter Number of Units
----------- ---------------
▇▇▇▇▇ & Company, Inc.
TOTAL 500,000
42