OH&S DRAFT 12/14/99
[FORM OF UNDERWRITING AGREEMENT]
250,000 Shares of
Common Stock
▇▇▇▇▇▇▇ SPORTS, INC.
UNDERWRITING AGREEMENT
New York, New York
___________ __, 2000
▇.▇. ▇▇▇▇▇▇▇▇▇▇ & CO., INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇▇ Sports, Inc., a Delaware corporation (the "Company"),
confirms its agreement with ▇.▇. ▇▇▇▇▇▇▇▇▇▇ & Co., Inc. ("▇▇▇▇▇▇▇▇▇▇")
(hereinafter referred to as "you" or the "Underwriter"), with respect to the
sale by the Company and the purchase by the Underwriter of 250,000 shares of
common stock, $0.01 par value (the "Common Stock"). Such 250,000 shares are
hereinafter referred to as the "Firm Shares." Upon the Underwriter's request, as
provided in Section 2(b) of this Agreement, the Company shall also issue and
sell to the Underwriter up to an additional 37,500 shares for the purpose of
covering over-allotments, if any. Such 37,500 shares are hereinafter
collectively referred to as the "Option Shares." The Company also proposes to
issue and sell to the Underwriter or its designees warrants (the "Underwriter's
Warrants"), pursuant to the Underwriter's Warrant Agreement (the "Underwriter's
Warrant Agreement"), for the purchase of an additional ________ Shares (the
"Underwriter's Shares"). The Firm Shares and the Option Shares are hereinafter
collectively referred to as the "Shares." The Shares, the Underwriter's Warrants
and the Underwriter's Shares are hereinafter collectively referred to as the
"Securities" and are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and covenants and agrees with, the Underwriter as of
the date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and amendments
thereto, on Form S-1 (Registration No. 333-______________), including any
related preliminary prospectus or prospectuses (each a "Preliminary
Prospectus"), for the registration of the 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 of the Commission under the Act. The
Company will not file any other amendment to such registration statement which
the Underwriter 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 it
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 that information incorporated
by reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430A of the rules and regulations under
the Act), is hereinafter called the "Registration Statement," and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the rules and regulations under the Act is hereinafter called the
"Prospectus." For purposes hereof, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any 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 threatened. Each of the Preliminary Prospectus, the Registration Statement
and the Prospectus, at the respective times of filing thereof, conformed with
the requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, the Registration Statement nor the Prospectus, at the
respective times of filing thereof, contained an 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, in light of the circumstances in which
they were made, not misleading; provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or the Prospectus.
The Company has filed all reports, forms or other documents required to be filed
under the Act and 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.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Option Closing Date, if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriter 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; and, at and through such dates, neither the Registration Statement
nor the Prospectus, nor any amendment or
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supplement thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriter by or on behalf of the Underwriter expressly for use in the
Preliminary Prospectus, Registration Statement or the Prospectus or any
amendment thereof or supplement thereto.
(d) Each of the Company and its subsidiaries, __________, a
______________ corporation ("_____") and ______________, a _________ corporation
("____" and together with "_____, the "Subsidiaries"), has been duly organized
and is validly existing as a corporation in good standing under the laws of the
jurisdiction 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 require such qualification or licensing. Except as
set forth in the Prospectus, neither the Company nor any of the Subsidiaries
owns, directly or indirectly, an interest in any corporation, partnership,
trust, joint venture or other business entity. Each of the Company and the
Subsidiaries has all requisite power and authority (corporate and other), and
has obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; 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 with all federal, state, local and foreign laws, rules and
regulations to which it is subject; and neither the Company nor any of 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 or any of the Subsidiaries. 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' business as currently conducted and as contemplated are correct in
all respects and do 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.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, if any, based upon the
assumptions set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement
and the Underwriter's 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 all statements
with respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been
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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
Underwriter's 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 Underwriter'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.
(f) The audited consolidated financial statements of the Company
together with the related notes thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, income, changes in stockholders' equity and the results of operations
of the Company on a consolidated basis at the respective dates and for the
respective periods to which they apply. 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, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company or any of the Subsidiaries taken as a whole, whether
or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement and the Prospectus;
and the outstanding debt, the property, both tangible and intangible, and the
businesses of each of the Company and the Subsidiaries conform in all respects
to the descriptions thereof contained in the Registration Statement and the
Prospectus. The financial information set forth in the Prospectus under the
headings "Summary Financial Information," "Capitalization," "Selected Financial
Information" and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" fairly presents, on the basis stated in the Prospectus,
the information set forth therein and such financial information has been
derived from or compiled on a basis consistent with that of the audited
consolidated financial statements included in the Prospectus.
(g) 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.
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(h) No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriter in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriter of the
Securities from the Company, (iii) the consummation by the Company of any of its
obligations under this Agreement or the Underwriter's Warrant Agreement, or (iv)
resales of the Securities in connection with the distribution contemplated
hereby.
(i) Each of the Company and the Subsidiaries maintains insurance
policies, including, but not limited to, general liability, property, personal
and product liability insurance, and surety bonds which insure the Company and
the Subsidiaries and the employees of each against such losses and risks
generally insured against by comparable businesses. Neither the Company nor any
of the Subsidiaries (i) has failed to give notice or present any insurance claim
with respect to any insurable matter under the appropriate insurance policy or
surety bond in a due and timely manner, (ii) does have any disputes or claims
against any underwriter of such insurance policies or surety bonds, or has
failed to pay any premiums due and payable thereunder, or (iii) has 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 of the Subsidiaries.
(j) Except as disclosed in the Registration Statement, 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, the Company or any of the Subsidiaries which (i)
questions the validity of the capital stock of the Company, this Agreement and
the Underwriter's Warrant Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement or the Underwriter's
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 respects), or (iii)
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 the Company and the Subsidiaries taken as a
whole.
(k) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, to enter into this Agreement
and the Underwriter's Warrant Agreement and to consummate the transactions
provided for in such agreements; and each of this Agreement and the
Underwriter's Warrant Agreement have been duly and properly authorized, executed
and delivered by the Company. Each of this Agreement and the Underwriter's
Warrant Agreement 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 motion, legal or equitable, and except as obligations to
indemnify or contribute to losses may be limited by applicable law). None of the
Company's issue and sale of the Securities, execution or delivery of this
Agreement, the Underwriter's Warrant Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated
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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 any of the Subsidiaries pursuant to
the terms of (i) the certificate of incorporation or by-laws of the Company or
any of the Subsidiaries, (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 either the Company
or any of 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,
or (iii) any statute, judgment, decree, order, rule or regulation applicable to
the Company or any of the Subsidiaries 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
the Subsidiaries or any of their activities or properties.
(l) 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 and the Underwriter's Warrant Agreement, the performance of this
Agreement and the Underwriter's Warrant Agreement and the transactions
contemplated hereby and thereby, except such as have been obtained under the
Act, state securities laws and the rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the Underwriter's
purchase and distribution of the Securities.
(m) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company or any of the Subsidiaries is a
party or by which any of such entities may be bound or to which any of such
entities' assets, properties or business may be subject have been duly and
validly authorized, executed and delivered by the Company or the Subsidiaries,
and constitute legal, valid and binding agreements of the Company and the
Subsidiaries, as the case may be, enforceable against the Company or any of the
Subsidiaries, as the case may be, in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting the enforcement of creditors' rights and the
application of equitable principles in any motion, legal or equitable, and
except as obligations to indemnify or contribute to losses may be limited by
applicable law). The descriptions in the Registration Statement of agreements,
contracts and other documents are accurate and fairly present the information
required to be shown with respect thereto by Form S-1; 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 complete and correct copies of the documents of which they
purport to be copies.
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(n) 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 any of 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
any class of its capital stock; and, subsequent to such dates, and except as may
otherwise be disclosed in the Prospectus, there has not been any change in the
capital stock, debt (long or short term) or liabilities or any material change
in 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.
(o) No default exists in the due performance and observance of any
term, covenant or condition 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 the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries is or may be bound or to which the property or assets (tangible
or intangible) of the Company or any of the Subsidiaries is or may be subject.
(p) 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, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company or any of the Subsidiaries by the United States Department of Labor
or any other governmental agency responsible for the enforcement of any federal,
state, local or foreign laws, rules and regulations relating to employment.
There is no unfair labor practice charge or complaint against the Company or any
of the Subsidiaries pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company or any of the Subsidiaries, or any predecessor
entity, and none has ever occurred. No representation question exists respecting
the employees of the Company or any of the Subsidiaries, and, except as
disclosed in the Registration Statement, no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of the
Subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
the Subsidiaries. No labor dispute with the employees of the Company or any of
the Subsidiaries exists or is imminent.
(q) Neither 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(l) and 3(37), respectively,
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). Neither 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 any of the Subsidiaries to any tax penalty
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on prohibited transactions and which has not adequately been corrected. Each
ERISA Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
Neither the Company nor any of the Subsidiaries has ever completely or partially
withdrawn from a "multiemployer plan."
(r) Neither the Company nor any of the Subsidiaries, nor any of
their respective employees, directors, stockholders or affiliates (within the
meaning of the Rules and Regulations), has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might be
expected to cause or result in, under the Exchange Act or otherwise, the
stabilization or manipulation of the price of any security of the Company,
whether to facilitate the sale or resale of the Securities or otherwise.
(s) To the best knowledge of the Company and the Subsidiaries, none
of the trademarks, trade names, service marks, service names, copyrights,
patents and patent applications, and none of the licenses and rights to the
foregoing, presently owned or held by the Company or any of the Subsidiaries are
in dispute or are in 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
trademarks, trade names, service marks, service names, copyrights, patents and
patent applications, and licenses and rights 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 payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any trademark, trade name, service ▇▇▇▇,
service name, copyright, patent or patent application except as set forth in the
Registration Statement or the Prospectus. 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 or any of the Subsidiaries that
challenges the exclusive rights of the Company or any of 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.
(t) Each of the Company and the Subsidiaries owns and has the
unrestricted right to use all trade secrets, know-how (including all 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 that are material to the
development, manufacture, operation and sale of all products and services sold
or proposed to be sold by the Company or any of the Subsidiaries, free and clear
of and without violating any right, lien, or claim of others, including, without
limitation, former employers of its employees.
(u) 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,
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encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, other than liens for taxes not yet due and
payable.
(v) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, whose reports are 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.
(w) 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 issuances
that may affect the Underwriter's compensation, as determined by the NASD.
(x) The Common Stock is listed for quotation on the American Stock
Exchange ("AMEX") and the Company is in compliance with the maintenance
requirements of AMEX.
(y) Neither the Company, nor any of the Subsidiaries, nor any of
their respective directors, officers, stockholders, employees, agents or any
other person acting on behalf of the Company or any of 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 instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any other person who was, is or may be in a
position to help or hinder the business of the Company or any of the
Subsidiaries (or assist the Company or any of the Subsidiaries in connection
with any actual or proposed transaction) which (i) might subject the Company or
any 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), (ii) if not given in the past, might have had a material and adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs, prospects, stockholders' equity, value, operations, properties,
business or results of operations of the Company or any of the Subsidiaries, or
(iii) if not continued in the future, might materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company or any of the Subsidiaries. The Company's and each of
the Subsidiaries' 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.
(z) Each of the Company and the Subsidiaries 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
9
Cuba or with any person or affiliate located in Cuba changes in any material
way, the Company will provide the Department notice of such business or change,
as appropriate, in a form acceptable to the Department.
(aa) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company or any of the Subsidiaries, and no affiliate or
associate (as these terms are defined in the Rules and Regulations) of any of
the foregoing persons or entities, has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be furnished
or sold by the Company or any of the Subsidiaries, or (B) purchases from or
sells or furnishes to the Company or any of the Subsidiaries any goods or
services, or (ii) a beneficial interest in any contract or agreement to which
the Company or any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries may be bound. 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 of the
Subsidiaries, and any officer, director or any person listed in the "Principal
Stockholders" section of the Prospectus or any affiliate or associate of any of
the foregoing persons or entities.
(bb) The minute books of the Company and each of the Subsidiaries
that have been made available to the Underwriter, contain a complete summary of
all meetings and actions of the directors and stockholders of the Company and
each of the Subsidiaries since the time of its incorporation, and reflect all
transactions referred to in such minutes accurately in all respects.
(cc) Except and to the extent described in the Prospectus, no holder
of any securities of the Company or any of the Subsidiaries or of any options,
warrants or other convertible or exchangeable securities of the Company or any
of the Subsidiaries has the right to include any securities issued by the
Company or any of the Subsidiaries in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement. Except as set forth in the Prospectus, no person
or entity holds any anti-dilution rights with respect to any securities of the
Company or any of the Subsidiaries.
(dd) Any certificate signed by any officer of the Company or any
Subsidiary, and delivered to the Underwriter or to Underwriter's Counsel (as
defined in Section 4(d) hereof), shall be deemed a representation and warranty
by the Company to the Underwriter as to the matters covered thereby.
(ee) The Company has filed a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Securities and such Form 8-A
has been declared effective by the Commission and the Company has complied with
all of its reporting obligations under the Exchange Act subsequent thereto.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to
10
sell to the Underwriter, and the Underwriter agrees to purchase from the
Company, the Firm Shares at a price equal to $_____ per Share [93% of the public
offering price].
(b) In addition, on the basis of the representations, warranties,
covenants and agreement, herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase all or any part of the Option Shares at a price equal to
$______ per Share [93% of the public offering price]. The option granted hereby
will expire forty-five (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 Shares upon notice by the Underwriter to the Company
setting forth the number of Option Shares as to which the Underwriter is then
exercising the option and the time and date of payment and delivery for any such
Option Shares. Any such time and date of delivery (an "Option Closing Date")
shall be determined by the Underwriter, but shall not be later than seven (7)
full business days after the exercise of said option, nor in any event prior to
the Closing Date, unless otherwise agreed upon by the Underwriter and the
Company. Nothing herein contained shall obligate the Underwriter to exercise the
option granted hereby. No Option Shares shall be delivered unless the Firm
Shares shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Shares shall be made at the offices of counsel to the Underwriter
at, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall
be agreed upon by the Underwriter and the Company. Such delivery and payment
shall be made at 10:00 a.m. (New York City time) on ____________ __, 2000 or at
such other time and date as shall be agreed upon by the Underwriter 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 the "Closing Date"). In addition, in
the event that any or all of the Option Shares are purchased by the Underwriter,
payment of the purchase price for, and delivery of certificates for, such Option
Shares shall be made at the above mentioned office of the Underwriter or at such
other place as shall be agreed upon by the Underwriter and the Company. Delivery
of the certificates for the Firm Shares and the Option Shares, if any, shall be
made to the Underwriter against payment by the Underwriter of the purchase price
for the Firm Shares and the Option Shares, if any, to the order of the Company
by New York Clearing House funds. Certificates for the Firm Shares and the
Option Shares, if any, shall be in definitive, fully registered form, shall bear
no restrictive legends and shall be in such denominations and registered in such
names as the Underwriter 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 Shares and the Option Shares, if any, shall be
made available to the Underwriter at such offices or such other place as the
Underwriter may designate for inspection, checking and packaging no later than
9:30 a.m. on the last business day prior to the Closing Date or the relevant
Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Underwriter or its designees the Underwriter's Warrants for an aggregate
purchase price of $.0001 per
11
warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of an additional _____ shares of Common Stock. The Underwriter'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
_______ percent (_____%) of the public offering price of the Shares. The
Underwriter's Warrant Agreement and the form of the certificates for the
Underwriter's Warrant shall be substantially in the form filed as Exhibit ____
to the Registration Statement. Payment for the Underwriter's Warrants shall be
made on the Closing Date.
3. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Underwriter deems advisable, the Underwriter
shall make a public offering of the Firm Shares and such of the Option Shares as
the Underwriter may determine (other than to residents of or in any jurisdiction
in which qualification of the Shares is required and has not become effective)
at the price and upon the other terms set forth in the Prospectus. The
Underwriter may from time to time increase or decrease the public offering price
after distribution of the Shares has been completed to such extent as the
Underwriter, in its sole discretion, deems advisable. The Underwriter may enter
into one or more agreements as the Underwriter, in its sole discretion, deems
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 the Underwriter 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 the
Exchange Act before termination of the offering of the Securities to the public
by the Underwriter of which the Underwriter shall not previously have been
advised and furnished with a copy, or to which the Underwriter shall have
objected or which is not in compliance with the Act, the Exchange Act and the
Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriter and confirm the same in writing, (i)
when the Registration Statement, as amended, becomes effective, when any
post-effective amendment to the Registration Statement becomes effective and, 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, (ii) of the
issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding the outcome of which may result in the suspension
of 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 any 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
12
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 Underwriter) with the Commission, or transmit the Prospectus
by a means reasonably calculated to result in filing the same with the
Commission, pursuant to Rule 424(b)(1) of the Rules and Regulations (or, if
applicable and if consented to by the Underwriter, pursuant to Rule 424(b)(4) of
the Rules and Regulations) within the time period specified in Rule 424(b)(1)
(or, if applicable and if consented to by the Underwriter, Rule 424(b)(4)).
(d) The Company will give the Underwriter 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 in
connection with the offering of any 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 Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such amendment or supplement to which the Underwriter
or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, its counsel ("Underwriter's Counsel"),
shall object.
(e) The Company shall endeavor in good faith, in cooperation with
the Underwriter, 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 Underwriter may reasonably designate to permit
the continuance of sales and dealings therein for as long as may be necessary to
complete the distribution contemplated hereby, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Underwriter 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, the Exchange Act and the Rules and
Regulations 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 Underwriter's Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading, or if it is necessary at any time to amend or supplement the
prospectus to comply with the Act, the Company will notify the Underwriter
promptly and prepare and file with the Commission an
13
appropriate amendment or supplement in accordance with Section 10 of the Act,
each such amendment or supplement to be satisfactory to Underwriter's Counsel,
and the Company will furnish to the Underwriter copies of such amendment or
supplement as soon as available and in such quantities as the Underwriter may
request.
(g) As soon as practicable, but in any event not later than forty
five (45) days after the end of the 12-month period beginning on the day after
the end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (ninety (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 Underwriter, 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 five (5) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings and will deliver to the Underwriter:
i) concurrently with furnishing such quarterly reports to its
stockholders statements of income of the Company for such quarter in the
form furnished to the Company's stockholders and certified by the
Company's principal financial and accounting officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity and cash flows of the Company for such fiscal year,
accompanied by a copy of the report thereon of the Company's independent
certified public accountants;
iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD
or any securities exchange;
v) every press release and every material news item or article
of interest to the financial community in respect of the Company, the
Subsidiaries or their respective affairs which was released or prepared by
or on behalf of the Company or any of the Subsidiaries; and
vi) any additional information of a public nature concerning
the Company or any of the Subsidiaries (and any future subsidiaries) or
their respective business which the Underwriter may request.
14
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for the Common Stock.
(j) The Company will furnish to the Underwriter, without charge and
at such place as the Underwriter may designate, copies of each Preliminary
Prospectus, the Registration Statement and any pre-effective or post-effective
amendments thereto (one of which 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 Underwriter may request.
(k) None of the Company, the Subsidiaries, nor any of their
respective officers, directors, stockholders or affiliates (within the meaning
of the Rules and Regulations) will take, directly or indirectly, any action
designed to stabilize or manipulate the price of any securities of the Company,
or which might in the future reasonably be expected to cause or result in the
stabilization or manipulation of the price of any such securities.
(l) The Company shall apply the net proceeds from the sale of the
Securities offered to the public in the manner set forth under "Use of Proceeds"
in the Prospectus. No portion of the net proceeds will be used, directly or
indirectly, to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, any Form SR
required by Rule 463 under the Act) from time to time under the Act, the
Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents will comply as to form and substance with the applicable requirements
under the Act, the Exchange Act and the Rules and Regulations.
(n) The Company shall furnish to the Underwriter 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 their letters to be
furnished pursuant to Section 6(j) hereof.
(o) The Company shall for a period of five (5) years from the date
hereof, use its best efforts to maintain the AMEX quotation of the Common Stock
to the extent outstanding.
(p) For a period of five (5) years from the Closing Date, the
Company shall at the request of the Underwriter, furnish or cause to be
furnished to the Underwriter and at the
15
Company's sole expense, (i) daily consolidated transfer sheets relating to the
Common Stock and (ii) a list of holders of all of the Company's securities.
(q) For a period of five (5) years from the Closing Date, the
Company shall, at the Company's sole expense, (i) promptly provide the
Underwriter, upon any and all requests of the Underwriter, with a "blue sky
trading survey" for secondary sales of the Company's securities, prepared by
counsel to the Company, and (ii) take all necessary and appropriate actions to
further qualify the Company's securities in all jurisdictions of the United
States in order to permit secondary sales of such securities pursuant to the
"blue sky" laws of those jurisdictions, provided that such jurisdictions do not
require the Company to qualify as a foreign corporation.
(r) As soon as practicable, but in no event more than thirty (30)
days after 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 five (5) years.
(s) Until the completion of the distribution of the shares of Common
Stock to the public, and during any period during which a prospectus is required
to be delivered, the Company shall not, without the prior written consent of the
Underwriter, 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.
(t) For a period equal to the lesser of (i) five (5) years from the
date hereof, and (ii) the sale to the public of the Underwriter's Securities,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Form S-3 (or other appropriate form) for the registration
under the Act of the Underwriter's Shares.
(u) 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 Underwriter.
(v) 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.
(w) The Company agrees that, from the effective date of the
Registration Statement, it shall retain the services of a public relations firm,
reasonably acceptable to ▇▇▇▇▇▇▇▇▇▇.
(x) The Company shall have entered into an agreement with certain
individuals and/or institutions who (i) may be current shareholders of the
Company and (ii) shall have agreed to exercise any and all rights not exercised
by the stockholders of the Company in the rights offering described in the
Registration Statement.
16
5. Payment of Expenses.
(a) The Company hereby agrees to pay (such payment to be made, at
the discretion of the Underwriter, on the Closing Date and any Option Closing
Date (to the extent not paid on the Closing Date or a previous Option Closing
Date)) all expenses and fees (other than fees of Underwriter's Counsel, except
as set forth in clause (iv) below), incident to the performance of the
obligations of the Company under this Agreement and the Underwriter's Warrant
Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing, (including mailing and
handling charges) filing, delivery and mailing (including the payment of
postage, 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, overnight
delivery or courier charges with respect thereto) and delivery of this
Agreement, the Underwriter's Warrant Agreement and agreements with selected
dealers, and related documents, including the cost of all copies thereof and of
each Preliminary Prospectus and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriter and such dealers as the
Underwriter may request, in such quantities as the Underwriter may request,
(iii) the printing, engraving, issuance and delivery of the Securities, (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, expenses and fees of counsel in connection
therewith, (v) advertising costs and expenses, including, but not limited to
costs and expenses in connection with "road shows," information meetings and
presentations, information agent fees, bound volumes and prospectus memorabilia
and "tombstone" advertisement expenses, (vi) costs and expenses in connection
with due diligence investigations, including, but not limited to, the fees of
any independent counsel or consultants, (vii) fees and expenses of a transfer
and warrant agent and registrar for the Securities, (viii) applications for
assignments of a rating of the Securities by qualified rating agencies, (ix)
issue and transfer taxes, if any, (x) the fees payable to the Commission and the
NASD, (xi) the fees and expenses incurred in connection with the listing of the
Securities on AMEX and any other exchange and (x) legal fees (not to exceed
$75,000 taken together with such fees incurred in connection with the rights
offering described in the Registration Statement) and expenses of Underwriter's
Counsel in addition to any legal fees and expenses of Underwriter's counsel
related to blue sky laws in (iv) above.
(b) If this Agreement is terminated by the Underwriter in accordance
with the provisions of Section 6 or Section 10(a) hereof, the Company shall
reimburse and indemnify the Underwriter for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriter's Counsel.
6. Conditions of the Underwriter's Obligations. The obligations of
the Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date and each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date and each Option Closing Date, if
any, of the statements of officers of the Company made pursuant to the
17
provisions hereof; 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 Underwriter, and, at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriter's Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the shares of Common Stock
and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Underwriter of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, is material, or omits to state a
fact which, in the Underwriter's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances in which they were made not misleading, or that the Prospectus, or
any supplement thereto, contains an untrue statement of fact which, in the
Underwriter's opinion, is material, or omits to state a fact which, in the
Underwriter's opinion, is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall have
received from Underwriter's Counsel such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the Registration
Statement, the Prospectus and such other related matters as the Underwriter may
request and Underwriter's Counsel shall have received such papers and
information as they may request in order to enable them to pass upon such
matters.
(d) On the Closing Date, the Underwriter shall have received the
favorable opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and Brandeis LLP, counsel to the Company,
dated the Closing Date, addressed to the Underwriter, in form and substance
satisfactory to Underwriter's Counsel, to the effect that:
i) Each of the Company and the Subsidiaries (A) has been duly
organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation (Delaware [and ________],
respectively), (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
18
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. To the best of its
knowledge, 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 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,
neither 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 or the Subsidiaries. The disclosure in the
Registration Statement concerning the effects of federal, state, local and
foreign laws, rules and regulations on the Company's and the Subsidiaries'
business as currently conducted and as contemplated are correct in all
respects and do 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) neither the Company nor the Subsidiaries owns, directly or
indirectly, an interest in any corporation, partnership, joint venture,
trust or other business entity, other than its subsidiaries _________ , as
described in the Registration Statement and the Prospectus. The Company is
the registered owner of one hundred percent (100%) of the outstanding
capital stock of the Subsidiaries, and all 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) the Company has a duly authorized, issued and outstanding
capitalization and as set forth in the Prospectus under "Capitalization,"
and except as set forth in the Prospectus, neither the Company nor any of
the Subsidiaries is a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and the
Underwriter's 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 each of the Company
and the Subsidiaries 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 of the Subsidiaries or any similar contractual right
granted by the Company or any of the Subsidiaries. The Securities to be
19
sold by the Company hereunder and under the Underwriter's 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
Underwriter'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 and the Underwriter's
Warrant Agreement of the Securities to be sold by the Company hereunder
and thereunder, the Underwriter 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 (within the
meaning of the Rules and Regulations) of the Company. No transfer tax is
payable by or on behalf of the Underwriter in connection with (A) the
issuance by the Company of the Securities, (B) the purchase by the
Underwriter of the Securities from the Company, (C) the consummation by
the Company of any of its obligations under this Agreement or the
Underwriter's Warrant Agreement, or (D) resales of the Securities in
connection with the distribution contemplated hereby;
iv) 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;
v) 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;
vi) to such counsel's knowledge, (A) there are no agreements,
contracts or other documents required by the Act to be described in the
Registration Statement and the Prospectus or required to be filed as
exhibits to 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) 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
is a party or by which it is bound are accurate and fairly represent the
information required to be shown by Form S-1; (C) except as disclosed in
the
20
Registration Statement and the Prospectus, 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, the Company and 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 or the Underwriter's 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 the Company 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 an adverse
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 operations of the
Company taken as a whole, which could adversely affect the present or
prospective ability of the Company to perform its obligations under this
Agreement or the Underwriter's Warrant Agreement or which in any manner
draws into question the validity or enforceability of this Agreement or
the Underwriter's Warrant Agreement;
vii) the Company has full legal right, power and authority to
enter into each of this Agreement and the Underwriter's Warrant Agreement
and to consummate the transactions provided for herein and therein; and
each of this Agreement and the Underwriter's Warrant Agreement has been
duly authorized, executed and delivered by the Company. Each of this
Agreement and the Underwriter's Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto,
constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating
to or affecting 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 and the Underwriter's 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 any of the Subsidiaries pursuant to the
terms of (A) the certificate of incorporation or bylaws of the Company or
any of the Subsidiaries, (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
21
money, or any other agreement or instrument to which the Company or any of
the Subsidiaries is a party or by which any is or may be bound or to which
the properties or assets (tangible or intangible) of either are or may be
subject, (C) any statute applicable to the Company or any of the
Subsidiaries or (D) any judgment, decree, order, rule or regulation
applicable to the Company or any of the Subsidiaries 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 the Subsidiaries or any of their
activities or properties;
viii) 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 Statement, this Agreement and the Underwriter's Warrant
Agreement, or the performance of this Agreement and the Underwriter's
Warrant Agreement and the transactions contemplated hereby and thereby;
ix) 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;
x) to the best of such counsel's knowledge, neither the
Company nor any of the Subsidiaries is 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 the Company or any of 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 or
any of 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;
xi) the statements in the Prospectus under "Prospectus
Summary," "Risk Factors," "The Company," "Business," "Management,"
"Principal Stockholders," "Certain Transactions," "Shares Eligible For
Future Sale," and "Description of Capital Stock" 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;
22
xii) to the best of our knowledge, the Company meets all the
maintenance requirements for continued quotation on AMEX and has complied
with all reporting obligations under the Exchange Act;
xiii) 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 Company or
any of the Subsidiaries) and there is no claim or action by any person
pertaining to, or proceeding, pending or threatened, which challenges the
rights of the Company or any of 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 or any of the Subsidiaries' business (including, without
limitation, any such licenses or rights described in the Prospectus as
being owned or possessed by the Company or any of the Subsidiaries);
xiv) the persons listed under the captions "Principal
Stockholders" and 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) except as disclosed in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the right
to include and/or register any securities of the Company or any of the
Subsidiaries in the Registration Statement, require the Company to file
any registration statement or, if filed, to include any security in such
registration statement; and
xvi) 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
Underwriter's compensation, as determined by the NASD.
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and each of
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 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 or the 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 the Prospectus, or any amendment or
supplement thereto, as of the date of the Preliminary Prospectus and the
Prospectus, and as of the
23
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, in light of the circumstances in which they were
made, 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 the Prospectus, or any supplements or amendments
thereto).
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 Underwriter's Counsel) of
other counsel acceptable to Underwriter's Counsel, familiar with the applicable
laws; and (b) as to matters of fact, to the extent they deem proper, on
certificates and written statements of responsible officers of the Company or
the Subsidiaries and certificates or other written statements of officers of
departments of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company or the Subsidiaries,
provided that copies of any such statements or certificates shall be delivered
to Underwriter's Counsel, if requested. The opinion of such counsel for the
Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Underwriter and they are justified in
relying thereon. Such opinion shall also state that the Underwriters' Counsel is
entitled to rely thereon. 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 accord.
(e) At each Option Closing Date, if any, the Underwriter shall have
received the favorable opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & Brandeis LLP, counsel to the
Company, dated the relevant Option Closing Date, addressed to the Underwriter,
and in form and substance satisfactory to Underwriter's Counsel confirming as of
the Option Closing Date, the statements made by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & Brandeis LLP,
in its opinion delivered on the Closing Date.
(f) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriter's Counsel shall have been furnished with such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
Section 6(g) hereof, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(g) 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, business or
results of operations of the Company or any of 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 the Company or any of the Subsidiaries from the latest date as
of which the financial condition of the Company and the Subsidiaries is set
forth in the Registration Statement and the Prospectus; (iii) neither the
24
Company nor any of the Subsidiaries shall be in default under any provision of
any instrument relating to any outstanding indebtedness; (iv) neither the
Company nor any of 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 the Company or any of 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 the
Company or any of 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 the Company or any of
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 Company and the Subsidiaries taken as a whole, 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.
(h) At the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or the relevant 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 in this
Agreement are true and correct, as if made on and as of the Closing Date
or the Option Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to
the best of each of such person's knowledge, 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 or any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading and neither the Preliminary Prospectus nor any supplement
thereto included any untrue statement of a material fact or omitted to
state any material fact required to be stated
25
therein or necessary to make the statements therein, in light of the
circumstances in 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) neither the
Company nor any of the Subsidiaries has incurred any material liabilities
or obligations, direct or contingent; (B) neither the Company nor any of
the Subsidiaries has not paid or declared any dividends or other
distributions on its capital stock; (C) neither the Company nor any of 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 or
long-term debt or any increase in the short-term borrowings (other than
any increase in short-term borrowings in the ordinary course of business)
of the Company (E) neither the Company nor any of the Subsidiaries has
sustained any material loss or damage to its property or assets, whether
or not insured; (F) there is no litigation which is pending or threatened
(or circumstances giving rise to same) against the Company or any
affiliate (within the meaning of the Rules and Regulations) of the
foregoing which is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (G) there has occurred no
event required to be set forth in an amended or supplemented Prospectus
which has not been set forth.
References to the Registration Statement and the Prospectus in this
Section 6(h) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriter will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriter shall
have received a letter, dated such date, addressed to the Underwriter and in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriter and Underwriter's Counsel, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and
the Rules and Regulations;
ii) stating that it is their opinion that the financial
statements of the Company included in the Registration Statement comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations and that the
Underwriter may rely upon the opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP 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 unaudited interim consolidated financial
statements of the Company and the Subsidiaries, a reading of the latest
available minutes of the stockholders and
26
board of directors and the various committees of the board of directors of
the Company and the Subsidiaries, consultations with officers and other
employees 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 unaudited consolidated financial statements and supporting
schedules of the Company included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are not fairly
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
consolidated financial statements of the Company included in the
Registration Statement, or (B) at a specified date nor more than five (5)
days prior to the effective date of the Registration Statement, there has
been any change in the capital stock or long-term debt of the Company and
the Subsidiaries, or any decrease in the stockholders' equity or net
current assets or net assets of the Company and the Subsidiaries as
compared with amounts shown in the September 30, 1999 balance sheet
included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any change or
decrease, setting forth the amount of such change or decrease, and (C)
during the period from September 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, net earnings or net
earnings per share of Common Stock, in each case as compared with the
corresponding period beginning September 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 the Company and 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 audit 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 Underwriter may request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter, dated as of
the Closing Date or the relevant Option Closing Date, as the case may be, to the
effect that (i) it reaffirms the statements made in the letter furnished
pursuant to Section 6(j), (ii) if the Company has elected to rely on
27
Rule 430A of the Rules and Regulations, to the further effect that ▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP has carried out procedures as specified in clause (v) of Section
6(j) hereof with respect to certain amounts, percentages and financial
information as specified by the Underwriter and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (v).
(l) The Company shall have received a letter, dated such date,
addressed to the Company, in form and substance satisfactory in all respects to
the Underwriter, from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company's management any "weakness," as defined in Statement of Auditing
Standard No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's internal controls.
(m) On each of Closing Date and Option Closing Date, if any, there
shall have been duly tendered to the Underwriter the appropriate number of
Securities.
(n) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to Section 4(e) 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.
(o) On or before the effective date of the Registration Statement,
the Company shall have executed and delivered to the Underwriter, the
Underwriter's Warrant Agreement, substantially in the form filed as Exhibit ____
to the Registration Statement. On or before the Closing Date, the Company shall
have executed and delivered to the Underwriter the Underwriter's Warrants in
such denominations and to such designees as shall have been provided to the
Company.
(p) On or before Closing Date, the Common Stock shall be in good
standing with respect to its continued listing on AMEX.
(q) 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 consolidated financial
statements required to be so delivered pursuant to Section 4(n) of this
Agreement.
If any condition to the Underwriter's or the Underwriter's
obligations hereunder to be fulfilled prior to or at the Closing Date or at any
Option Closing Date, as the case may be, is not so fulfilled, the Underwriter
may terminate this Agreement or, if the Underwriter 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
Underwriter (for purposes of this Section 7, "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
and each person, if any, who controls the
28
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 referred to as "applications") 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 NASD, AMEX or any 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 light
of the circumstances in 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 Underwriter 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 Section 7(a) shall be in addition to any liability which the Company may
have at common law or otherwise.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, and each 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 the 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 the Prospectus directly
relating to the transactions effected by the Underwriter in connection with the
offering contemplated hereby. 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 for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriter for
inclusion in any Preliminary Prospectus, the Registration Statement or the
Prospectus. The indemnity agreement
29
in this Section 7(b) shall be in addition to any liability which the Underwriter
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, 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 or they 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, an indemnified party shall
have the right to employ its own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party
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 shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to one or all of the
indemnifying parties (in which event 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. 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, 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 from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party. 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 may not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent
30
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 (A) above but also
the relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any case
where the Company is a contributing party and the Underwriter is the indemnified
party, the relative benefits received by the Company, on the one hand, and the
Underwriter, 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 Underwriter
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 Underwriter, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid 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
in the first (1st) sentence of this Section 7(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 Section 7(d), the Underwriter shall not be required to contribute any
amount in excess of the underwriting discount applicable to the Securities
purchased by the Underwriter hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7(d), each person, if any, who
controls the Company or the Underwriter 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 or the Underwriter, as the case may be, subject in each case to this
Section 7(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 Section 7(d), notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this Section 7(d), or to the extent that such party or
parties were not adversely affected by such omission. Notwithstanding anything
in this Section 7 to the contrary, no party will be liable for contribution with
respect to the settlement of any action or claim
31
effected without its written consent. 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, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company contained in this Agreement, or contained in certificates of officers of
the Company submitted pursuant hereto, shall be deemed to be representations,
warranties, covenants and agreements at the Closing Date and each Option Closing
Date, if any, and such representations, warranties, covenants and agreements of
the Company, and the respective indemnity and contribution agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter or the Company, and shall
survive the termination of this Agreement or the issuance and delivery of the
Securities to the Underwriter.
9. Effective Date. This Agreement shall become effective at 10:00
a.m., New York City time, on the next full business day following the date
hereof, or at such earlier time after the Registration Statement becomes
effective as the Underwriter, 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 Underwriter of telegrams to
securities dealers releasing such shares for offering or the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to Section 10(b) hereof, the Underwriter shall have the
right to terminate this Agreement: (i) if any domestic or international event or
act or occurrence has materially adversely disrupted, or in the Underwriter's
opinion will in the immediate future materially adversely disrupt, the financial
markets; or (ii) if 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, AMEX, the Nasdaq Stock Market, the NASD, the Boston Stock Exchange,
the Commission or any governmental authority having jurisdiction over such
matters; or (iv) if trading of any of the securities of the Company shall have
been suspended, or if 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 shall have been declared by any state or federal authority;
or (vii) if the Company shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Underwriter's opinion, make it inadvisable to proceed with the delivery
of the Securities; or (ix) 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
if there shall have been such a material adverse change in the general market,
political or economic
32
conditions, in the United States or elsewhere, as in the Underwriter'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 Underwriter in accordance
with the provisions of Section 6 or Section 10(a) hereof the Company shall
promptly reimburse and indemnify the Underwriter for all its actual
out-of-pocket expenses, including the fees and disbursements of Underwriter's
Counsel, less amounts previously paid pursuant to Section 5(c) hereof. In
addition, the Company shall remain liable for all "blue sky" counsel fees and
expenses and "blue sky" filing fees. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections 6 and 10(a)
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 be affected by
such election or termination or failure to carry out the terms of this Agreement
or any part hereof.
11. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Shares to be purchased on an Option Closing Date, the Underwriter may, at
its option, by notice from the Underwriter to the Company, terminate the
Underwriter's obligation to purchase Option Shares from the Company on such
date) without any liability on the part of any non-defaulting party other than
pursuant to Section 5, Section 7 and Section 10 hereof. No action taken pursuant
to this Section 11 shall relieve the Company from liability, if any, in respect
of such default.
12. 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 ▇.▇. ▇▇▇▇▇▇▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to
the Company at ▇▇▇▇▇▇▇ Sports, Inc., ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Mr. ▇▇▇▇▇ ▇▇▇▇▇, with a copy to, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ &
Brandeis LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
13. Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Underwriter, 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 Shares from the Underwriter shall be deemed to be a
successor by reason merely of such purchase.
14. 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 choice of law or conflict of laws principles.
33
15. 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.
16. Entire Agreement; Amendments. This Agreement and the
Underwriter'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 and thereof. This
Agreement may not be amended except in a writing signed by the Underwriter and
the Company.
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
▇▇▇▇▇▇▇ SPORTS, INC.
By:___________________________________
Name:
Title:
Confirmed and accepted as of the date first above written.
▇.▇. ▇▇▇▇▇▇▇▇▇▇ & CO., INC.
By:________________________
Name:
Title:
34