Exhibit 1.1
Draft of Underwriting Agreement
_________ SHARES
WEBVALLEY, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
___________, 1999
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated
-----------------------------------------
As Representatives of the Several Underwriters
c/o ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
WebValley, Inc., a Minnesota corporation (the "Company"), proposes to
sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), for whom you are acting as the representatives (the
"Representatives"), an aggregate of ________ Million (_________) shares (the
"Firm Shares") of Common Stock, $.01 par value, of the Company (the "Common
Stock"). The respective amounts of Firm Shares to be so purchased by the several
Underwriters are set forth opposite their names in Schedule I hereto. In
addition, the Company proposes, subject to the terms and conditions stated
herein, to grant to the Underwriters an option to purchase an aggregate of up to
_______ additional shares of Common Stock upon the request of the
Representatives solely for the purpose of covering over allotments (the "Option
Shares"). The Firm Shares and the Option Shares are referred to herein
collectively as the "Shares." Further, the Company hereby confirms its agreement
to issue to the Representatives warrants for the purchase of a total of
__________ shares as described in Section 2(G) hereof (the "Representatives'
Warrants") assuming purchase by the Underwriters of the Firm shares. The shares
issuable upon exercise of the Representatives' Warrants are referred to as the
Warrant Shares.
As Representatives, you have advised the Company (i) that you are
authorized to enter into this Agreement on behalf of the Underwriters and (ii)
that the Underwriters are willing, acting severally and not jointly, to purchase
the number of Firm Shares, aggregating in total ______ Million (_________)
shares, set forth opposite their respective names in Schedule I hereto, plus
their pro rata portion of the Option Shares purchased if you elect to exercise
the over allotment option in whole or in part for the accounts of the
Underwriters.
The Company hereby confirms the arrangements with respect to the
purchase of the Shares severally by each of the Underwriters. The Company has
been advised and hereby acknowledges that ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company,
Incorporated and _____________________ have been duly authorized to act as the
representatives of the Underwriters. As used in this Agreement, the term
"Underwriter" refers to any individual member of the underwriting syndicate and
includes any party substituted for an Underwriter under Section 9 hereof.
1
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
A. The Company represents and warrants to, and agrees
with, each of the several Underwriters as follows:
i. A registration statement on Form S-1 (Registration
No. 333-_____) with respect to the Shares has been
prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") promulgated
thereunder and has been filed with the Commission
under the Act. If the Company has elected to rely
upon Rule 462(b) under the Act to increase the size
of the offering registered under the Act, the Company
will prepare and file with the Commission a
registration statement with respect to such increase
pursuant to Rule 462(b). Copies of the registration
statement as amended to date have been delivered by
the Company to the Representatives. Such registration
statement, including a registration statement (if
any) filed pursuant to Rule 462(b) under the Act and
the information (if any) deemed to be part thereof
pursuant to Rules 430A and 434(d) under the Act, and
all prospectuses included as a part thereof, all
financial statements included in such registration
statement, and all schedules and exhibits thereto, as
amended at the time when the registration statement
shall become effective, are herein referred to as the
"Registration Statement," and the term "Prospectus"
as used herein shall mean the final prospectus
included as a part of the Registration Statement on
file with the Commission when it becomes effective
(except that if a prospectus is filed by the Company
pursuant to Rules 424(b) and 430A under the Act, the
term "Prospectus" as used herein shall mean the
prospectus so filed pursuant to Rules 424(b) and 430A
(including any term sheet meeting the requirements of
Rule 434 under the Act provided by the Company for
use with a prospectus subject to completion within
the meaning of Rule 434 in order to meet the
requirements of Section 10(a) of the Act)). The term
"Preliminary Prospectus" as used herein means any
prospectus used prior to the Effective Date (as
defined in Section 5(A) hereof) and included as a
part of the Registration Statement, prior to the time
it becomes or became effective under the Act and any
prospectus subject to completion as described in
Rules 430A or 434 under the Act. Copies of the
Registration Statement, including all exhibits and
schedules thereto, any amendments thereto and all
Preliminary Prospectuses have been delivered to you.
ii. The Registration Statement has been declared
effective, and at all times subsequent thereto up to
each closing date, the Registration Statement and
Prospectus and all amendments thereof and supplements
thereto, will comply in all material respects with
the provisions of the Act
2
and the Rules and Regulations. Neither the Commission
nor any state securities division has issued any
order (i) preventing or suspending the use of any
Preliminary Prospectus, (ii) issuing a stop order
with respect to the offering of the Shares or (iii)
requiring the recirculation of a Preliminary
Prospectus. The Registration Statement (as amended,
if the Company shall have filed with the Commission
any post effective amendments thereto) does not and
will not contain any untrue statement of a material
fact or omit to state a material fact require to be
stated therein or necessary to make the statements
therein, in light of the circumstances under which
they were made, not misleading. Each Preliminary
Prospectus, at the time of filing thereof, the
Registration Statement as of the date declared
effective and at all times subsequent thereto up to
each closing date, and the Prospectus (as amended or
supplemented, if the Company shall have filed with
the Commission any amendment thereof or supplement
thereto) conformed and conforms in all material
respects to the requirements of the Act and the Rules
and Regulations and did not, does not and will not
contain any untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which
they were made, not misleading; provided, however,
that none of the representations and warranties in
this Subsection 1(A)(ii) shall apply to statements
in, or omissions from, the Registration Statement or
the Prospectus (or any amendment thereof or
supplement thereto) which are based upon and conform
to information furnished to the Company by the
Underwriters, in writing specifically for use in the
preparation of the Registration Statement or the
Prospectus or any such amendment or supplement. There
is no contract or other document of the Company of a
character required by the Act or the Rules and
Regulations to be described in the Registration
Statement or Prospectus or to be filed as an exhibit
to the Registration Statement that has not been
described or filed as required. The descriptions of
all such contracts and documents or references
thereto are correct and include the information
required under the Act and the Rules and Regulations.
iii. The Company has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of Minnesota, with full
corporate power and authority, to own, lease and
operate its properties and conduct its business as
described in the Registration Statement and
Prospectus. The Company owns all of the outstanding
shares of capital stock of Software Moguls India
Private, Ltd. (the "India Subsidiary"). The India
Subsidiary has been duly incorporated and is validly
existing as a corporation under the laws of India,
with full corporate power and authority to own, lease
and operate its properties and conduct its business
as described in the Registration Statement and
Prospectus. Each of the Company and the India
Subsidiary is duly
3
qualified to do business as a foreign corporation in
good standing in each jurisdiction in which the
ownership or lease of its properties, or the conduct
of its business, requires such qualification and in
which the failure to be qualified or in good standing
would have a material adverse effect on the condition
(financial or otherwise), results of operations,
shareholders' equity, business, property or prospects
of the Company and the India Subsidiary, taken as a
whole. Except for the India Subsidiary, the Company
has no subsidiaries, is not affiliated with, and does
not own any stock or other equity interest of, any
other company or business entity.
iv. Each of the Company and the India Subsidiary has
all necessary material authorizations, licenses,
approvals, consents, permits, certificates and orders
of and from all state, federal, foreign and other
governmental or regulatory authorities to own its
properties and to conduct its business as described
in the Registration Statement and Prospectus, is
conducting its business in substantial compliance
with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business,
and has received no notice of nor has it knowledge of
any basis for any proceeding or action for the
revocation or suspension of any such authorizations,
licenses, approvals, consents, permits, certificates
or orders.
v. Neither the Company nor the India Subsidiary is in
violation of or in default under (i) its Articles of
Incorporation or Bylaws, (ii) or in default in the
performance or observance of any material obligation,
agreement, covenant or condition contained in any
bond, debenture, note or other evidence of
indebtedness or in any contract, license, indenture,
bond mortgage, loan agreement, joint venture or
partnership agreement, lease, agreement or instrument
to which the Company or the India Subsidiary is a
party or by which the Company or the India Subsidiary
or any of its properties are bound, (iii) any law,
order, rule, regulation, writ, injunction or decree
of any government, governmental instrumentality or
court, domestic or foreign, which violation or
default would have a material adverse effect on the
condition (financial or otherwise), results of
operations, shareholders' equity, business, property
or prospects of the Company and the India Subsidiary,
taken as a whole, or the ability of the Company to
consummate the transactions contemplated hereby.
vi. The Company has full requisite power and
authority to enter into this Agreement. This
Agreement has been duly authorized, executed and
delivered by the Company and will be a valid and
binding agreement on the part of the Company,
enforceable in accordance with its terms, if and when
this Agreement shall have become effective in
accordance with Section 8, except as enforceability
may be limited by the application of bankruptcy,
insolvency, moratorium or similar laws affecting the
rights of creditors generally and by judicial
limitations on the right of specific
4
performance and other equitable remedies, and except
as the enforceability of the indemnification or
contribution provisions hereof may be affected by
applicable federal or state securities laws. The
performance of this Agreement and the consummation of
the transactions herein contemplated will not result
in a material breach or violation of any of the terms
and provisions of or constitute a material default
under (i) any bond, debenture, note or other evidence
of indebtedness, or any contract, license, indenture,
mortgage, loan agreement, joint venture or
partnership agreement, lease, agreement or other
instrument to which the Company is a party or by
which the property of the Company is bound, (ii) the
Company's Articles of Incorporation or Bylaws, or
(iii) any statute or any order, rule or regulation of
any court, governmental agency or body having
jurisdiction over the Company. No consent, approval,
authorization or order of any court, governmental
agency or body is required for the consummation by
the Company of the transactions on its part herein
contemplated, except such as may be required under
the Act or under state or other securities laws.
vii. There are no actions, suits or proceedings
pending before any court or governmental agency,
authority or body to which the Company or the India
Subsidiary is a party or of which the business or
property of the Company or the India Subsidiary is
the subject which (i) might result in any material
adverse change in the condition (financial or
otherwise), shareholders' equity, results of
operations, business or prospects of the Company and
the India Subsidiary, taken as a whole, (ii)
materially and adversely affect their properties or
assets, or (iii) prevent consummation of the
transactions contemplated by this Agreement. To the
best of the Company's knowledge, no such actions,
suits or proceedings are threatened.
viii. The Company has the duly authorized and
outstanding capitalization set forth under the
caption "Capitalization" in the Prospectus. The
outstanding shares of capital stock of the Company
have been duly authorized and validly issued, fully
paid and nonassessable. The Shares conform in
substance to all documents relating thereto contained
in the Registration Statement and Prospectus. The
Shares to be sold by the Company hereunder have been
duly authorized and, when issued and delivered
pursuant to this Agreement, will be validly issued,
fully paid and nonassessable and will conform to the
description thereof contained in the Prospectus. No
statutory preemptive rights or similar rights to
subscribe for or purchase shares of capital stock of
any security holders of the Company exist with
respect to the issuance and sale of the Shares by the
Company. Except as described in the Prospectus, the
Company has no agreement with any security holder
which gives such security holder the right to require
the Company to register under the Act
5
any securities of any nature owned or held by such
person in connection with the transactions
contemplated by this Agreement. Except as described
in the Prospectus, there are no outstanding options,
warrants, agreements, contracts or other rights to
purchase or acquire from the Company or the India
Subsidiary any shares of their capital stock. Except
as described in the Prospectus, there are no
agreements among the Company's executive officers and
directors and any other persons with respect to the
voting or transfer of the Company's capital stock or
with respect to other aspects of the Company's
affairs. Upon payment for and delivery of the Shares
to be sold by the Company pursuant to this Agreement,
the Underwriters will acquire good and marketable
title to such Shares, free and clear of all liens,
encumbrances or claims created by actions of the
Company. The certificates evidencing the Shares will
comply as to form with all applicable provisions of
the laws of the State of Minnesota.
ix. The Representatives' Warrants and the Warrant
Shares have been duly authorized. The
Representatives' Warrants, when issued and delivered
to the Representatives, will constitute valid and
binding obligations of the Company in accordance with
their terms, except as enforceability may be limited
by the application of bankruptcy, insolvency,
moratorium or similar laws affecting the rights of
creditors generally and by judicial limitations on
the right of specific performance. The Warrant Shares
when issued in accordance with the terms of this
Agreement and pursuant to the Representatives'
Warrants, will be validly issued, fully paid and
nonassessable and subject to no preemptive rights or
similar rights on the part of any person or entity. A
sufficient number of shares of Common Stock of the
Company have been reserved for issuance by the
Company upon exercise of the Representatives'
Warrants.
x. The financial statements of the Company, together
with the related notes, included in the Registration
Statement and Prospectus (the "Financial Statements")
fairly and accurately present the financial position,
the results of operations and changes in
shareholders' equity and cash flows of the Company at
the dates and for the respective periods to which
such Financial Statements apply. The Financial
Statements are accurate, complete and correct and
have been prepared in accordance with the Act, the
Rules and Regulations and generally accepted
accounting principles, consistently applied
throughout the periods involved, and all adjustments
necessary for a fair presentation of results for such
periods have been made, except as otherwise stated
therein; and the supporting schedules included in the
6
Registration Statement present fairly the information
required to be stated therein. No other financial
statements or schedules are required to be included
in the Registration Statement. The summary and
selected consolidated financial data included in the
Registration Statement present fairly the information
shown therein on the basis stated in the Registration
Statement and have been compiled on a basis
consistent with the financial statements presented
therein. The summaries of the Financial Statements
and the other financial, statistical and related
notes set forth in the Registration Statement and the
Prospectus are (i) accurate and correct and fairly
present the information purported to be shown thereby
as of the dates and for the periods indicated on a
basis consistent with the audited financial
statements of the Company and (ii) in compliance in
all material respects with the requirements of the
Act and the Rules and Regulations.
xi. Ernst & Young, LLP, which has expressed its
opinion with respect to the financial statements
filed with the Commission as part of the Registration
Statement, are independent public accountants as
required by the Act and the rules and regulations
thereunder.
xii. Since the respective dates as of which
information is given in the Registration Statement
and Prospectus, (i) there has not been any material
adverse change, or any development, event or
occurrence in the business of the Company and the
India Subsidiary, taken as a whole, that, together
with other developments, events and occurrences with
respect to such business, would have or would
reasonably be expected to have a material adverse
effect on the condition (financial or otherwise) of
the Company, the India Subsidiary or the management,
shareholders' equity, results of operations,
business, property or prospects of the Company or the
India Subsidiary, whether or not occurring in the
ordinary course of business, (ii) there has not been
any transaction not in the ordinary course of
business entered into by the Company or the India
Subsidiary which is material to the Company and the
India Subsidiary, taken as a whole, other than
transactions described or contemplated in the
Registration Statement, (iii) neither the Company nor
the India Subsidiary has incurred any material
liabilities or obligations, which are not in the
ordinary course of business or which could result in
a material reduction in the future earnings of the
Company on a consolidated basis, (iv) neither the
Company nor the India Subsidiary has sustained any
material loss or interference with its business or
properties from fire, flood, windstorm, accident or
other calamity, whether or not covered by insurance,
(v) there has not been any change in the capital
stock of the Company or the India Subsidiary (other
than upon the exercise of options described in the
Registration Statement) or any material increase in
the short-term or long-term debt (including
capitalized lease obligations) of the Company or the
India Subsidiary, (vi) there has not been any
declaration or payment of any dividends or any
distributions of any kind with respect to the capital
stock of the Company or the India Subsidiary, other
than any dividends or distributions described or
contemplated in the Registration Statement, and
7
(vii) there has not been any issuance of warrants,
options, convertible securities or other rights to
purchase or acquire capital stock of the Company or
the India Subsidiary.
xiii. The Company and the India Subsidiary have filed
all necessary federal, state, local and foreign
income and franchise tax returns and paid all taxes
shown as due thereon. The Company has no knowledge of
any tax deficiency which either has been or might be
asserted against it or the India Subsidiary which
would materially and adversely affect the business or
properties of the Company and the India Subsidiary,
taken as a whole.
xiv. The Company and the India Subsidiary maintain a
system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions
are executed in accordance with management's general
or specific authorizations and (ii) transactions are
recorded as necessary to permit preparation of
financial statements in conformity with generally
accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is
permitted only in accordance with management's
general or specific authorization; and (iv) the
recorded accountability for assets is compared with
existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
xv. The Company and the India Subsidiary have good
and marketable title to all of the property, real and
personal, described in the Registration Statement or
Prospectus as being owned by the Company and the
India Subsidiary, free and clear of all liens,
encumbrances, equities, charges or claims, except as
do not materially interfere with the uses made and to
be made by the Company and the India Subsidiary of
such property or as disclosed in the Financial
Statements. The Company and the India Subsidiary have
valid and binding leases to the real and personal
property described in the Registration Statement or
Prospectus as being under lease to the Company and
the India Subsidiary, except as to those leases which
are not material to the Company and the India
Subsidiary, taken as a whole, or the lack of
enforceability of which would not materially
interfere with the use made and to be made by the
Company and the India Subsidiary of such leased
property.
xvi. There has been no unlawful storage, treatment or
disposal of waste by the Company or the India
Subsidiary at any of the facilities owned or leased
thereby, except for such violations which would not
have a material adverse effect on the condition,
(financial or otherwise) or the shareholders' equity,
results of operation, business, properties or
prospects of the Company and the India Subsidiary,
taken as a whole. There has been no material spill,
discharge, leak, emission, ejection, escape, dumping
or release of any kind onto the properties owned or
leased by
8
the Company or the India Subsidiary, or into the
environment surrounding those properties, of any
toxic or hazardous substances, as defined under any
federal, state or local regulations, laws or
statutes, except for those releases either
permissible under such regulations, laws or statutes
or otherwise allowable under applicable permits or
which would not have a material adverse effect on the
condition (financial or otherwise) or the
shareholders' equity, results of operation, business,
properties or prospects of the Company and the India
Subsidiary, taken as a whole.
xvii. Each employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"))
("Employee Benefit Plan"), and each bonus,
retirement, pension, profit sharing, stock bonus,
thrift, stock option, stock purchase, incentive,
severance, deferred or other compensation or welfare
benefit plan, program, agreement or arrangement of,
or applicable to employees or former employees of,
the Company or the India Subsidiary or with respect
to which the Company or the India Subsidiary could
have any liability ("Benefit Plans"), was or has been
established, maintained and operated in all material
respects in compliance with all applicable federal,
state, and local statutes, orders, governmental rules
and regulations, including, but not limited to, ERISA
and the Internal Revenue Code of 1986, as amended
(the "Code"). No Benefit Plan is or was subject to
Title IV of ERISA or Section 302 of ERISA or Section
412 of the Code and for which an unfunded liability
exists. The Company does not, either directly or
indirectly as a member of a controlled group within
the meaning of Sections 414(b), (c), (m) and (o) of
the Code ("Controlled Group"), have any material
liability that remains unsatisfied or arising under
Section 502 of ERISA, Subchapter D of Chapter I of
Subtitle A of the Code or under Chapter 43 of
Subtitle D of the Code. No action, suit, grievance,
arbitration or other matter of litigation or claim
with respect to any Benefit Plan (other than routine
claims for benefits made in the ordinary course of
plan administration for which plan administrative
procedures have not been exhausted) is pending or, to
the Company's knowledge, threatened or imminent
against or with respect to any Benefit Plan, any
member of a Controlled Group that includes the
Company, or any fiduciary within the meaning of
Section 3(21) of ERISA with respect to a Benefit Plan
which, if determined adversely to the Company, would
have a material adverse effect on the Company.
Neither the Company nor any member of a Controlled
Group that includes the Company, has any knowledge of
any facts that could give rise to any action, suit,
grievance, arbitration or any other manner of
litigation or claim with respect to any Benefit Plan.
xviii No labor disturbance or dispute by the
employees or consultants or contractors of the
Company or the India Subsidiary exists or, to the
Company's knowledge, is threatened which could
reasonably be expected
9
to have a material adverse effect on the conduct of
the business or the financial condition (financial or
otherwise), results of operations, properties or
prospects of the Company and the India Subsidiary,
taken as a whole.
xix. Except as disclosed in the Prospectus:
a. To the Company's knowledge, the Company
and the India Subsidiary own or possess the
full right to use or are licensed to use all
patents, patent applications, inventions,
copyrights, trademarks, service marks,
applications for registration of trademarks
and service marks, trade secrets, know-how
and other intellectual property, proprietary
information or know-how reasonably necessary
for the conduct of their present or intended
business as described in the Prospectus
("Proprietary Rights"); there are no pending
legal, governmental or administrative
proceedings relating to the Proprietary
Rights to which the Company or the India
Subsidiary is a party or of which any
property of the Company or the India
Subsidiary is subject; and no such
proceedings are, to the best of the
Company's knowledge, threatened or
contemplated against the Company which
threatened or contemplated proceedings are
likely to result in a material adverse
effect upon the Company and the India
Subsidiary, taken as a whole;
b. Neither the Company nor the India
Subsidiary has received notice of any
material conflict or claim with asserted
intellectual property rights of any third
parties;
c. To the best of the Company's knowledge,
neither the Company nor the India Subsidiary
infringes upon the rights or claimed rights
of any person under or, with respect to, any
of the Proprietary Rights referred to in
Section 1(A)(xix)(a) above; except as
disclosed in the Prospectus, neither the
Company nor the India Subsidiary is
obligated or under any liability whatsoever
to make any payments by way of royalties,
fees or otherwise to any owner of, licensor
of, or other claimant to, any Proprietary
Rights, with respect to the use thereof or
in connection with the conduct of its
business or otherwise; and to the best of
the Company's knowledge, neither the Company
nor the India Subsidiary is using any
confidential information or trade secrets of
any other party in the conduct of its
business;
d. Neither the Company nor the India
Subsidiary have entered into any consent,
indemnification, forbearance to ▇▇▇ or
settlement
10
agreement with respect to the Proprietary
Rights other than in the ordinary course of
business;
e. To the best of the Company's knowledge,
the Company's and the India Subsidiary's
patents, trademark registrations, service
▇▇▇▇ registrations and copyright
registrations are valid and enforceable and
no such registrations have lapsed, expired
or been abandoned or canceled or are the
subject of cancellation or other adversarial
proceedings, and all applications therefor
are pending and are in good standing;
f. The Company and the India Subsidiary are
in compliance in all material respects with
their contractual obligations under licenses
of Proprietary Rights; and
g. To the Company's knowledge, the Company
and the India Subsidiary own or possess the
full rights to use or are licensed to use
all trade secrets, including know-how,
customer lists, inventions, designs,
processes, computer programs and any other
technical data or information necessary to
the development, manufacture, operation and
sale of all products sold or proposed to be
sold by them.
xx. The Company and the India Subsidiary
maintain insurance, which is in full force
and effect, of the types and in the amounts
reasonably adequate for their business and,
to the best of the Company's knowledge,
consistent with coverage comparable to the
insurance maintained by similar companies or
businesses.
xxi. The Company has not sold any securities in
violation of Section 5 of the Act.
xxii. The conditions for use of a registration
statement on Form S-1 for the distribution of the
Shares have been satisfied with respect to the
Company.
xxiii. The Company intends to apply the proceeds from
the sale of the Shares by it to the purposes and
substantially in the manner set forth in the
Prospectus.
xxiv. No person is entitled, directly or indirectly,
to compensation from the Company or the Underwriters
for services as a finder in connection with the
transactions contemplated by this Agreement.
11
xxv. All material transactions between the Company
and the India Subsidiary and shareholders of the
Company who beneficially own more than 5% of any
class of the Company's voting securities or officers
or directors of the Company have been accurately
disclosed in the Prospectus, and the terms of each
such transaction are fair to the Company and no less
favorable to the Company than the terms that could
have been obtained from unrelated parties.
xxvi. The Company has not distributed and will not
distribute any prospectus or other offering material
in connection with the offering and sale of the
Shares other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to
be distributed by the Company.
xxvii. The Company has not taken and will not take,
directly or indirectly, any action designed to, or
which has constituted, or which might reasonably be
expected to cause or result in, stabilization or
manipulation of the price of the Common Stock.
xxviii. The Company's application for listing the
Shares on the Nasdaq National Market ("Nasdaq") has
been approved.
xxix. To the Company's knowledge, none of the
Company's officers, directors or security holders has
any affiliations with the National Association of
Securities Dealers, Inc., except as set forth in the
Registration Statement or as otherwise disclosed in
writing to the Representatives.
xxx. The Company has obtained a written agreement,
enforceable by the Representatives, from each officer
and director of the Company and shareholder who holds
5% or more of the outstanding Common Stock of the
Company that for 180 days following the Effective
Date, such person will not, without the prior written
consent of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated,
sell, transfer or otherwise dispose of, or agree to
sell, transfer or otherwise dispose of, other than by
gift to donees who agree to be bound by the same
restriction or by will or the laws of descent, any of
his or her Common Stock, or any options, warrants or
rights to purchase Common Stock or any shares of
Common Stock received upon exercise of any options,
warrants or rights to purchase Common Stock, which
are beneficially held by such persons during such
180-day period.
xxxi. The Company is not, and upon completion of the
sale of the Shares contemplated hereby will not be,
required to register as an "investment company" under
the Investment Company Act of 1940, as amended.
12
xxxii. The Company has complied and will comply with
all provisions of Florida Statutes Section 517.075
(Chapter 92-198, Laws of Florida). Neither the
Company, nor any affiliate thereof, does business
with the government of Cuba or with any person of
affiliate located in Cuba.
xxxiii. Other than as contemplated by this Agreement,
the Company has not incurred any liability for any
finder's fee, broker's fee or other agent's
commission in connection with the execution and
delivery of this Agreement or the consummation of the
transactions contemplated hereby.
B. Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel to the
Underwriters shall be deemed to be a representation and
warranty of the Company to each Underwriter as to the matters
covered thereby.
2. PURCHASE, SALE, DELIVERY AND PAYMENT.
A. On the basis of the representations, warranties, and
agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to
each of the Underwriters, and the Underwriters agree,
severally and not jointly, to purchase, at a purchase price
equal to 93% of the per share price to public of $_____ (the
"Offering Price"), the respective amount of Firm Shares set
forth opposite such Underwriter's name in Schedule I hereto,
subject to adjustments in accordance with Section 9 hereof.
The Underwriters will collectively purchase all of the Firm
Shares if any are purchased.
B. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters
to purchase an aggregate of up to ________ Option Shares at
the same purchase price as the Firm Shares for use solely in
covering any over allotments made by the Underwriters in the
sale and distribution of the Firm Shares. The option granted
hereunder may be exercised at any time (but not more than
once) within 30 days after the Effective Date (as defined in
Section 5(A) hereof) upon notice (confirmed in writing) by the
Representatives to the Company setting forth the aggregate
number of Option Shares as to which the Underwriters are
exercising the option and the date on which certificates for
such Option Shares are to be delivered. Option Shares shall be
purchased severally for the account of each Underwriter in
proportion to the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto. The option
granted hereby may be canceled by the Representatives upon
notice to the Company as to the Option Shares for which the
option is unexercised at the time of expiration of the 30-day
period.
C. The Company will deliver the Firm Shares to the
Representatives at the offices of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company,
Incorporated, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless some other place
is agreed upon, at 10:00 a.m., Minneapolis time, against
payment of the purchase price at the same place, on the third
full business day after trading of the Shares has commenced,
or, if the offering commences after 4:30 p.m., on the fourth
full business day after commencement of the offering, or such
earlier time as may be agreed upon between the Representatives
and the Company, such time and place being herein referred to
as the "First Closing Date."
D. The Company will deliver the Option Shares being purchased
by the Underwriters to the Representatives at the
above-referenced offices of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company,
Incorporated set forth in Section 2(C) above, unless some
other place is agreed, at 10:00 a.m., Minneapolis time,
against payment of the purchase price at such place, on the
date determined by the Representatives and of which the
Company has received notice as provided in Section 2(B), which
shall not be earlier than two nor later than five full
business days after the exercise of the option as set forth in
Section 2(B), or at such other time not later than ten full
business days thereafter as may be agreed upon by the
Representatives and the Company, such time and date being
herein referred to as the "Second Closing Date."
E. Certificates for the Shares to be delivered will be
registered in such names and issued in such denominations as
the Underwriters shall request two business days prior to the
First Closing Date or the Second Closing Date, as the case may
be. The certificates will be made available to the
Underwriters in definitive form for the purpose of inspection
and packaging at least twenty-four (24) hours prior to the
respective closing dates.
F. Payment to the Company for the Shares sold shall be made,
against delivery to the Representatives or their designated
agent, of certificates for the Shares, by wire transfer to an
account designated by the Company or by certified or official
bank check or checks in Clearing House funds, payable to the
order of the Company.
G. On the first Closing Date, the Company shall issue and
deliver to the Representatives the Representatives' Warrants
against payment by the Representatives of the purchase price
therefor of $__________. The Representatives' Warrants shall
first become exercisable one year after the Effective Date and
shall remain exercisable for a period of four years
thereafter. The Representatives' Warrants shall be subject to
certain transfer restrictions and shall be in substantially
the form filed as an exhibit to the Registration Statement and
attached hereto as Appendix A.
14
3. UNDERWRITERS' OFFERING TO THE PUBLIC.
A. The Underwriters will make a public offering of the Shares
directly to the public (which may include selected dealers who
are members in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or foreign dealers not
eligible for membership in the NASD but who have agreed to
abide by the interpretation of the NASD Board of Governor's
with respect to free-riding and withholding) as soon as the
Underwriters deem practicable after the Registration Statement
becomes effective at the Offering Price, subject to the terms
and conditions of this Agreement and in accordance with the
Prospectus. Concessions from the Offering Price may be allowed
selected dealers who are members of the NASD as the
Underwriters determine and the Underwriters will furnish the
Company with such information about the distribution
arrangements as may be necessary for inclusion in the
Registration Statement. It is understood that the Offering
Price and such concessions may vary after the public offering.
The Underwriters shall offer and sell the Shares only in
jurisdictions in which the offering of Shares has been duly
registered or qualified, or is exempt from registration or
qualification, and shall take reasonable measures to effect
compliance with applicable state and local securities laws.
B. It is understood that the Representatives, individually and
not as representatives, may (but shall not be obligated to)
make payment on behalf of any Underwriter or Underwriters for
the Shares to be purchased by such Underwriter or
Underwriters. No such payment by the Representatives shall
relieve such Underwriter or Underwriters from any of its or
their other obligations hereunder.
4. COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees with each of the several
Underwriters as follows:
A. If the Company has elected to rely on Rule 430A under the
Act, the Company will prepare and file a Prospectus (or term
sheet within the meaning of Rule 434 under the Act) containing
the information omitted therefrom pursuant to Rule 430A under
the Act with the Commission within the time period required
by, and otherwise in accordance with the provisions of, Rules
424(b), 430A and 434, if applicable, under the Act; if the
Company has elected to rely upon Rule 462(b) under the Act to
increase the size of the offering registered under the Act,
the Company will prepare and file a registration statement
with respect to such increase with the Commission within the
time period required by, and otherwise in accordance with the
provisions of, Rule 462(b) under the Act; the Company will
prepare and file with the Commission, promptly upon the
request of the Representatives, any amendments or supplements
to the Registration Statement or Prospectus (including any
term sheet within the meaning of Rule 434 under the
15
Act) that, in the opinion of the Representatives, may be
necessary or advisable in connection with distribution of the
Securities by Underwriters; and the Company will not file any
amendment or supplement to the Registration Statement or
Prospectus (including any term sheet within the meaning of
Rule 434 under the Act) to which the Representatives shall
reasonably object by notice to the Company after having been
furnished with a copy a reasonable time prior to the filing.
B. The Company will advise the Representatives promptly of (i)
any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or
for any additional information, (ii) the issuance by the
Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus, (iii)
the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, or (iv) the institution or
threatening of any proceedings for that purpose, and the
Company will use its best efforts to prevent the issuance of
any such stop order preventing or suspending the use of the
Prospectus or suspending such qualification and to obtain as
soon as possible the lifting thereof, if issued.
C. The Company will promptly prepare and file at its own
expense with the Commission any amendments of, or supplements
to, the Registration Statement and the Prospectus which may be
necessary in connection with the distribution of the Shares by
the Underwriters. During the period when a Prospectus relating
to the Shares is required to be delivered under the Act, the
Company will promptly file any amendments of, or supplements
to, the Registration Statement and the Prospectus which may be
necessary to correct any untrue statement of a material fact
or any omission to state any material fact necessary to make
the statements therein, in light of the circumstances under
which they were made, not misleading. The Company will not
file any amendment of, or supplement to, the Registration
Statement or Prospectus, after the Effective Date, which shall
not previously have been submitted to the Representatives and
its counsel a reasonable time prior to such proposed filing or
to which the Representatives shall have reasonably objected.
In case any Underwriter is required to deliver a prospectus in
connection with sales of any Shares at any time nine months or
more after the Effective Date, upon the request of the
Representatives but at the expense of such Underwriter, the
Company will prepare and deliver to such Underwriter as many
copies as the Representatives may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the
Act.
D. The Company will endeavor to qualify the Shares for sale
under the securities laws of such jurisdictions as the
Representatives may reasonably designate and the Company will
file such consents to service of process or other documents
necessary or appropriate in order to effect such qualification
or registration. In each jurisdiction in which the Shares
shall have been qualified or registered as above provided, the
Company will continue such qualifications or
16
registrations in effect for so long as may be required for
purposes of the distribution of the Shares and make and file
such statements and reports in each year as are or may be
reasonably required by the laws of such jurisdiction to permit
secondary trading of the same; provided, however, that in no
event shall the Company be obligated to qualify to do business
in any jurisdiction where it is not now so qualified or to
take any action which would subject it to the service of
process in suits, other than those arising out of the offering
or sale of the Shares.
E. The Company will furnish to the Representatives, as soon as
available, copies of the Registration Statement and all
amendments (two of which will be signed and which shall
include all exhibits), each Preliminary Prospectus, if any,
the Prospectus and any amendments or supplements to such
documents including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such
quantities as the Representatives may from time to time
reasonably request. The Company specifically authorizes the
Underwriters and all dealers to whom any of the Shares may be
sold by the Underwriters to use and distribute copies of such
Preliminary Prospectuses and Prospectuses in connection with
the sale of the Shares as and to the extent permitted by the
federal and applicable state and local securities laws.
F. The Company will make generally available to its security
holders an earnings statement, in a form complying with
requirements of Section 11(a) of the Act and Rule 158
thereunder, as soon as practicable and in any event not later
than 45 days after the end of its fiscal quarter in which
occurs the first anniversary date of the Effective Date,
meeting the requirements of Section 11(a) of the Act covering
a period of at least 12 consecutive months beginning after the
Effective Date, and will advise you in writing when such
statement has been so made available.
G. The Company will, for such period up to two years from the
First Closing Date, deliver to the Representatives copies of
its annual report and copies of all other documents, and
information furnished by the Company to its security holders
or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant
to the Act or the Exchange Act, or any state securities
commission by the Company. The Company will deliver to the
Representatives similar reports with respect to significant
subsidiaries, if any, as that term is defined in the rules and
regulations under the Act, which are not consolidated in the
Company's financial statements.
H. The Company shall be responsible for and pay all costs and
expenses incident to the performance of its obligations under
this Agreement including, without limiting the generality of
the foregoing, (i) all costs and expenses in connection with
the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits),
Preliminary Prospectuses, if any, the Prospectus and any
amendments thereof or supplements to any of the foregoing;
17
(ii) the issuance and delivery of the Shares, including taxes,
if any; (iii) the cost of all certificates representing the
Shares; (iv) the fees and expenses of the Transfer Agent for
the Shares; (v) the fees and disbursements of counsel for the
Company; (vi) all fees and other charges of the independent
public accountants of the Company; (vii) the cost of
furnishing and delivering to the Underwriters and dealers
participating in the offering copies of the Registration
Statement (including appropriate exhibits), Preliminary
Prospectuses, the Prospectus and any amendments of, or
supplements to, any of the foregoing; (viii) the NASD filing
fee; (ix) all fees and expenses of counsel for the
Representatives incurred in qualifying the Shares for sale
under the laws of such jurisdictions designated by the
Representatives (including filing fees). In the event this
Agreement is terminated pursuant to Section 8 below, the
Company shall remain obligated to pay the Representatives
their actual accountable out-of-pocket expenses, plus any fees
and expenses described in (ix) above, not to exceed $75,000.
I. The Company will not take, and will use its best efforts to
cause each of its officers and directors not to take, directly
or indirectly, any action designed to or which might
reasonably be expected to cause or result in the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares and will not
effect any sales of any security of the Company which are
required to be disclosed in response to Item 701 of Regulation
S-K of the Commission which have not been so disclosed in the
Registration Statement.
J. Upon completion of this offering, the Company will use its
best efforts to maintain the listing of its Common Stock on
the National Association of Securities Dealers Automated
Quotation System (Nasdaq) National Market or any other
national securities exchange.
K. The Company will apply the net proceeds from the sale of
the Shares substantially in the manner set forth in the
Prospectus.
L. During the period ending on the final closing date, the
Company agrees that it will issue press releases, make public
statements and respond to inquiries of the press and
securities analysts only after conferring with its counsel and
with the Representatives.
M. Prior to or as of either closing date, the Company shall
have performed each condition to closing required to be
performed by the Company pursuant to Section 5 hereof.
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS.
The respective obligations of the Underwriters to purchase and pay for
the Shares as provided herein shall be subject to the accuracy of the
representations and warranties of the Company, in the case of the Firm Shares as
of the date hereof and the First Closing Date (as if
18
made on and as of the First Closing Date), and in the case of the Option Shares,
as of the date hereof and the Second Closing Date (as if made on and as of the
Second Closing Date), to the performance by the Company of their obligations
hereunder, and to the satisfaction of the following additional conditions on or
before the First Closing Date in the case of the Firm Shares and on or before
the Second Closing Date in the case of the Option Shares:
A. The Registration Statement has been declared effective as
of ____ p.m. Eastern Standard Time on ____________, 1999 (the
"Effective Date"). All filings required by Rules 424, 430A and
434 under the Act shall have been timely made. No stop order
suspending the effectiveness thereof shall have been issued
and no proceeding for that purpose shall have been initiated
or, to the knowledge of the Company or the Representatives,
threatened by the Commission or any state securities
commission or similar regulatory body. Any request of the
Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of the
Underwriters and their legal counsel.
B. The Representatives shall not have advised the Company that
the Registration Statement or Prospectus, or any amendment
thereof or supplement thereto, contains any untrue statement
of a fact which is material or omits to state a fact which is
material and is required to be stated therein or is necessary
to make the statements contained therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that this Section 5(B) shall not apply to
statements in, or omissions from, the Registration Statement
or Prospectus or any amendment thereof or supplement thereto,
which are based upon and conform to written information
furnished to the Company by any of the Underwriters
specifically for use in the preparation of the Registration
Statement or the Prospectus, or any such amendment or
supplement.
C. Subsequent to the Effective Date, and except as
contemplated or referred to in the Prospectus, the Company and
the India Subsidiary shall not have incurred any direct or
contingent liabilities or obligations material to the Company
and the India Subsidiary, taken as a whole, or entered into
any material transactions, except liabilities, obligations or
transactions in the ordinary course of business, or declared
or paid any dividends or made any distribution of any kind
with respect to their capital stock; and there shall not have
been any change in the capital stock (other than a change in
the number of outstanding shares of Common Stock due to the
exercise of options or warrants described in the Registration
Statement and the Prospectus), or any change in the short-term
debt or long-term debt (including capitalized lease
obligations) of the Company or the India Subsidiary, or any
issuance of options, warrants, convertible securities or other
rights to purchase the capital stock of the Company or the
India Subsidiary or any change or any development involving a
prospective change in or affecting the general affairs,
management, financial position, shareholders' equity or
results of operations of the Company or the India Subsidiary,
otherwise than as set forth or
19
contemplated in the Prospectus, the effect of which, in the
judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the
delivery of the Shares being delivered.
D. The Representatives shall have received the opinion of
▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.A., counsel for the
Company, dated the First Closing Date or the Second Closing
Date, as the case may be, addressed to the Underwriters
covering certain corporate matters to the effect that:
i. The Company has been duly incorporated and is
validly existing in good standing under the laws of
the State of Minnesota; has the corporate power to
own, lease and operate its properties and conduct its
business as described in the Prospectus; and is duly
qualified to do business as a foreign corporation in
good standing in all jurisdictions where the
ownership or leasing of its properties or the conduct
of its business requires such qualification and in
which the failure to be so qualified or in good
standing would have a material adverse effect on
condition (financial or otherwise), shareholders'
equity, results of operations, business, properties
or prospects of the Company and the India Subsidiary,
taken as a whole.
ii. The Company has the number of authorized and
outstanding shares of capital stock of the Company as
set forth under the caption "Capitalization" in the
Prospectus, and all issued and outstanding capital
stock of the Company has been duly authorized and is
validly issued, fully paid and nonassessable. There
are no statutory preemptive rights, or to the
knowledge of such counsel, no similar subscription or
purchase rights of securities holders of the Company
with respect to issuance or sale of the Shares by the
Company pursuant to this Agreement or the issuance of
the Warrant Shares upon exercise of the
Representatives' Warrants, and to the knowledge of
such counsel except as described in the Prospectus,
no rights to require registration of shares of Common
Stock or other securities of the Company because of
the filing of the Registration Statement exist. The
Shares, the Representatives' Warrants and the Warrant
Shares conform as to matters of law in all material
respects to the description of such made in the
Prospectus, and such description accurately sets
forth the material legal provisions thereof required
to be set forth in the Prospectus.
iii. The Shares have been duly authorized and, upon
delivery to the Underwriters against payment
therefor, will be validly issued, fully paid and
nonassessable.
iv. The certificates evidencing the Shares comply as
to form with the applicable provisions of the laws of
the State of Minnesota.
20
v. The Representatives' Warrants have been duly
authorized, executed and delivered by the Company and
are the valid and binding obligations of the Company,
enforceable in accordance with their terms, except as
enforceability may be limited by the application of
bankruptcy, insolvency, moratorium, or other laws of
general application affecting the rights of creditors
generally and by judicial limitations on the right of
specific performance and other equitable remedies,
and except as the enforceability of indemnification
or contribution provisions hereof may be limited by
federal or state securities laws. The Warrant Shares
when issued in accordance with the terms of this
Agreement and pursuant to the Representatives'
Warrants will be validly issued, fully paid and
nonassessable. A sufficient number of shares of
Common Stock has been reserved for issuance upon
exercise of the Representatives' Warrants.
vi. The Registration Statement has become effective
under the Act, the Prospectus has been filed as
required by Rule 424(b) if necessary, and, to the
knowledge of such counsel, no stop orders suspending
the effectiveness of the Registration Statement have
been issued and no proceedings for that purpose have
been instituted or are pending or, to the knowledge
of such counsel, contemplated under the Act.
vii. Upon payment for and delivery of the Shares to
be sold by the Company pursuant to this Agreement,
the Underwriters will acquire good and marketable
title to such Shares, free and clear of all liens,
encumbrances or claims created by actions of the
Company.
viii. To such counsel's knowledge, there are no
material legal or governmental proceedings, pending
or threatened, before any court or administrative
body or regulatory agency, to which the Company, the
India Subsidiary or their affiliates are a party or
to which any of the properties of the Company, the
India Subsidiary or their affiliates are subject that
are required to be disclosed in the Registration
Statement or Prospectus that are not so described, or
statutes, regulations, or legal or governmental
proceedings that are required to be described in the
Registration Statement or Prospectus that are not so
described.
ix. To such counsel's knowledge, there are no
franchises, leases, contracts, agreements or
documents of a character required to be disclosed in
the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement or
required to be incorporated by reference into the
Prospectus which are not disclosed or filed or
incorporated by reference, as required.
x. No authorization, approval or consent of any
governmental authority or agency is necessary in
connection with the issuance and sale
21
of the Shares as contemplated under this Agreement,
except such as may be required under the Act or under
state or other securities laws in connection with the
purchase and distribution of the Shares by the
Underwriters.
xi. The Registration Statement and the Prospectus and
any amendments thereof or supplements thereto (other
than the financial statements and schedules and
supporting financial and statistical data and
information included or incorporated therein, as to
which such counsel need express no opinion) conform
in all material respects with the requirements of the
Act and the Rules and Regulations, and the conditions
for use of a registration statement on Form S-1 for
the distribution of the Shares have been satisfied
with respect to the Company.
xii. The statements (i) in the Prospectus under the
caption "Risk Factors Government Regulation May
Adversely Affect Us", "We are Dependent on LEC
Relationships," "Dividend Policy and Termination of S
Corporation Status" "Business --Facilities,"
"Management - Limitation of Liability and
Indemnification," "-- Employment Agreements," "--
1999 Stock Option Plan," "Description of Securities,"
"Shares Eligible for Future Sale" and (ii) in the
Registration Statement in Item 14 insofar as such
statements constitute a summary of statutes, legal
and governmental proceeding, contracts and other
documents, are accurate summaries and fairly present
the information called for with respect to such
matters.
xiii. Such counsel does not know of any contracts,
agreements, documents or instruments required to be
filed as exhibits to the Registration Statement or
described in the Registration Statement or the
Prospectus which are not so filed or described as
required, and does not know of any amendment to the
Registration Statement required to be filed that has
not been filed; and insofar as any statements in the
Registration Statement or the Prospectus constitute
summaries of any contract, agreement, document or
instrument to which the Company is a party, such
statements are accurate summaries and fairly present
the information called for with respect to such
matters.
xiv. To such counsel's knowledge, there are no
defects in title or leasehold interests, or any
liens, encumbrances, equities, charges or claims, not
disclosed in the Registration Statement or Prospectus
which would materially affect the present occupancy
or use of any of the real or personal property owned
or leased by the Company or the India Subsidiary.
xv. The Company has the corporate power and
authorization to enter this Agreement and to
authorize, issue and sell the Shares as contemplated
22
hereby. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding
agreement of the Company, enforceable in accordance
with its terms, except as enforceability may be
limited by the application of bankruptcy, insolvency,
moratorium or similar laws affecting the rights of
creditors generally and judicial limitations on the
right of specific performance and other equitable
remedies and except as the enforceability of
indemnification or contribution provisions hereof may
be limited by action of a court interpreting or
applying federal or state securities laws or
equitable principles.
xvi. The performance of this Agreement and the
consummation of the transactions described herein
will not result in a violation of or default under,
the Company's Articles of Incorporation, Bylaws or
other governing documents. To the best of such
counsel's knowledge, (a) the Company is not in
violation of, or in default under, its Articles of
Incorporation, Bylaws or other governing documents;
and (b) the performance of this Agreement and the
consummation of the transactions described herein
will not result in a material violation of, or a
material default under, the terms or provisions of
(A) any bond, debenture, note, or other evidence of
indebtedness or any contract, license, indenture,
mortgage, loan agreement, joint venture or
partnership agreement, lease, agreement or instrument
to which the Company is a party or by which the
Company or any of its properties is bound, or (B) any
law, order, rule, regulation, writ, injunction, or
decree known to such counsel of any government,
governmental agency or court having jurisdiction over
the Company or any of its properties.
xvii. Sales of unregistered securities by the Company
prior to the Effective Date were exempt from
registration requirements of the Act and are not
required to be integrated, under Rule 502(a) of
Regulation D of the Act, with the public offering
contemplated hereby.
xviii. The Company is not, and immediately upon
completion of the sale of the Shares contemplated
hereby will not, based upon information regarding the
Company's current and contemplated business as
described in the Registration Statement, be required
to register as an "investment company" under the
Investment Company Act of 1940, as amended.
xix. To the best of such counsel's knowledge, the
Company is not engaged in any negotiations regarding
any form of business combination with another entity.
xxi. ▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.A.,
counsel for the Company, has not been retained to
provide substantive legal advice on any pending or
threatened claim, action or proceeding by any person
which
23
challenges the rights of the Company with respect to
any material intellectual property of the Company.
Such counsel is not aware of any pending or
threatened claim, action or proceeding by a person or
governmental agency which challenges the rights of
the Company with respect to any material intellectual
property of the Company, except as described in
Section 1(A)(xix)(a) above or as provided in the
Prospectus.
xxii. To such counsel's knowledge, the Company's
current products, services and processes do not
infringe on any intellectual property rights of any
third parties, except as set forth in the Prospectus.
xxi. The Company's trademark registrations which have
been issued by the United States Patent and Trademark
Office have been fully maintained and are in full
force and effect. Such counsel gives no opinion,
however, as to whether any third party could
successfully challenge the validity or enforceability
of any of such trademark registrations.
In expressing the foregoing opinion, as to matters of fact
relevant to conclusions of law, counsel may rely, to the extent that
they deem proper, upon certificates of public officials and of the
officers of the Company, and opinions of other legal counsel to the
Company, provided that copies of all such certificates and opinions are
attached to the opinion.
In addition to the matters set forth above, such opinion shall
also include a statement to the effect that, although such
counsel cannot guarantee the accuracy, completeness or
fairness of any of the statements contained in the
Registration Statement or Prospectus, in connection with such
counsel's representation and inquiry of the Company in the
preparation of the Registration Statement and Prospectus, such
counsel has no reason to believe that, (i) as of its Effective
Date, the Registration Statement or any further amendment
thereto (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) made by the Company prior to the First Closing Date
or the Second Closing Date, as the case may be, 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 not misleading, or (ii), as of its
date, the Prospectus or any further amendment or supplement
thereto (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) made by the Company prior to the First Closing Date
or the Second Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading or (iii), as of the First Closing Date or the
Second Closing Date, as the case may be, either the
Registration Statement or the Prospectus or any further
amendment or supplement thereto (other than the financial
statements and related schedules therein, as to which such
counsel need express no opinion) made by the Company
24
prior to the First Closing Date or the Second Closing Date, as
the case may be, contains an untrue statement of a material
fact or omits to state a material fact necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading.
E. The Representatives shall have received the opinion of
counsel for the India Subsidiary, dated the First Closing Date
or the Second Closing Date, as the case may be, addressed to
the Underwriters covering certain corporate matters to the
effect that:
i. The India Subsidiary has been duly incorporated
and is validly existing in good standing under the
laws of India; has the corporate power to own, lease
and operate its properties and conduct its businesses
as described in the Prospectus; and is duly qualified
to do business as a foreign corporation in good
standing in all jurisdictions where the ownership or
leasing of its properties or the conduct of its
business requires such qualification and in which the
failure to be so qualified or in good standing would
have a material adverse effect on condition
(financial or otherwise), shareholders' equity,
results of operations, business, properties or
prospects of the India Subsidiary;
ii. The Company owns all of the issued and
outstanding capital stock of the India Subsidiary,
which stock has been duly authorized and is validly
issued, fully paid and nonassessable. The India
Subsidiary does not have outstanding any options to
purchase, or any rights or warrants to subscribe for,
or any securities or obligations convertible into, or
any contracts or commitments to issue or sell, any
capital stock or other securities of the India
Subsidiary, or any such warrants, convertible
securities or obligations.
iii. To such counsel's knowledge, there are no
material legal or governmental proceedings, pending
or threatened, before any court or administrative
body or regulatory agency, to which the India
Subsidiary or its affiliates is a party or to which
any of the properties of the India Subsidiary or its
affiliates are subject.
iv. The statements in the Prospectus under the
captions "Risk Factors --Government Regulation and
General Economic Conditions in India May Adversely
Affect our Business," "Business - Facilities,"
insofar as such statements constitute a summary of
statutes, legal and government proceedings, contracts
and other documents relating to the India Subsidiary
are accurate summaries and fairly present the
information called for with respect to such matters.
25
v. To such counsel's knowledge, there are no defects
in title or leasehold interests, or any liens,
encumbrances, equities, charges or claims, not
disclosed in the Registration Statement or prospectus
which would materially affect the present occupancy
or use of any of the real or personal property owned
or leased by the India Subsidiary.
vi. Counsel for the India Subsidiary has not been
retained to provide substantive legal advice on any
pending or threatened claim, action or proceeding by
any person which challenges the rights of the India
Subsidiary with respect to any material intellectual
property of the India Subsidiary. To such counsel's
knowledge, such counsel is not aware of any pending
or threatened claim, action or proceeding by a person
or governmental agency which challenges the rights of
the India Subsidiary with respect to any material
intellectual property of the India Subsidiary.
In expressing the foregoing opinion, as to matters of fact relevant to
conclusions of law, counsel may rely, to the extent that they deem proper, upon
certificates of public officials and of the officers of the Company, and
opinions of other legal counsel to the Company, provided that copies of all such
certificates and opinions are attached to the opinion.
F. The Representatives shall have received from ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, P.A., its counsel, such opinion or opinions as the
Representatives may reasonably require, dated the First
Closing Date or the Second Closing Date, as the case may be,
with respect to the sufficiency of corporate proceedings and
other legal matters relating to this Agreement and the
transactions contemplated hereby, and other related matters as
the Representatives may reasonably request; and the Company
and its counsel shall have furnished to said counsel such
documents as they may have reasonably requested for the
purpose of enabling them to pass upon such matters. In
connection with such opinion, as to matters of fact relevant
to conclusions of law, such counsel may rely, to the extent
that they deem proper, upon representations or certificates of
public officials and of responsible officers of the Company.
G. The Representatives and the Company shall have received
letters, dated the date hereof and the First Closing Date and
the Second Closing Date, as the case may be, from Ernst &
Young LLP, to the effect that they are independent public
accountants with respect to the Company within the meaning of
the Act and the related rules and regulations, stating that in
their opinion the financial statements and schedules examined
by them and included in the Registration Statement comply in
form in all material respects with the applicable accounting
requirements of the Act and the related rules and regulations,
and containing such other statements and information of the
type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and
certain financial information contained in the Registration
Statement and the Prospectus.
26
H. The Representatives shall have received from the Company a
certificate, dated as of each Closing Date, of the Chief
Executive Officer and the Chief Financial Officer of the
Company to the effect that as of the First Closing Date and
the Second Closing Date:
i. The representations and warranties of the Company
in this Agreement are true and correct as if made on
and as of each Closing Date. The Company has complied
with all the agreements and satisfied all the
conditions on its part to be performed or satisfied
at, or prior to, each such Closing Date.
ii. No stop order suspending the effectiveness of the
Registration Statement has been issued, and no
proceeding for that purpose has been instituted or is
pending or to the best knowledge of such officers
contemplated under the Act.
iii. Neither the Registration Statement nor the
Prospectus nor any amendment thereof 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, since the Effective
Date, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which
has not been so set forth; provided, however, that
such certificate does not require any representation
concerning statements in, or omissions from, the
Registration Statement or Prospectus or any amendment
thereof or supplement thereto, which are based upon
and conform to written information furnished to the
Company by any of the Underwriters specifically for
use in the preparation of the Registration Statement
or the Prospectus or any such amendment or
supplement.
iv. Subsequent to the respective dates as of which
information is given in the Registration Statement
and the Prospectus and except as contemplated or
referred to in the Prospectus, the Company and the
India Subsidiary have not incurred any direct or
contingent liabilities or obligations material to the
Company and the India Subsidiary, taken as a whole,
or entered into any material transactions, except
liabilities, obligations or transactions in the
ordinary course of business, or declared or paid any
dividend or made any distribution of any kind with
respect to their capital stock, and there has not
been any change in the capital stock of the Company
or the India Subsidiary (other than a change in the
number of outstanding shares of Common Stock due to
the exercise of options or warrants described in the
Registration Statement and the Prospectus) and there
has not been any material adverse change in the
capital stock, short-
27
term debt, or long-term debt (including capitalized
lease obligations) of the Company or the India
Subsidiary, or any material adverse change or any
development involving a prospective material adverse
change (whether or not arising in the ordinary course
of business) in or affecting the general affairs,
condition (financial or otherwise), business, key
personnel, property, prospects, shareholders' equity
or results of operations of the Company and the India
Subsidiary, taken as a whole.
v. Subsequent to the respective dates as of which
information is given in the Registration Statement
and the Prospectus, the Company and the India
Subsidiary have not sustained any material loss of,
or damage to, their properties, whether or not
insured.
vi. Except as is otherwise expressly stated in the
Registration Statement and Prospectus there are no
material actions, suits or proceedings pending before
any court or governmental agency, authority or body,
or, to the best of such officer's knowledge,
threatened, to which the Company or the India
Subsidiary is a party or of which the business or
property of the Company or the India Subsidiary is
the subject.
I. The Representatives shall have received, dated as of each
Closing Date, from the Secretary of the Company a certificate
of incumbency certifying the names, titles and signatures of
the officers authorized to execute the resolutions of the
Board of Directors of the Company authorizing and approving
the execution, delivery and performance of this Agreement, a
copy of such resolutions to be attached to such certificate,
certifying such resolutions and certifying that the Articles
of Incorporation and the Bylaws of the Company have been
validly adopted and have not been amended or modified, except
as described in the Prospectus.
J. The Representatives shall have received a written
agreement, enforceable by the Representatives, from each
officer and director of the Company and each shareholder who
holds 5% or more of the outstanding Common Stock of Company,
that for 180 days following the Effective Date, such person
will not, without the Representatives' prior written consent,
sell, transfer or otherwise dispose of, or agree to sell,
transfer or otherwise dispose of, other than by gift to donees
who agree to be bound by the same restriction or by will or
the laws of descent, any of his or her Common Stock, or any
options, warrants or rights to purchase Common Stock or any
shares of Common Stock received upon exercise of any options,
warrants or rights to purchase Common Stock, all of which are
beneficially held by such persons during the 180 day period.
K. The Shares shall have been approved for listing on the
Nasdaq National Market.
28
L. The Company shall have furnished to the Underwriters, dated
as of the date of each Closing Date, such further certificates
and documents as the Underwriters shall have reasonably
required.
M. All such opinions, certificates, letters and documents will
be in compliance with the provisions hereof only if they are
reasonably satisfactory to the Representatives and their legal
counsel. All statements contained in any certificate, letter
or other document delivered pursuant hereto by, or on behalf
of, the Company shall be deemed to constitute representations
and warranties of the Company.
N. The Representatives may waive in writing the performance of
any one or more of the conditions specified in this Section 5
or extend the time for their performance.
O. If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Agreement
to be fulfilled, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time
prior to, each closing date by the Representatives. Any such
cancellation shall be without liability of the Underwriters to
the Company or to any other party, and shall not relieve the
Company of its obligations under Section 4(H) hereof. Notice
of such cancellation shall be given to the Company at the
address specified in Section 11 hereof in writing, or by
facsimile or telephone and confirmed in writing.
6. INDEMNIFICATION.
A. The Company hereby agrees to indemnify and hold harmless
each Underwriter, and each person, if any, who controls any
Underwriter within the meaning of the Act, against any losses,
claims, damages or liabilities, joint or several, to which
such Underwriter or each such controlling person may become
subject, under the Act, the Exchange Act, the common law or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof), arise out of, or
are based upon: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus or the Prospectus
including any amendment thereof, or (ii) the omission or
alleged omission to state in the Registration Statement, any
Preliminary Prospectus or Prospectus including any amendment
thereof a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any application or other statement
executed by the Company or based upon written information
furnished by the Company filed in any jurisdiction in order to
qualify the Shares under, or exempt the Shares or the sale
thereof from qualification under, the securities laws of such
jurisdiction, or the omission or alleged omission to state in
such
29
application or statement a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; and the Company will reimburse each Underwriter
and each such controlling person for any legal or other
expenses reasonably incurred by such Underwriter or
controlling person (subject to the limitation set forth in
Section 6(D) hereof, in connection with investigating or
defending against any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that
the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of,
or is based upon, any untrue statement, or alleged untrue
statement, omission or alleged omission, made in reliance upon
and in conformity with information furnished to the Company
by, or on behalf of, any Underwriter in writing specifically
for use in the preparation of the Registration Statement or
any such post effective amendment thereof, any such
Preliminary Prospectus or the Prospectus or any such amendment
thereof or supplement thereto. This indemnity agreement is in
addition to any liability which the Company may otherwise
have.
B. Each Underwriter severally, but not jointly, agrees to
indemnify and hold harmless the Company, each of the Company's
directors, each of the Company's officers who has signed the
Registration Statement and each person who controls the
Company within the meaning of the Act against any losses,
claims, damages or liabilities to which the Company or any
such director, officer, or controlling person may become
subject, under the Act, the Exchange Act, the common law, or
otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of, or
are based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus or Prospectus, including
any amendment thereof, (ii) the omission or alleged omission
to state in the Registration Statement, any Preliminary
Prospectus or Prospectus including any amendment thereof a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; or (iii) any
untrue statement or alleged untrue statement of a material
fact contained in any application or other statement executed
by the Company or by any Underwriter and filed in any
jurisdiction in order to qualify the Shares under, or exempt
the Shares or the sale thereof from qualification under, the
securities laws of such jurisdiction, or the omission or
alleged omission to state in such application or statement a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; in each of the
above cases to the extent, but only the extent, that such
untrue statement, alleged untrue statement, omission or
alleged omission, was made in reliance upon and in conformity
with information furnished to the Company by, or on behalf of,
any Underwriter in writing specifically for use in the
preparation of the Registration Statement or any such post
effective amendment thereof, any such Preliminary Prospectus
or the Prospectus or any such amendment thereof or supplement
thereto, or in any
30
application or other statement executed by the Company or by
any Underwriter and filed in any jurisdiction; and each
Underwriter will reimburse any legal or other expenses
reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating
or defending against any such loss, claim, damage, liability
or action as such expenses are incurred. This indemnity
agreement is in addition to any liability which the
Underwriters may otherwise have.
C. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action or
proceeding (including any governmental investigation), such
indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6,
notify in writing the indemnifying party of the commencement
thereof. The failure to so notify the indemnifying party will
not relieve such party from any liability under this Section 6
as to the particular item for which indemnification is then
being sought, unless such failure so to notify prejudices the
indemnifying party's ability to defend such action. In case
any such action is brought against any indemnified party and
the indemnified party notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel who shall be
reasonably satisfactory to such indemnified party; and after
notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable
judgment of the indemnified party, it is advisable for such
parties and controlling persons to be represented by separate
counsel, any indemnified party shall have the right to employ
separate counsel to represent it and all other parties and
their controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be
sought by the Underwriters against the Company or by the
Company against the Underwriters hereunder, in which event the
fees and expenses of such separate counsel shall be borne by
the indemnifying party and paid as incurred; Any such
indemnifying party shall not be liable to any such indemnified
party on account of any settlement of any claim or action
effected without the consent of such indemnifying party.
7. CONTRIBUTION.
A. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless any indemnified
party in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or
liabilities in such proportion as is
31
appropriate to reflect the relative benefits received by the
Company and the Underwriters from the offering of the Shares.
In the event that the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then
each indemnifying party shall contribute in such proportion as
is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company
and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable
considerations. The Company and the Underwriters agree that
contribution determined by per capita allocation (even if the
Underwriters were considered a single person) would not be
equitable. The respective relative benefits received by the
Company, on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion (a) in the case
of the Company as the total price paid to the Company for the
Shares by the Underwriters (net of underwriting discount
received but before deducting expenses) bears to the aggregate
Offering Price of the Shares, and (b) in the case of the
Underwriters, as the aggregate underwriting discount received
by them bears to the aggregate Offering Price of the Shares,
in each case as reflected in the Prospectus. The relative
fault of the Company and the Underwriters shall be determined
by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of
the losses, claims, damages and liabilities referred to above
shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with
investigating or defending any action or claim.
Notwithstanding the provisions of this Section 7, (i) no
Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the
Shares underwritten by it were offered to the public exceeds
the amount of any damages which such Underwriter has otherwise
been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto. The Underwriters' obligation
to contribute pursuant to this Section 7 is several and not
joint. No person guilty of fraudulent misrepresentation
(within the meaning of the Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7,
each person who controls an Underwriter within the meaning of
the Act or the Exchange Act shall have the same rights to
contribution as such Underwriter, each person who controls the
Company within the meaning of the Act or the Exchange Act
shall have the same rights to contribution as the Company and
each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall
have the same rights to contribution as the Company.
32
B. Promptly after receipt by a party to this Agreement of
notice of the commencement of any action, suit, or proceeding,
such person will, if a claim for contribution in respect
thereof is to be made against another party (the "Contributing
Party"), notify the Contributing Party of the commencement
thereof, but the failure to so notify the Contributing Party
will not relieve the Contributing Party from any liability
which it may have to any party other than under this Section
7, unless such failure to so notify prejudices the
Contributing Party's ability to defend such action. Any notice
given pursuant to Section 6 hereof shall be deemed to be like
notice hereunder. In case any such action, suit or proceeding
is brought against any party, and such person notifies a
Contributing Party of the commencement thereof, the
Contributing Party will be entitled to participate therein
with the notifying party and any other Contributing Party
similarly notified.
C. The obligations of the Company under this Section 7 shall
be in addition to any liability which the Company may
otherwise have, and the obligations of the Underwriters under
this Section 7 shall be in addition to any liability which the
Underwriters may otherwise have.
8. EFFECTIVE DATE AND TERMINATION.
A. This Agreement shall become effective at the later of (i)
the day upon which this Agreement shall have been executed and
delivered by the parties hereto, or (ii) at 10:00 a.m.
Minneapolis time, on the first full business day following the
Effective Date, or at such earlier time after the Effective
Date as the Representatives in its discretion shall first
release the Shares for offering to the public. For purposes of
this Section 8, the Shares shall be deemed to have been
released to the public upon release by the Representatives of
the publication of a newspaper advertisement relating to the
Shares or upon release of a telegram or a letter offering the
Shares for sale to securities dealers, whichever shall first
occur.
B. The Representatives shall have the right to terminate this
Agreement by giving notice to the Company as hereinafter
specified at any time prior to the First Closing Date, and the
option referred to in Section 2(B), if exercised, may be
canceled at any time by the Representatives by giving such
notice to the Company at any time prior to the Second Closing
Date, if (i) the Company shall have failed, refused or been
unable, at or prior to the First Closing Date, to perform any
material agreement on its part to be performed hereunder; (ii)
any other condition of the Underwriters' obligations hereunder
is not fulfilled; (iii) trading in securities generally on the
New York Stock Exchange, American Stock Exchange or the Nasdaq
Stock Market shall have been suspended, or minimum or maximum
prices for trading shall have been required or established by
the Commission or by any such exchange or the Nasdaq Stock
Market; (iv) a banking moratorium shall have been declared by
federal, New York or Minnesota authorities; (v) there shall
have been such a material adverse change in general economic,
monetary,
33
political or financial conditions, or the effect of
international conditions on the financial markets in the
United States shall be such as, in the judgment of the
Representatives, makes it impracticable or inadvisable to
proceed with the completion of the sale of and payment for the
Shares; (vi) there shall have been the enactment, publication,
decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental
authority, which in the judgment of the Representatives
materially and adversely affects or will materially and
adversely affect the business or operations of the Company; or
(vii) there shall be an outbreak of major hostilities (or an
escalation thereof) in which the United States is involved or
a formal declaration of war by the United States of America
shall have occurred or any other substantial national or
international calamity or any other event or occurrence of a
similar character shall have occurred since the execution of
this Agreement that, in the judgment of the Representatives,
makes it impracticable or inadvisable to proceed with the
completion of the sale of and payment for the Shares. Any such
termination shall be without liability of any party to any
other party, except as provided in Sections 6 and 7 hereof;
provided, however, that the Company shall remain obligated to
pay costs and expenses to the extent provided in Section 4(H)
hereof.
C. If the Representatives elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided
in this Section 8, it shall notify the Company promptly by
telecopy or telephone, confirmed by letter sent to the address
specified in Section 11 hereof. If the Company shall elect to
prevent this Agreement from becoming effective, it shall
notify the Representatives promptly by telecopy or telephone,
confirmed by letter sent to the address specified in Section
11 hereof.
D. If the Company shall fail at the First Closing Date to sell
and deliver the number of Shares which it is obligated to sell
hereunder, then this Agreement shall terminate without any
liability on the part of any Underwriter. No action taken
pursuant to this Section 8(D) shall relieve the Company from
liability, if any, in respect of such default.
9. DEFAULT OF UNDERWRITER.
If on the First Closing Date or the Second Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company), you, as
Representatives of the Underwriters, shall use your best efforts to procure
within 36 hours thereafter one or more of the other Underwriters, or any others,
to purchase from the Company such amounts as may be agreed upon, and upon the
terms set forth herein, of the Firm Shares or Option Shares, as the case may be,
which the defaulting Underwriter or
34
Underwriters failed to purchase. If during such 36 hours you, as
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the Firm Shares or Option Shares, as the case may be, agreed to be
purchased by the defaulting Underwriter or Underwriters, then (i) if the
aggregate number of Shares with respect to which such default shall occur does
not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase or (ii) if the aggregate number of shares of
Firm Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case
may be, covered hereby, the Company or you as the Representatives of the
Underwriters will have the right, by written notice given within the next 36-
hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or of the
Company except for expenses to be borne by the Company and the Underwriters as
provided in Section 4(H) hereof and the indemnity and contribution agreements in
Sections 6 and 7 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the First Closing Date or Second
Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you, as Representatives, may determine in order that
the required changes, not including a reduction in the number of Firm Shares, in
the Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section 9
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. SURVIVAL.
The respective indemnity and contribution agreements of the Company and
the Underwriters contained in Sections 6 and 7, respectively, the
representations and warranties of the Company set forth in Section 1 hereof and
the covenants of the Company set forth in Section 4 hereof shall remain
operative and in full force and effect, regardless of any investigation made by,
or on behalf of, the Underwriters, the Company, any of its officers and
directors or any controlling person referred to in Sections 6 and 7 and shall
survive the delivery of and payment for the Shares. The aforesaid indemnity and
contribution agreements shall also survive any termination or cancellation of
this Agreement. Any successor of any party or of any such controlling person, or
any legal representative of such controlling person, as the case may be, shall
be entitled to the benefit of the respective indemnity and contribution
agreements.
11. NOTICES.
All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to the Representatives
or any of the Underwriters, shall be mailed, delivered, or telecopied and
confirmed, to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, with a copy to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., 1100 International Centre, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; or, if sent to the Company, shall be
mailed, delivered, or telegraphed, and confirmed, to WebValley, Inc., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq., ▇▇▇▇,
35
Plant, ▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇, P.A., 3400 City Center, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
12. INFORMATION FURNISHED BY THE UNDERWRITERS.
The statements relating to the stabilization activities of the
Underwriters set forth in the last paragraph on the inside front cover page and
the statements in the table and paragraphs _____ and ___ under the caption
"Underwriting" in any Preliminary Prospectus and in the Prospectus constitute
the only information furnished by, or on behalf of, the Underwriters in writing
specifically for use with reference to the Underwriters referred to in Section
1(A)(ii) and Section 6 hereof.
13. PARTIES.
This Agreement shall inure to the benefit of and be binding upon each
of the Underwriters and the Company, their respective successors and assigns and
the officers, directors and controlling persons referred to in Sections 6 and 7.
Nothing expressed in this Agreement is intended or shall be construed to give
any person or corporation, other than the parties hereto, their respective
successors and assigns and the controlling persons, officers and directors
referred to in Sections 6 and 7 any legal or equitable right, remedy or claim
under, or in respect of, this Agreement or any provision herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective executors, administrators, successors, assigns and such controlling
persons, officers and directors, and for the benefit of no other person or
corporation. No purchaser of any Shares from the Underwriters shall be construed
to be a successor or assign merely by reason of such purchase.
14. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the
laws of the State of Minnesota, without regard to conflict of law provisions.
36
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed counterpart of this
Agreement, whereupon it will become a binding agreement between the Company, and
each of the several Underwriters in accordance with its terms.
Very truly yours,
WebValley, Inc.
By_________________________________
▇▇▇▇▇ ▇. ▇▇▇▇
President and Chief Executive Officer
The foregoing Underwriting Agreement is
hereby confirmed and accepted by us for
ourselves and as Representatives of the
Underwriters referred to in the foregoing
Agreement as of the date first above written.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND COMPANY, INCORPORATED
-------------------------------------------------
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND COMPANY, INCORPORATED
By_____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Vice President
37
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Name of Underwriter Number of Firm Shares
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated..................... _______
____________________________________.......................... _______
____________________________________.......................... _______
____________________________________.......................... _______
____________________________________.......................... _______
____________________________________.......................... _______
____________________________________.......................... _______
____________________________________.......................... _______
____________________________________.......................... _______
Total.................................................. _______
38
SCHEDULE II
SCHEDULE OF SHAREHOLDERS REQUIRED TO EXECUTE
LOCK-UP AGREEMENTS
Name of Shareholder Number of Shares
------------------- ----------------
________________________________________________ ________
________________________________________________ ________
________________________________________________ ________
________________________________________________ ________
________________________________________________ ________
________________________________________________ ________
________________________________________________ ________
________________________________________________ ________
________________________________________________ ________
Total
_______________________ ________
39
Appendix A
WARRANT
TO PURCHASE ______ SHARES OF COMMON STOCK
OF
WebValley, Inc.
THIS CERTIFIES THAT, for good and valuable consideration, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and Company, Incorporated (the "Representative"), or its registered
assigns, is entitled to subscribe for and purchase from WebValley, Inc., a
Minnesota corporation (the "Company"), at any time after [effective date less
one day] 2000, to and including [effective date], 2004,
______________________________ (________) fully paid and nonassessable shares of
the Common Stock of the Company at the price of $____ per share (the "Warrant
Exercise Price"), subject to the antidilution provisions of this Warrant.
Reference is made to this Warrant in the Underwriting Agreement dated
_____________, 1999, by and between the Company and the Representative. The
shares which may be acquired upon exercise of this Warrant are referred to
herein as the "Warrant Shares." As used herein, the term "Holder" means the
Representative, any party who acquires all or a part of this Warrant as a
registered transferee of the Representative, or any record holder or holders of
the Warrant Shares issued upon exercise, whether in whole or in part, of the
Warrant. As used herein, the term "Common Stock" means and includes the
Company's presently authorized common stock, no par value, and shall also
include any capital stock of any class of the Company hereafter authorized which
shall not be limited to a fixed sum or percentage in respect of the rights of
the Holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution, or winding up of the
Company.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by written notice of exercise (in the form attached hereto) delivered to
the Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant along
with a check in payment of the Warrant Exercise Price for such shares.
(b) Until exercisable, this Warrant may not be sold, assigned,
hypothecated, or otherwise transferred, other than by will or pursuant to the
operation of law, except to a person who is an officer of the Representative.
Further, this Warrant may not be sold, transferred, assigned, hypothecated or
divided into two or more Warrants of smaller denominations, nor may any Warrant
shares issued pursuant to exercise of this Warrant be transferred, except as
provided in Section 7 hereof.
2. Exchange and Replacement. Subject to Sections l and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if the Underwriter shall be such Holder, an agreement of
indemnity by such Holder shall be sufficient for all purposes of this Section 2.
This Warrant shall be promptly canceled by the Company upon the surrender hereof
in connection with any exchange or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes), and other charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as aforesaid. Subject to the provisions of the next
section, certificates for the Warrant Shares so purchased shall be delivered to
the Holder within a reasonable time, not exceeding fifteen (15) days after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the right to purchase the
number of Warrant Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and agreements as may
be required solely to comply with the exemptions relied upon by the Company, or
the registrations made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and
2
agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant a sufficient number of shares of Common Stock
to provide for the exercise of the rights represented by this Warrant.
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company payable in
Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock into a
greater number of shares; or
(iii) combine outstanding shares of Common Stock, by reclassification
or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this Subsection shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Section 5.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at
3
the adjusted Warrant Exercise Price the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares specified in
such Warrant (as adjusted as a result of all adjustments in the Warrant Exercise
Price in effect prior to such adjustment) by the Warrant Exercise Price in
effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a
party, or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), there shall be no adjustment under Subsection (a)
of this Section above but the Holder of each Warrant then outstanding shall have
the right thereafter to convert such Warrant into the kind and amount of shares
of stock and other securities and property which he would have owned or have
been entitled to receive immediately after such consolidation, merger, statutory
exchange, sale, or conveyance had such Warrant been converted immediately prior
to the effective date of such consolidation, merger, statutory exchange, sale,
or conveyance and in any such case, if necessary, appropriate adjustment shall
be made in the application of the provisions set forth in this Section with
respect to the rights and interests thereafter of any Holders of the Warrant, to
the end that the provisions set forth in this Section shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock and other securities and property thereafter deliverable
on the exercise of the Warrant. The provisions of this Subsection shall
similarly apply to successive consolidations, mergers, statutory exchanges,
sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the
4
Holder to the Company; provided that an appropriate legend may be endorsed on
this Warrant or the certificates for such Warrant Shares respecting restrictions
upon transfer thereof necessary or advisable in the opinion of counsel to the
Company and satisfactory to the Company to prevent further transfers which would
be in violation of Section 5 of the Securities Act of 1933, as amended (the
"1933 Act") and applicable state securities laws; and provided further that the
prospective transferee or purchaser shall execute such documents and make such
representations, warranties, and agreements as may be required solely to comply
with the exemptions relied upon by the Company for the transfer or disposition
of the Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to in this
Section 7, the proposed transfer or disposition of this Warrant or such Warrant
Shares described in the written notice given pursuant to this Section 7 may not
be effected without registration or qualification of this Warrant or such
Warrant Shares the Company shall promptly give written notice thereof to the
Holder, and the Holder will limit its activities in respect to such as, in the
opinion of both such counsel, are permitted by law.
8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the Holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the closing sale price reported by Nasdaq National Market or any national
securities exchange or, if none, the average of the last reported closing bid
and asked prices on any national securities exchange or quoted in Nasdaq
SmallCap Market, or if not listed on a national securities exchange or quoted in
Nasdaq SmallCap Market, the average of the last reported closing bid and asked
prices as reported by Metro Data Company, Inc. from quotations by market makers
in such Common Stock on the Minneapolis-St. ▇▇▇▇ local over-the-counter market.
9. Registration Rights.
(a) If at any time after [effective date less one day], 2000 and prior
to the end of the two-year period following complete exercise of this Warrant or
[effective date], 2003, whichever occurs earlier, the Company proposes to
register under the 1933 Act (except by a Form S-4 or Form S-8 Registration
Statement or any successor forms thereto) or qualify for a public distribution
under Section 3(b) of the 1933 Act, any of its securities, it will give written
notice to all Holders of this Warrant, any Warrants issued pursuant to Section 2
and/or Section 3(a) hereof, and any Warrant Shares of its intention to do so
and, on the written request of any such Holder given within twenty (20) days
after receipt of any such notice (which request shall specify the interest in
this Warrant or the Warrant Shares intended to be sold or disposed of by such
Holder and describe the nature of any proposed sale or other disposition
thereof), the Company will use its best efforts to cause all such Warrant
Shares, the Holders of which shall have requested the registration or
qualification thereof, to be included in such registration statement proposed to
be filed by the Company; provided,
5
however, that if a greater number of Warrant Shares is offered for participation
in the proposed offering than in the reasonable opinion of the managing
underwriter of the proposed offering can be accommodated without adversely
affecting the proposed offering, then the amount of Warrant Shares proposed to
be offered by such Holders for registration, as well as the number of securities
of any other selling shareholders participating in the registration, shall be
proportionately reduced to a number deemed satisfactory by the managing
underwriter.
(b) Further, on a one-time basis during the four-year period commencing
[effective date], 2000, upon request by the Holder or Holders of a majority in
interest of this Warrant, of any Warrants issued pursuant to Section 2 and/or
Section 3(a) hereof, and of any Warrant Shares, the Company will promptly take
all necessary steps to register or qualify, under the 1933 Act and the
securities laws of such states as the Holders may reasonably request, such
number of Warrant Shares issued and to be issued upon conversion of the Warrants
requested by such Holders in their request to the Company. The Company shall
keep effective and maintain any registration, qualification, notification, or
approval specified in this Paragraph (b) for such period as may be reasonably
necessary for such Holder or Holders of such Warrant Shares to dispose thereof
and from time to time shall amend or supplement the prospectus used in
connection therewith to the extent necessary in order to comply with applicable
law.
(c) With respect to each inclusion of securities in a registration
statement pursuant to this Section 9, the Company shall bear the following fees,
costs, and expenses: all registration, filing and NASD fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company is required to bear such fees and disbursements), all internal
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any jurisdictions
in which the securities to be offered are to be registered or qualified. Fees
and disbursements of special counsel and accountants for the selling Holders,
underwriting discounts and commissions, and transfer taxes for selling Holders
and any other expenses relating to the sale of securities by the selling Holders
not expressly included above shall be borne by the selling Holders.
(d) The Company hereby indemnifies each of the Holders of this Warrant
and of any Warrant Shares, and the officers and directors, if any, who control
such Holders, within the meaning of Section 15 of the 1933 Act, against all
losses, claims, damages, and liabilities caused by (1) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (and as amended or supplemented if the Company shall
have furnished any amendments thereof or supplements thereto), any Preliminary
Prospectus or any state securities law filings; (2) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as such
losses, claims, damages, or liabilities are caused by any untrue statement or
omission contained in information furnished in writing to the Company by such
Holder expressly for use therein; and each such Holder by its acceptance hereof
severally agrees that it will indemnify and hold harmless the Company, each of
its officers who signs such Registration Statement, and each person, if any, who
controls the Company, within the meaning of Section 15 of the 1933 Act, with
respect to losses,
6
claims, damages, or liabilities which are caused by any untrue statement or
alleged untrue statement, omission or alleged omission contained in information
furnished in writing to the Company by such Holder expressly for use therein.
10. Additional Right to Convert Warrant.
(a) The Holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time after it is
exercisable, but prior to its expiration into shares of Company Common Stock as
provided for in this Section 10. Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by the Holder of any
Warrant Exercise Price) that number of shares of Company Common Stock equal to
the quotient obtained by dividing (x) the value of the Warrant at the time the
Conversion Right is exercised (determined by subtracting the aggregate Warrant
Exercise Price for the Warrant Shares in effect immediately prior to the
exercise of the Conversion Right from the aggregate Fair Market Value for the
Warrant Shares immediately prior to the exercise of the Conversion Right) by (y)
the Fair Market Value of one share of Company Common Stock immediately prior to
the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Holder, at any time or
from time to time after it is exercisable, prior to its expiration, on any
business day by delivering a written notice in the form attached hereto (the
"Conversion Notice") to the Company at the offices of the Company exercising the
Conversion Right and specifying (i) the total number of shares of Stock the
Holder will purchase pursuant to such conversion and (ii) a place and date not
less than one or more than 20 business days from the date of the Conversion
Notice for the closing of such purchase.
(c) At any closing under Section 10(b) hereof, (i) the Holder will
surrender the Warrant and (ii) the Company will deliver to the Holder a
certificate or certificates for the number of shares of Company Common stock
issuable upon such conversion, together with cash, in lieu of any fraction of a
share, and (iii) the Company will deliver to the Holder a new warrant
representing the number of shares, if any, with respect to which the warrant
shall not have been exercised.
(d) Fair Market Value of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or
is quoted on the Nasdaq National Market, then the average closing or
last sale prices, respectively, reported for the ten (10) business days
immediately preceding the Determination Date,
(ii) If the Company's Common Stock is not traded on an
exchange or on the Nasdaq National Market but is traded on the Nasdaq
SmallCap Market_ or other over-the-counter market, then the average
closing bid and asked prices reported for the ten (10) business days
immediately preceding the Determination Date, and
7
(iii) If the Company's Common Stock is not traded on an
exchange or on the Nasdaq National Market, Nasdaq SmallCap Market_ or
other over-the-counter market, then the price established in good faith
by the Board of Directors.
IN WITNESS WHEREOF, WebValley, Inc. has caused this Warrant to be
signed by its duly authorized officer and this Warrant to be dated
_______________ 1999.
"Company"
WEBVALLEY, INC.
By___________________________________
Its_________________________________
8
TO: WEBVALLEY, INC.
NOTICE OF EXERCISE OF WARRANT -- To Be Executed by the Registered Holder in
Order to Exercise the Warrant
-----------------------------
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, _________________ of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
_______________________________________
(Print Name)
Please insert social security
or other identifying number
of registered Holder of
certificate (_______________________)
Address:
_______________________________________
_______________________________________
Date:____________________________ ________________________________________
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
NOTE: If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said Holder for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
9
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto _________________________________________________________________
the right to purchase the securities of WebValley, Inc. to which the within
Warrant relates and appoints ____________________________________________,
attorney, to transfer said right on the books of WebValley, Inc. with full power
of substitution in the premises.
Dated:__________________ ________________________________________
(Signature)
Address:
____________________________________
____________________________________
10
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 10)
TO: WEBVALLEY, INC.
The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Warrant Certificate for, and to
purchase thereunder, ______________ shares of Common Stock, as provided for in
Section 10 therein.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
_____________________________________
(Print name)
Please insert social security
or other identifying number
of registered Holder of
certificate (_______________________)
Address:
___________________________________
___________________________________
Date:_______________________________ ____________________________________
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
NOTE: If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said Holder for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
11