EXHIBIT 1.1
FORM OF UNDERWRITING AGREEMENT
2,500,000 UNITS
XXXXX Online, Inc.
UNDERWRITING AGREEMENT
_______, 2004
Xxxxxxx Investment Company, Inc.
As Representative of the
Several Underwriters
000 XX Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Gentlemen:
XXXXX Online, Inc., a Delaware corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as Representative (the "Representative") an aggregate of
2,500,000 Units (the "Firm Units"). Each Unit will consist of two shares
(individually, a "Share" and, collectively, the "Shares") of the common stock,
par value $0.01 of the Company ("Common Stock") and one warrant (individually, a
"Warrant" and, collectively, the "Warrants"). Each Warrant is exercisable to
purchase one share of Common Stock (collectively, the "Warrant Shares"). The
Warrants are to be issued under the terms of a Warrant Agreement (the "Warrant
Agreement") by and between the Company and American Stock Transfer & Trust
Company, as warrant agent (the "Warrant Agent"), in each case substantially in
the form most recently filed as an exhibit to the Registration Statement
(hereinafter defined.) The respective number of the Firm Units to be so
purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Company and TheBean LLC (the "Selling Stockholder") also
propose to grant to the Representative an option to purchase an aggregate of up
to 375,000 additional Units, identical to the Firm Units (the "Option Units"),
as set forth below. Of the 750,000 Shares of Common Stock included in the Option
Units, the first 300,000 Shares will be sold by the Selling Stockholder and
450,000 Shares and 375,000 warrants included in the Option Units will be sold by
the Company. Unless specified to the contrary, all references herein to "Units"
shall be deemed to include the Firm Units and the Option Units (to the extent
the aforementioned option
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has been exercised) and all references herein to Shares, Warrants and Warrant
Shares shall be deemed to include the Shares, Warrants and Warrant Shares
underlying the Option Units (to the extent the aforementioned option has been
exercised).
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm Units
set forth opposite their respective names in Schedule I.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to each of the Underwriters as
follows:
(a) A registration statement on Form S-2 (File No. 333-114044) with
respect to the Units 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") thereunder and has been filed with the Commission.
Copies of such registration statement, including any amendments thereto, the
preliminary prospectuses (meeting the requirements of the Rules and Regulations)
contained therein and the exhibits, financial statements and schedules, as
finally amended and revised, have heretofore been delivered by the Company to
you. Such registration statement, together with any registration statement filed
by the Company pursuant to Rule 462(b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the Prospectus
referred to below, has become effective under the Act and no post-effective
amendment to the Registration Statement has been filed as of the date of this
Agreement. "Prospectus" means (a) the form of prospectus first filed with the
Commission pursuant to Rule 424(b) or (b) the last preliminary prospectus
included in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(a) under the Act that is delivered by
the Company to the Underwriters for delivery to purchasers of the Units,
together with any term sheet or abbreviated term sheet filed with the Commission
pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus included
in the Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus."
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Except as described in the
Registration Statement, the Company does not own a controlling interest in any
other corporation or other business entity that has any material assets,
liabilities or operations. Each entity that the Registration Statement discloses
as being controlled by the Company (each a "Subsidiary and, collectively, the
"Subsidiaries") has been duly organized and is validly existing under the laws
of its jurisdiction of organization and has the necessary legal power and
authority to
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own or lease its properties and to conduct its business as described in the
Registration Statement. The Company and each Subsidiary is duly qualified to
transact business in all jurisdictions in which the conduct of its business
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, property, rights, assets, management, business or
prospects of the Company and the Subsidiaries considered as a whole (a "Material
Adverse Effect").
(c) The outstanding shares of each class or series of capital stock
or other equity interests of the Company and each Subsidiary have been duly
authorized and validly issued and are fully paid and non-assessable and, except
as disclosed in the Registration Statement, have been issued and sold by the
Company or the Subsidiary in compliance in all material respects with applicable
securities laws; the issuance and sale of the Units, the Shares (other than the
Shares to be sold by the Selling Stockholder), the Warrants and the Warrant
Shares (including the Shares, the Warrants and the Warrant Shares underlying the
Representative's Warrant, issuable as described in Section 2(d) below)
(collectively, the "Securities") have been duly authorized by all necessary
corporate action and, when issued and paid for as contemplated herein and, in
the case of the Warrant Shares, as contemplated in the Warrant Agreement, the
Securities will be validly issued, fully paid and non-assessable; and no
preemptive rights of shareholders exist with respect to any security of the
Company or the issue and sale thereof. Except as set forth in the Registration
Statement, neither the filing of the Registration Statement nor the offering or
sale of the Units as contemplated by this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock or other securities of the Company.
The Company has duly and validly reserved, out of its authorized and unissued
Common Stock, for issuance upon exercise of the Warrants, including the Warrants
included in the Option Units and Units obtainable on exercise of the
Representative's Warrant, a number of shares sufficient for such purpose.
(d) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. The Common Stock conforms and the Warrants
and the Representative's Warrant will conform, in all material respects, to the
respective descriptions thereof contained in the Registration Statement. The
forms of certificates for the Common Stock, the Warrants and the
Representative's Warrant conform in all material respects to the requirements of
the corporate law of Delaware.
(e) (i) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Units nor instituted proceedings for that purpose. There are no contracts,
agreements or other documents, which are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits thereto
which have not been so described and filed as required or incorporated by
reference. The Registration Statement contains, and the Prospectus and any
amendments or supplements thereto will contain, all statements that are required
to be stated therein by the Company, and will conform to, the requirements of
the Act and the Rules and Regulations. The Registration Statement, the
Prospectus and any amendments and supplements thereto do not contain, and will
not contain, any untrue statement of a material fact and do not omit, and will
not omit, to state any material fact required to be stated therein or necessary
to
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make the statements therein not misleading in light of the circumstances under
which they were or are made; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any Underwriter through the Representative,
specifically for use in the preparation thereof and further provided that, with
respect to information included in the Registration Statement and the Prospectus
in reliance on the opinion of experts identified as such in the Prospectus, such
representation is given to the Company's knowledge.
(ii) The documents incorporated or deemed to be incorporated
by reference in the Prospectus, at the time they were or hereafter are filed
with the Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
under the 1934 Act (the "1934 Act Regulations"), and, when read together with
the other information in the Prospectus, at the time the Registration Statement
became effective, did not and will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(f) The consolidated financial statements of the Company, together
with related notes and schedules as set forth in the Registration Statement,
present fairly the consolidated financial position and the results of operations
and cash flows of the Company and its consolidated subsidiaries at the indicated
dates and for the indicated periods. The impact of each material accounting
judgment made in the preparation of the financial statements included in the
Registration Statement has been fairly and adequately disclosed in the notes
thereto or elsewhere in the Registration Statement. Such financial statements
and related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed herein and in the Registration Statement, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary financial and statistical data of the Company included in
the Registration Statement presents fairly the information shown therein and
such data has been compiled on a basis consistent with the financial statements
presented therein and the books and records of the Company.
(g) BDO Xxxxxxx, LLP and KPMG LLP, who have certified certain of 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. There are no facts or circumstances that would cause the
selection and/or engagement of BDO Xxxxxxx, LLP or KPMG LLP as auditors of the
Company's financial statements included in the Registration Statement or the
Prospectus to constitute a violation of Title II of the Xxxxxxxx-Xxxxx Act of
2002 or any rules adopted or proposed to be adopted pursuant thereto.
(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
before any court or administrative agency or otherwise, which, if determined
adversely to the Company or such Subsidiary, might have
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a Material Adverse Effect or prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement.
(i) The Company and each Subsidiary either has or has disposed of in
the ordinary course of business since December 31, 2003 good and marketable
title to all of its properties and assets, tangible and intangible, reflected in
the consolidated balance sheet of the Company and its consolidated Subsidiaries
as of that date that is a part of the financial statements included in the
Registration Statement, and has good and marketable title to all other property
described in the Registration Statement as owned by the Company or a Subsidiary,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
those reflected in such financial statements (or as described in the
Registration Statement) or which are not material. All of the leases and
subleases under which the Company or any Subsidiary holds properties are in full
force and effect (with only such exceptions as are commonly accepted by prudent
companies engaged in the business of the Company or such Subsidiary) and neither
the Company nor any Subsidiary has received notice of any claim that is
materially adverse to the rights of the Company or any Subsidiary under any of
such leases or subleases.
(j) The Company, for itself and its Subsidiaries that have been
consolidated for tax purposes, has filed all federal, state, local and foreign
income tax returns which have been required to be filed prior to the date hereof
(after taking into account all timely filed requests for extensions) and has
paid all taxes indicated by said returns and all assessments received by the
Company to the extent that such taxes have become due and are not being
contested in good faith. All tax liabilities have been adequately provided for
in the financial statements of the Company. Except as described in the
Registration Statement, all of the Subsidiaries are consolidated with the
Company for tax purposes.
(k) Since the respective dates as of which information is given in
the Registration Statement, as it may have been amended or supplemented, there
has not been any change or any development involving a prospective change,
whether or not occurring in the ordinary course of business, that has had or
might have a Material Adverse Effect and there has not been any material
transaction entered into or any material transaction that is probable of being
entered into by the Company or any Subsidiary, other than transactions in the
ordinary course of business and changes and transactions described in the
Registration Statement, as it may be amended or supplemented. Neither the
Company nor any Subsidiary has any material contingent obligations that are not
disclosed in the Company's financial statements included in the Registration
Statement or elsewhere in the Prospectus.
(l) Neither the Company nor any Subsidiary is, nor, with the giving
of notice or lapse of time or both, will any such entity be, in violation of or
in default under its Certificate of Incorporation or Bylaws or other charter
documents or under any agreement, lease, contract, indenture or other instrument
or obligation to which it is a party or by which it, or any of its properties,
is bound and which default might have a Material Adverse Effect.
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(m) No consent, approval, authorization, order, registration,
filing, qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any Subsidiary or any of their respective properties or assets is required
for the execution, delivery and performance of this Agreement, the Warrant
Agreement, the Representative's Warrant or the consummation of the transactions
contemplated hereby or thereby, or by the Registration Statement and by the
Prospectus, including the issuance, sale and delivery of the Securities, except
the registration under the 1933 Act of the Securities and such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Securities and by the
National Association of Securities Dealers, Inc. (the "NASD").
(n) The Company or a Subsidiary holds all material patents, patent
rights trademarks, trade names, copyrights, trade secrets and licenses of any of
the foregoing (collectively, "Intellectual Property Rights") that are necessary
to the conduct of its businesses; there is no claim pending or, to the knowledge
of the Company, threatened against the Company or any Subsidiary or any of their
respective officers, directors or employees alleging any infringement of
Intellectual Property Rights, or any violation of the terms of any license
relating to Intellectual Property Rights, nor does the Company know of any basis
for any such claim. The Company knows of no infringement by others of
Intellectual Property Rights owned by or licensed to the Company or a
Subsidiary. The Company or a Subsidiary has obtained, is in compliance in all
material respects with and maintains in full force and effect all material
licenses, certificates, permits, orders or other, similar authorizations granted
or issued by any governmental agency (collectively "Government Permits")
required to conduct its business as it is presently conducted. No proceeding to
revoke, limit or otherwise materially change any Government Permit has been
commenced or, to the Company's knowledge, is threatened against the Company or
any Subsidiary, and the Company has no reason to anticipate that any such
proceeding will be commenced against the Company or any Subsidiary. Except as
disclosed or contemplated in the Prospectus, the Company has no reason to
believe that any pending application for a Government Permit will be denied or
limited in a manner inconsistent with the Company's business plan as described
in the Prospectus.
(o) The Company and each Subsidiary is in all material respects in
compliance with all applicable Environmental Laws. The Company has no knowledge
of any past, present or, as anticipated by the Company, future events,
conditions, activities, investigation, studies, plans or proposals that (i)
would interfere with or prevent compliance with any Environmental Law by the
Company or any Subsidiary or (ii) could reasonably be expected to give rise to
any common law or other liability, or otherwise form the basis of a claim,
action, suit, proceeding, hearing or investigation, involving the Company or any
Subsidiary and related to Hazardous Substances or Environmental Laws. Except for
the prudent and safe use and management of Hazardous Substances in the ordinary
course of the Company's business, (i) no Hazardous Substance is or has been
used, treated, stored, generated, manufactured or otherwise handled on or at any
Facility and (ii) to the Company's knowledge, no Hazardous Substance has
otherwise come to be located in, on or under any Facility. No Hazardous
Substances are stored at any Facility except in quantities necessary to satisfy
the reasonably anticipated use or consumption by the Company. No litigation,
claim,
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proceeding or governmental investigation is pending regarding any environmental
matter for which the Company or any Subsidiary has been served or otherwise
notified or, to the knowledge of the Company, threatened or asserted against the
Company or any Subsidiary, or the officers or directors of the Company or any
Subsidiary in their capacities as such, or any Facility or the Company's
business. There are no orders, judgments or decrees of any court or of any
governmental agency or instrumentality under any Environmental Law which
specifically apply to the Company or any Subsidiary, any Facility or any of the
Company's or any Subsidiary's operations. Neither the Company nor any Subsidiary
has received from a governmental authority or other person (i) any notice that
it is a potentially responsible person for any Contaminated site or (ii) any
request for information about a site alleged to be Contaminated or regarding the
disposal of Hazardous Substances. There is no litigation or proceeding against
any other person by the Company or any Subsidiary regarding any environmental
matter. The Company has disclosed in the Prospectus or made available to the
Underwriters and their counsel true, complete and correct copies of any reports,
studies, investigations, audits, analyses, tests or monitoring in the possession
of or initiated by the Company or any Subsidiary pertaining to any environmental
matter relating to the Company, any Subsidiary, their past or present operations
or any Facility.
For the purposes of the foregoing paragraph, "Environmental Laws"
means any applicable federal, state or local statute, regulation, code, rule,
ordinance, order, judgment, decree, injunction or common law pertaining in any
way to the protection of human health or the environment, including without
limitation, the Resource Conservation and Recovery Act of 1976, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Toxic Substances Control Act, as amended, the Clean Air Act, as
amended, the Clean Water Act, as amended, the Federal Water Pollution Control
Act, as amended, the Hazardous Material Transportation Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, and any similar or
comparable state or local law; "Hazardous Substance" means any hazardous, toxic,
radioactive or infectious substance, material or waste as defined, listed or
regulated under any Environmental Law; "Contaminated" means the actual existence
on or under any real property of Hazardous Substances, if the existence of such
Hazardous Substances triggers a requirement to perform any investigatory,
remedial, removal or other response action under any Environmental Laws or if
such response action legally could be required by any governmental authority;
"Facility" means any property currently owned, leased or occupied by the
Company.
(p) Neither the Company, nor to the Company's knowledge, any of its
affiliates, has taken or intends to take, directly or indirectly, any action
which is designed to cause or result in, or which constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock or the Warrants in order to facilitate the
sale or resale of the Units.
(q) The Company is not and, upon consummation of the transactions
contemplated by this Agreement and the Prospectus, will not be an "investment
company" within the meaning of such term under the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission thereunder.
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(r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (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. The Company has adopted Disclosure Controls and Procedures, as
defined in Section 13a-14(c) of the rules and regulations adopted under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and has
implemented such procedures as adopted and has evaluated the effectiveness of
such Disclosure Controls and Procedures not less than ninety days prior to the
filing date of each report on Form 10-Q or Form 10-K filed by the Company since
August 29, 2002.
(s) The Company and each Subsidiary carries, or is covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.
(t) The Company and each Subsidiary is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company or any Subsidiary would have any liability; neither the
Company nor any Subsidiary has incurred and the Company does not expect that it
or any Subsidiary will incur liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412
or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company or any Subsidiary would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such qualification.
(u) The Company and each Subsidiary is in compliance with all laws,
rules, regulations, orders of any court or administrative agency, operating
licenses or other requirements imposed by any governmental body applicable to
it, including, without limitation, all applicable laws, rules, regulations,
licenses or other governmental standards applicable to its business other than
to the extent to which non-compliance would not have a Material Adverse Effect;
and the conduct of the business of the Company and each Subsidiary, as described
in the Prospectus, will not cause the Company or such Subsidiary to be in
violation of any such requirements.
(v) Each of the Warrants and the Representative's Warrant have been
authorized for issuance to the purchasers thereof or to the Representative or
its designees, as the case may be, and will, when issued and delivered pursuant
to this Agreement and, in the case of the Warrants, countersigned by the Warrant
Agent as provided in the Warrant Agreement, will have been duly executed, issued
and delivered and will constitute valid and legally binding obligations of the
Company and the holders thereof will possess the rights, privileges, and
characteristics as
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represented in the most recent form of Warrant Agreement or Representative's
Warrant, as the case may be, filed as an exhibit to the Registration Statement;
the securities to be issued upon exercise of the Warrants and the
Representative's Warrant, when issued and delivered against payment therefor in
accordance with the terms thereof, will be duly and validly issued, fully paid,
nonassessable and free of preemptive rights, and all corporate action required
to be taken for the authorization and issuance of the Warrants and the
Representative's Warrant, and the securities to be issued upon their exercise,
have been validly and sufficiently taken. The execution by the Company of the
Warrant Agreement and the Representative's Warrant has been duly authorized by
all required action of the Company and, when so executed and delivered (and
assuming due and valid execution by the Warrant Agent, in the case of the
Warrant Agreement) will constitute the valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(w) The execution, delivery, and performance of this Agreement, the
Warrant Agreement and the consummation of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof do not and will
not (i) conflict with or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan
agreement, limited liability company agreement or partnership agreement, or
other agreement, instrument, franchise, license or permit to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary or their
respective properties or assets may be bound and which is material to the
business of the Company and its Subsidiaries taken as a whole; (ii) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws, as
the case may be, of the Company or any Subsidiary; or (iii) violate, contravene
or conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any Subsidiary or any of their respective
properties or assets other than to the extent to which such violation would not
have a Material Adverse Effect.
(x) No relationship, direct or indirect, exists between or among any
of the Company or any affiliate of the Company, on the one hand, and any
director, officer, stockholder, customer or supplier of the Company or any
affiliate of the Company, on the other hand, which is required by the 1933 Act,
1934 Act, and the 1933 Act Regulations to be described in the Registration
Statement or the Prospectus which is not so described or is not described as
required. There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or any affiliate of the Company to or for the
benefit of any of the officers or directors of the Company or any of their
respective family members, except as disclosed or incorporated by reference in
the Registration Statement and the Prospectus.
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(y) The statistical and market-related data included or incorporated
by reference in the Registration Statement and the Prospectus are based on or
derived from sources which the Company believes to be reliable and accurate.
(z) Except as disclosed in the Prospectus, neither the Company nor
any of its officers, directors or affiliates have caused any person, other than
the Underwriters, to be entitled to reimbursement of any kind, including,
without limitation, any compensation that would be includable as underwriter
compensation under the NASD's Corporate Financing Rule with respect to the
offering of the Units, as a result of the consummation of such offering based on
any activity of such person as a finder, agent, broker, investment adviser or
other financial service provider.
(aa) Except as described in the Prospectus, the Company does not
directly or indirectly control or have a material interest in any other business
entity.
(bb) The Common Stock is listed and traded on the Nasdaq National
Market System ("NMS"). The Shares, the Warrants and the Warrant Shares
(including the Shares, the Warrants and the Warrant Shares underlying the
Representative's Warrant) have been approved for listing on the NMS upon the
effectiveness of the Registration Statement and the Company has satisfied all of
the requirements of the NMS for such listing and for the trading of such
Securities on the NMS.
(cc) The Company has adopted organizational structures and policies
sufficient to comply with the requirements of the NMS corporate governance rules
in effect as of the date hereof and as proposed to be amended in accordance with
any proposed rules of NMS published for comment as of the date hereof
(collectively, the "NMS Corporate Governance Rules".) Without limiting the
generality of the foregoing, the Company's Board of Directors has validly
appointed an Audit Committee and a Compensation Committee whose composition
satisfies the requirements of the NMS Corporate Governance Rules. The Board of
Directors and/or the Audit Committee or Compensation Committee, as the case may
be, has adopted a charter governing the respective activities of the Audit and
Compensation Committees that satisfies the requirements of the NMS Corporate
Governance Rules. The Audit Committee and the Compensation Committee have each
acted in accordance with the provisions of their respective charters, as amended
from time to time.
(dd) Neither the Board of Directors nor the Audit Committee has been
informed, nor is any director of the Company aware, of (i) any significant
deficiencies in the design or operation of the Company's internal controls which
could adversely affect the Company's ability to record, process, summarize and
report financial data or any material weakness in the Company's internal
controls; or (ii) any fraud, whether or not material, that involves management
or other employees of the Company who have a significant role in the Company's
internal controls.
(ee) Each of the certifications made by the principal executive and
principal financial officers of the Company pursuant to Section 302 of the
Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations adopted thereunder was
correct in all material respects when made.
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(ff) The Company and each Subsidiary has complied with all
provisions of Section 517.075 Florida Statutes, relating to doing business with
the Government of Cuba or with any person or affiliate located in Cuba.
1A. Representations and Warranties of the Selling Stockholder.
The Selling Stockholder represents and warrants to each of the
Underwriters as follows:
(a) This Agreement and the Custody Agreement signed by the Selling
Stockholder and American Stock Transfer & Trust Company, as Custodian, relating
to the deposit of the Shares to be sold by the Selling Stockholder (the "Custody
Agreement") have been executed and delivered by or on behalf of the Selling
Stockholder.
(b) The execution and delivery by the Selling Stockholder of, and
the performance by the Selling Stockholder of its obligations under, this
Agreement and the Custody Agreement will not contravene any provision of
applicable law, or any agreement or other instrument binding upon the Selling
Stockholder or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Selling Stockholder, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Selling Stockholder of its
obligations under this Agreement or the Custody Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in connection
with the offer and sale of the Shares.
(c) The Selling Stockholder has, and on the Option Closing Date will
have, good and valid title to the Shares to be sold by the Selling Stockholder
free and clear of any security interests, claims, liens, equities and other
encumbrances and the legal right and power, and all authorization and approval
required by law, to enter into this Agreement and the Custody Agreement and to
sell, transfer and deliver the Shares to be sold by the Selling Stockholder.
Delivery of the Shares to be sold by the Selling Stockholder pursuant to this
Agreement will pass title to such Shares free and clear of any security
interests, claims, liens, equities and other encumbrances.
(d) All information relating to the Selling Stockholder furnished to
the Company by or on behalf of the Selling Stockholder for use in the
Registration Statement and the Prospectus is and on the appropriate Option
Closing Dates will be true, correct and complete and does not and on the
appropriate Option Closing Dates will not contain any untrue statement of
material fact or omit to state any material fact necessary to make such
information not misleading in light of the circumstances under which they were
or are made.
2. Purchase, Sale and Delivery of the Units.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_______ per Unit, the
11
number of Firm Units set forth opposite the name of each Underwriter in Schedule
I hereof, subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Units to be sold hereunder is to be made in
New York Clearing House funds and, at the option of the Representative, by bank
wire to an account specified by the Company, certified or bank cashier's checks
drawn to the order of the Company, against either uncertificated delivery of
Firm Units or of certificates therefor (which delivery, if certificated, shall
take place in such location in New York, New York as may be specified by the
Representative) to the Representative for the several accounts of the
Underwriters. Such payment is to be made at the offices of the Representative at
the address set forth on the first page of this agreement, at 7:00 a.m., Pacific
time, on the third business day after the date of this Agreement or at such
other time and date not later than five business days thereafter as the
Representative and the Company shall agree upon, such time and date being herein
referred to as the "Closing Date." (As used herein, "business day" means a day
on which the New York Stock Exchange is open for trading and on which banks in
New York are open for business and not permitted by law or executive order to be
closed.) Except to the extent uncertificated Firm Units are delivered at
closing, the certificates for the Firm Units will be delivered in such
denominations and in such registrations as the Representative requests in
writing not later than the second full business day prior to the Closing Date,
and will be made available for inspection by the Representative at least one
business day prior to the Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Selling Stockholder hereby grant an option to the Representative
to purchase the Option Units at the price per Unit as set forth in Section 2(a).
The Selling Stockholder has agreed to sell the first 300,000 Shares covered by
the Option Units and the Company has agreed to sell 450,000 Shares and 375,000
Warrants covered by the Option Units. In the event the Selling Stockholder for
any reason fails to deliver any of the Shares that it has agreed to sell
pursuant to the preceding sentence, the Company agrees that it will provide such
Shares. The option granted hereby may be exercised in whole or in part by giving
written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 45 days after the date of this Agreement, by the
Representative to the Company and the Selling Stockholder setting forth the
number of Option Units as to which the Representative is exercising the option,
the names and denominations in which the Option Units are to be registered and
the time and date at which certificates representing such Units are to be
delivered. The time and date at which certificates for Option Units are to be
delivered shall be determined by the Representative but shall not be earlier
than three nor later than 10 full business days after the exercise of such
option, nor in any event prior to the Closing Date (such time and date being
herein referred to as the "Option Closing Date"). If the date of exercise of the
option is three or more days before the Closing Date, the notice of exercise
shall set the Closing Date as the Option Closing Date. The option with respect
to the Option Units granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Units by the Underwriters. The
Representative may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Units shall be made,
in accordance with this Section 2(c), on the Option Closing Date in New York
Clearing House funds and, at the option of the Representative, by bank wire to
one or more accounts specified by the Company and the Selling
12
Stockholder, or by certified or bank cashier's check drawn to the order of the
Selling Stockholders or the Company for the Option Units in consideration either
of uncertificated delivery of Option Units or delivery of certificates therefore
(which delivery, if certificated, shall take place in such location in New York,
New York as may be specified by the Representative) to the Representative for
the several accounts of the Underwriters. Except to the extent uncertificated
Option Units are delivered at closing, the certificates for the Option Units
will be delivered in such denominations and in such registrations as the
Representative requests in writing not later than the second full business day
prior to the Option Closing Date, and will be made available for inspection by
the Representative at least one business day prior to the Option Closing Date.
The purchase price for the Option Units shall be allocated to the
Selling Stockholder and the Company based on the relative fair market values of
the Shares and the Warrants included in the Option Units. For this purpose, the
fair market value of the Shares and the Warrants included in the Option Units
shall be deemed to be their respective trading prices over the last three
(3) trading days immediately preceding the Option Closing Date.
(d) In addition to the sums payable to the Representative as
provided elsewhere herein, the Representative shall be entitled to receive at
the Closing, for itself alone and not as Representative of the Underwriters, as
additional compensation for its services, a warrant for the purchase of up to
250,000 Units at a price of $_____ per Unit [120% of the price at which the
Units will be offered to the public], upon the terms and subject to adjustment
and conversion as described in the form of Representative's Warrant filed as an
exhibit to the Registration Statement. The warrants included in the Units
underlying the Representative's Warrant have an exercise price of $ _____ per
share, which is the same as the exercise price of the warrants offered to the
public. The Representative's Warrant may not be sold, transferred, assigned,
pledged or hypothecated, or be subject of any hedging, short sale, derivative,
put, or call transaction that would result in the effective economic disposition
of the Representative's Warrant for a period of one hundred and eighty (180)
days from the date on which the Registration Statement is declared effective by
the Commission (the "Effective Date"), except as provided in Rule 2710(g)(1) of
the NASD Conduct Rules. Beginning one hundred and eighty (180) days from the
Effective Date, the Representative's Warrant may be divided or combined, upon
request to the Company by the warrantholder, into a certificate or certificates
evidencing the same aggregate number of warrants under the Representative's
Warrant.
3. Offering by the Underwriters.
It is understood that the several Underwriters are to make a public
offering of the Firm Units as soon as the Representative deems it advisable to
do so. The Firm Units are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representative may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Units are purchased pursuant to
Section 2 hereof, the Representative will offer them to the public on the
foregoing terms.
13
It is further understood that you will act as the Representative for the
Underwriters in the offering and sale of the Units in accordance with an
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representative containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy or to which the
Representative shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations.
(b) The Company will advise the Representative promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Units, the Shares and the Warrants for sale under the
securities laws of such jurisdictions as the Representative may reasonably have
designated in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company will,
from time to time, prepare and file such statements, reports, and other
documents, as are or may be required to continue such qualifications in effect
for so long a period as the Representative may reasonably request for
distribution of the Units.
(d) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of any Preliminary Prospectus
as the Representative may reasonably request. The Company will deliver to, or
upon the order of, the Representative during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representative may
reasonably request. The Company will deliver to the Representative at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will
14
deliver to the Representative such number of copies of the Registration
Statement (including such number of copies of the exhibits filed therewith that
may reasonably be requested), and of all amendments thereto, as the
Representative may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Units as contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of the Representative, it becomes necessary
to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, not misleading, or, if it is necessary at any time to
amend or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances existing
at the time the Prospectus is so delivered, be misleading, or so that the
Prospectus will comply with the law.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise the Representative in writing when such statement has been so made
available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representative copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders 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.
The Company will deliver to the Representative similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(h) The Company will make no offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivatives of Common Stock (or agreement therefor), directly or indirectly, for
a period of ninety days after the date of this Agreement otherwise than
hereunder, or pursuant to contractual obligations existing on the date hereof or
pursuant to employee benefit plans in effect on the date hereof, or with the
prior written consent of the Representative, which consent will not be
unreasonably withheld.
(i) The Company will use its best efforts to list, subject to notice
of issuance, the Shares, the Warrants and the Warrant Shares (including the
Shares, Warrants and warrant Shares
15
underlying the Representative's Warrant) on the NMS and to cause such listing to
remain in effect with respect to each such security unless and until (i) such
security expires; (ii) such security is listed on another exchange of at least
comparable reputation; or (iii) the Company is no longer required to file
reports under Section 12 of the Exchange Act.
(j) The Company has caused each officer and director to furnish to
the Representative, on or prior to the date of this agreement, a letter or
letters, in form and substance satisfactory to the Underwriters ("Lockup
Agreements"), pursuant to which each such person has agreed not to offer, sell,
sell short or otherwise dispose of any shares of Common Stock or other capital
stock of the Company, or any other securities convertible, exchangeable or
exercisable for Common Stock or derivatives of Common Stock owned by such person
or request the registration for the offer or sale of any of the foregoing (or as
to which such person has the right to direct the disposition) for a period of
ninety days after the date of this Agreement, directly or indirectly, except
with the prior written consent of the Representative, which may or may not be
given in its sole and absolute discretion.
(k) The Company shall apply the net proceeds of its sale of the
Units as set forth in the Prospectus and shall file such reports with the
Commission with respect to the sale of the Units and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Units in such a manner as would
require the Company to register as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act").
(m) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock, and shall comply with the provisions of the Warrant Agreement with
respect to the appointment and maintenance of a Warrant Agent for the Warrants.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
(o) The Company will reserve and keep available at all times, free
of preemptive or other similar rights, a sufficient number of Warrant Shares for
the purpose of enabling the Company to satisfy any obligations to issue such
shares upon exercise of the Warrants and a sufficient number of shares of Common
Stock, Warrants and Warrant Shares to satisfy its obligation to issue such
securities upon exercise of the Representative's Warrant.
5. Costs and Expenses.
(a) The Representative shall be entitled to reimbursement from the
Company, for itself alone and not as Representative of the Underwriters, to a
non-accountable expense allowance
16
equal to 3.0% of the gross offering proceeds from the sale of the Firm Units to
the public, or $______ assuming 2,500,000 Firm Units to be sold at $____ per
Unit. The Representative shall be entitled to withhold this allowance on the
Closing Date related to the purchase of the Firm Units. The Company shall
receive a credit against this non-accountable expense allowance, any amounts
previously paid to the Representative.
(b) In addition to the payment described in Paragraph (a) of this
Section 5, the Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of printing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the NMS listing application; the costs of due diligence investigation
of the principals of the Company, the Blue Sky Survey and any supplements or
amendments thereto; the filing fees of the Commission; the NASD filing fees
incident to securing the required review by the NASD Corporate Finance
Department of the underwriting terms and arrangements; the NMS listing fee; and
the expenses, including the fees and disbursements of counsel for the
Underwriters, incurred in connection with the qualification of the Units under
state securities or Blue Sky laws; and any and all expenses customarily borne by
an issuer of securities. Any transfer taxes imposed on the sale of the Units to
the several Underwriters will be paid by the Company. The Company agrees to pay
all costs and expenses of the Underwriters, including the fees and disbursements
of counsel for the Underwriters, incident to the offer and sale of directed
Units by the Underwriters to employees and persons having business relationships
with the Company. Except as set forth above, the Company shall not, however, be
required to pay for any of the Underwriters' expenses except that, if this
Agreement shall not be consummated, then the Company shall reimburse the several
Underwriters for actual accountable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Units or in contemplation of performing
their obligations hereunder up to a maximum of $100,000 in the aggregate taking
into account all amounts paid to the Underwriters; but the Company shall not in
any event be liable to any of the several Underwriters for damages on account of
loss of anticipated profits from the sale by them of the Units.
6. Conditions of Obligations of the Underwriters.
The several obligations of the Underwriters to purchase the Firm Units on
the Closing Date and the Option Units, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company contained
herein, and to the performance by the Company of their covenants and obligations
hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the
17
Representative and complied with to their reasonable satisfaction. No stop order
suspending the effectiveness of the Registration Statement, as amended from time
to time, shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission and no injunction, restraining order, or order of any nature by a
Federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance of the Units.
(b) The Representative shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Xxxxxxx Xxxxxx LLP,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement.
(ii) Each Subsidiary has been duly organized and is validly
existing as a business entity in good standing under the laws of its
jurisdiction of formation with all requisite power and authority under the laws
governing such entities to own or lease its properties and conduct its business
as described in the Registration Statement.
(iii) The Company and each Subsidiary is duly qualified to
transact business in all jurisdictions in which the conduct of its business
requires such qualification, or in which the failure to qualify would have a
material adverse effect upon the business of the Company.
(iv) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable; the Shares to be sold by the Company have
been duly authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-assessable; all of
the securities of the Company, including, but not limited to, the Common Stock,
the Warrants and the Representative's Warrant, conform to the description
thereof contained in the Prospectus; the certificates for the Common Stock and
the Warrants are in due and proper form under Delaware law and comply in all
material respects with the requirements of the NMS; no preemptive rights of
shareholders exist with respect to any of the Common Stock or the issuance or
sale thereof pursuant to any applicable statute or the provisions of the
Company's Certificate of Incorporation or Bylaws or, to such counsel's
knowledge, pursuant to any contractual obligation. The Company's ownership
interest in each Subsidiary is, in all material respects, as described in the
Registration Statement.
(v) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, (A) there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and (B) there are no
outstanding or authorized options, warrants or rights of any
18
character obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Units or the right to have any Common Stock or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(vi) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company and constitutes a legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditor's rights and to general
equity principles.
(vii) The Warrant Agreement has been duly authorized, executed
and delivered by the Company and the Warrants have been duly authorized,
executed, authenticated, issued and delivered as contemplated in the
Registration Statement and the Warrant Agreement. The Warrant Agreement and the
Warrants constitute legally binding obligations of the Company, enforceable
against the Company in accordance with their respective terms and, in the case
of the Warrants, entitled to the benefits of the Warrant Agreement subject, as
to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(viii) The Warrants are exercisable to purchase Common Stock
in accordance with the terms of the Warrant Agreement; the Warrant Shares
(including those issuable upon exercise of the Warrants underlying the Option
Units and on the Representative's Warrant) has been duly authorized and reserved
for issuance upon such conversion or exercise, as the case may be, and, when
issued upon such conversion or exercise in accordance with the terms of the
Warrant Agreement, will be validly issued, fully paid and nonassessable.
(ix) The Representative's Warrant has been duly authorized by
the Company. When duly executed, issued and delivered by the Company as
contemplated in the Underwriting Agreement and Registration Statement, the
Representative's Warrant will constitute the legally binding obligation of the
Company, enforceable against the Company in accordance with its terms subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
(x) The Registration Statement has become effective under the
Act and, to the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
19
(xi) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial statements
and statistical data and related schedules therein).
(xii) The statements under the caption "Description of
Securities" in the Prospectus and in Item 15 of the Registration Statement,
insofar as such statements constitute a summary of documents referred to therein
or matters of law, fairly summarize in all material respects the information
called for with respect to such documents and matters.
(xiii) Such counsel does not know of any contracts or
documents 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 such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.
(xiv) Except as set forth in the Prospectus, such counsel
knows of no material legal or governmental proceedings pending or threatened
against the Company or any Subsidiary.
(xv) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of the
Company, or any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may be bound.
(xvi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD and state securities and Blue Sky
laws, as to which such counsel need express no opinion) except such as have been
obtained or made, specifying the same.
(xvii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
(c) The Representative shall have received on the Option Closing
Date the opinion of Xxxxxxx Xxxxxx LLP, counsel for the Selling Stockholder,
dated the Option Closing Date, addressed to the Underwriters (and stating that
it may be relied upon by counsel to the Underwriters) to the effect that:
(i) This Agreement has been duly executed and delivered by or
on behalf of the Selling Stockholder.
20
(ii) The execution and delivery by the Selling Stockholder of,
and the performance by the Selling Stockholder of its obligations under, this
Agreement and the Custody Agreement will not contravene any provision of
applicable law, or, to counsel's knowledge, any agreement or other instrument
binding upon the Selling Stockholder or, to counsel's knowledge, any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over the Selling Stockholder of its obligations under this Agreement or the
Custody Agreement , and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Selling Stockholder of its obligations under this Agreement
or the Custody Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with offer and sale of the
Shares.
(iii) The Selling Stockholder is the record owner and, to such
counsel's knowledge, the beneficial owner, of the Shares to be sold by the
Selling Stockholder and has the legal right and power, and all authorization and
approval required by law, to enter into this Agreement and the Custody Agreement
and to sell, transfer and deliver the Shares to be sold by the Selling
Stockholder.
(iv) The Custody Agreement have been executed and delivered by
the Selling Stockholder and are valid and binding agreements of the Selling
Stockholder.
(v) Delivery of the Shares to be sold by the Selling
Stockholder pursuant to this Agreement will pass good and valid title to such
Shares free and clear of any security interests, claims, liens, equities and
other encumbrances.
(vi) Such counsel is of the opinion that the Registration
Statement and Prospectus (except for financial statements and schedules and
other financial and statistical data included therein as to which such counsel
need not express any opinion) comply as to form in all material respects with
the Securities Act and the applicable rules and regulations of the Commission
thereunder.
(d) The opinions set forth in Paragraphs (b) and (c) of this Section
shall be based on the federal laws of the United States of America and the laws
of the states of Delaware and New York. In so far as the laws of any other
jurisdiction apply, such counsel may rely on local counsel in such
jurisdictions, provided that in each case such counsel shall state that they
believe that they and the Underwriters are justified in relying on such other
counsel. With respect to factual matters, counsel for the Company and the
Selling Stockholder may rely on (i) certificates issued by governmental
agencies, (ii) certificates executed and delivered by an executive officer of
the Company and (iii) the representations and warranties of the Company and the
Selling Stockholder as set forth herein, provided that such counsel shall not
have actual knowledge that any information or statements set forth in such
certificates or any representations and warranties contained herein are untrue,
inaccurate, wrong or misleading and such counsel shall specifically state that
they believe that the Underwriters and their counsel may rely on the same. In
addition to the matters set forth above, the opinion of Xxxxxxx Krooks LLP shall
also include a statement to the effect that nothing
21
has come to the attention of such counsel that has caused them to believe that
(i) the Registration Statement, at the time it became effective under the Act
(but after giving effect to any modifications incorporated therein pursuant to
Rule 430A under the Act) and as of the Closing Date or the Option 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 in light of the circumstances under which such
statement were or are made, and (ii) the Prospectus, or any supplement thereto,
on the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements, schedules and financial or statistical information
contained or incorporated by reference therein). With respect to such statement,
Xxxxxxx Xxxxxx LLP may state that their belief is based upon the procedures set
forth therein and, to the extent not set forth therein, upon other
investigations of fact and law as would customarily be performed by
knowledgeable and experienced legal counsel in comparable circumstances but is
otherwise without independent check and verification.
(e) The Representative shall have received from Morse, Zelnick, Rose
& Lander LLP, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (x) and (xi) of Paragraph (b) of this Section 6. In
rendering such opinion Morse, Zelnick, Rose & Lander LLP may rely as to all
matters governed other than by the laws of the states of Delaware and New York
or Federal laws on the opinion of counsel referred to in Paragraph (b) of this
Section 6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel that has caused them to believe that (i) the Registration Statement, or
any amendment thereto, as of the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) and as of the Closing Date or the Option 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 in light of the circumstances under which such
statements were or are made, and (ii) the Prospectus, or any supplement thereto,
on the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Morse, Zelnick, Rose & Lander LLP may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(f) The Representative shall have received at or prior to the
Closing Date from Morse, Zelnick, Rose & Lander LLP a memorandum or summary, in
form and substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Units under the
state securities or Blue Sky laws of such jurisdictions as the Representative
may reasonably have designated to the Company.
22
(g) The Representative, on behalf of the several Underwriters, shall
have received, on each of the dates hereof, the Closing Date and the Option
Closing Date, as the case may be, a letter dated the date hereof, the Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representative, of BDO Xxxxxxx, LLP confirming that they are
independent public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and 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 published Rules
and Regulations and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(h) The Representative shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that, as of the Closing Date or the Option Closing Date, as the case
may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading in light of the
circumstances under which such statements were or are made, and since the
effective date of the Registration Statement, no event has occurred which should
have been set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
change or development involving a prospective change, whether or not arising in
the ordinary course of business, which might have a Material Adverse Effect.
23
(i) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representative may reasonably have requested.
(j) The Common Stock is listed and traded on the NMS. The Shares,
the Warrants and the Warrant Shares (including the Shares, Warrants and Warrant
Shares underlying the Representative's Warrant) have been approved for listing
on the NMS and will trade commencing on ________ __, 2004.
(k) The Lockup Agreements described in Section 4(j) are in full
force and effect.
(l) The Company shall have complied with the provisions of Section
4(d) hereof with respect to the furnishing of prospectuses.
(m) The NASD shall have confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Representative and to Morse,
Zelnick, Rose & Lander LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representative by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
In such event, the Company and the Underwriters shall not be under
any obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company.
The obligations of the Company to sell and deliver the portion of the
Units required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
(a) (1) The Company 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 to which
such Underwriter or any such controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged
24
untrue statement of any material fact contained in the Registration Statement,
any Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which such statements were
made; and will reimburse each Underwriter and each such controlling person upon
demand for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating or defending any
such loss, claim, damage or liability, action or proceeding or in responding to
a subpoena or governmental inquiry related to the offering of the Units, whether
or not such Underwriter or controlling person is a party to any action or
proceeding; 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 an untrue statement or alleged untrue statement, or omission or
alleged omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through the
Representative specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability that the Company may otherwise
have.
(2) The Selling Stockholder severally 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 to which such Underwriter or any such controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances in which such statements were made; provided, however, that the
Selling Stockholder will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, in reliance
upon and in conformity with information relating to such Selling Stockholder
furnished by or on behalf of the Selling Stockholder; and will reimburse each
Underwriter and each such controlling person upon demand for any legal or other
expenses reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or governmental
inquiry related to the offering of the Units, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the liability of the Selling Stockholder under this Section 8 shall not in
any event exceed the net proceeds received by the Selling Stockholder from the
sale of its Shares. This indemnity agreement will be in addition to any
liability that the Company may have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Selling Stockholder and the Company, each of its directors,
each of its officers who have signed the Registration Statement and each person,
if any, who controls the Company within the meaning of the Act, against any
losses, claims, damages or liabilities to which the Selling Stockholder or the
25
Company or any director, officer or controlling person of the Company may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and will reimburse any legal or
other expenses reasonably incurred by the Selling Stockholder or the Company or
any director, officer or controlling person of the Company in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability that such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of whom
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant
26
to Section 8(a) and by the Company in the case of parties indemnified pursuant
to Section 8(b). The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) 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 (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Units. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
faults of the Selling Stockholder and the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Selling Stockholder and
the Company on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Selling Stockholder and the Company bears to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Selling Stockholder or the Company on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Selling Stockholder, the Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to
27
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Units purchased by such Underwriter, and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 8(d)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and the Selling Stockholder set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any persons controlling the Company, or the Selling Stockholder, (ii)
acceptance of any Units and payment therefore hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company, or to
the Selling Stockholder shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters.
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Units 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 or the Selling Stockholder,
as the case may be), you, as Representative of the Underwriters, shall use
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company or the Selling
Stockholder, as the case may be, such amounts as may be agreed upon and upon the
terms set forth herein, the Firm Units or Option Units, as the case may be,
which the defaulting Underwriter or Underwriters failed to purchase. If during
such 36 hours you, as such Representative, shall not have procured such other
Underwriters, or any others, to purchase the Firm Units or Option Units, as the
case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of Units with respect to which
such default shall occur does not exceed 10% of the Firm Units or Option Units,
as the case may be, covered hereby, the other Underwriters shall be obligated,
severally, in proportion to the respective numbers of Firm Units or Option
Units, as the case may be, which they are obligated to
28
purchase hereunder, to purchase the Firm Units or Option Units, as the case may
be, which such defaulting Underwriter or Underwriters failed to purchase, or (b)
if the aggregate number of Firm Units or Option Units, as the case may be, with
respect to which such default shall occur exceeds 10% of the Firm Units or
Option Units, as the case may be, covered hereby, the Company or you as the
Representative 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 or of the Selling Stockholder except to the extent provided in
Section 8 hereof. In the event of a default by any Underwriter or Underwriters,
as set forth in this Section 9, the Closing Date or Option Closing Date, as the
case may be, may be postponed for such period, not exceeding seven days, as you,
as Representative, may determine in order that the required changes 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. Notices.
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to Xxxxxxx Investment Company,
Inc., 000 XX Xxxxx Xxxxxxx, Xxxxxxxx, Xxxxxx 00000, Attention: Xxxxxxx X.X.
Xxxxxxx; with a copy, which shall not constitute notice, to Morse, Zelnick, Rose
& Lander, LLP, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxx X. Xxxxxxxxxxx; if to the Company, to XXXXX Online, Inc., 00 Xxxxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxxxxx; with copy,
which shall not constitute notice, to Xxxxxxx Krooks, LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxx X. Xxxxxxx; if to the Selling
Stockholder, to TheBean LLC, c/o Xxxxx and Xxxx Xxxxxxxxxx, 000 Xxx Xxxxxx Xxxx,
Xxxxx Xxxxx, Xxx Xxxx 00000.
11. Termination.
This Agreement may be terminated by the Representative by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the Units are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any change or development
involving a prospective change, whether or not arising in the ordinary course of
business, might reasonably be expected to have have a Material Adverse
Effect;,(ii) any outbreak or escalation of hostilities or declaration of war or
national emergency or other national or international calamity or crisis or
change in economic or political conditions if the
29
effect of such outbreak, escalation, declaration, emergency, calamity, crisis or
change on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Units or to enforce contracts for
the sale of the Units, (iii) the Dow Xxxxx Industrial Average shall have fallen
by 15 percent or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission, (iv) suspension of trading in securities generally on the New York
Stock Exchange or the NMS or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities on either such Exchange, (v)
the enactment, publication, decree or other promulgation of any statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects or may materially and adversely
affect the business or operations of the Company, (vi) declaration of a banking
moratorium by United States or New York State authorities, (vii) any downgrading
in the rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Exchange Act); (viii) the suspension of trading of the Common Stock or the
Warrants by the Commission or the NMS, or (ix) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company, the Selling Stockholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Units from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. Information Provided by Underwriters.
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in the Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(b)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. Miscellaneous.
The reimbursement, indemnification and contribution agreements contained
in this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Selling
30
Stockholder or the Company or its directors or officers and (c) delivery of and
payment for the Units under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
When used herein, the terms "knowledge," "knows" and other variations
thereof shall mean actual knowledge after a reasonable investigation.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Oregon. All disputes relating to this Underwriting
Agreement shall be adjudicated before a court located in Multnomah County,
Oregon to the exclusion of all other courts that might have jurisdiction.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
XXXXX Online, Inc.
By:
-----------------------------
Xxxxx Xxxxxxxxxx
Chief Executive Officer
TheBean LLC
By:
-----------------------------
Xxxxx Xxxxxxxxxx,
Managing Member
31
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
XXXXXXX INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By:
-------------------------------
Authorized Officer
32
SCHEDULE I
Schedule of Underwriters
Number of Firm Units
Underwriter to be Purchased
----------- ---------------
Xxxxxxx Investment Company, Inc.
33
