1,000,000 Shares
Frontline Communications Corporation
Series B Preferred Stock
UNDERWRITING AGREEMENT
February __, 2000
Prime Charter Ltd.,
As representative of the
several Underwriters named
in Schedule A hereto
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Frontline Communications Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell 1,000,000 shares (the "Firm Shares") of
its authorized but unissued Series B Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock"), to Prime Charter Ltd. (the "Representative")
and the other underwriters listed on Schedule A to this Agreement (the
Representative and the other underwriters being herein collectively called the
"Underwriters"). The Company also proposes to grant to the Underwriters an
option to purchase up to an aggregate of 150,000 additional shares (the
"Overallotment Shares") of Series B Preferred Stock on the terms and conditions
set forth in Section 3(c). The Firm Shares and the Overallotment Shares are
hereinafter collectively referred to as the "Shares."
The Company wishes to confirm as follows its agreements with the
Underwriters in connection with the several purchases by the Underwriters of the
Shares.
1. Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form SB-2 (File No. 333-92969), including a prospectus relating to the Shares
and each amendment thereto in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"). There have been delivered to the
Representative signed copies of such registration statement and amendments,
together with copies of each exhibit filed therewith. Copies of such
registration statement and amendments and of the related preliminary prospectus
have been delivered to the Representative in such reasonable quantities as the
Representative has requested for each of the Underwriters. If such registration
statement has not become effective, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the Company
with the Commission. If such registration statement has become effective, a
final prospectus containing all Rule 430A Information (as hereinafter defined)
will be filed by the Company with the Commission in accordance with, and if
required by, Rule 424(b) of the rules and regulations of the Act (the "Rules and
Regulations") on or before the second business day after the date hereof (or
such earlier time as may be required by the Rules and Regulations).
The term "Registration Statement" as used in this Agreement shall mean
such registration statement (including all exhibits and financial statements) at
the time such registration statement becomes or became effective and, if any
post-effective amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended;
provided, however, that such term shall include all Rule 430A Information deemed
to be included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the Rules and
Regulations and shall also mean any registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations with respect to the Shares. The term
"Preliminary Prospectus" shall mean any preliminary prospectus referred to in
the preceding paragraph and any preliminary prospectus included in the
Registration Statement at the time it becomes effective that omits Rule 430A
Information. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares in the form in which it is first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no
filing pursuant to Rule 424(b) of the Rules and Regulations is required, shall
mean the form of final prospectus included in the Registration Statement at the
time such registration statement becomes effective. The term "Rule 430A
Information" means information with respect to the Shares and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A of the Rules and Regulations.
2. Representations and Warranties. The Company hereby represents and
warrants as follows:
(a) The Company has not received, and has no notice of, any
order of the Commission preventing or suspending the use of any Preliminary
Prospectus, or the institution of proceedings for that purpose, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Rules and Regulations. When the
Registration Statement became or becomes, as the case may be, effective (the
"Effective Date") and at all times subsequent thereto up to and at the Closing
Date (as hereinafter defined), any later date on which Overallotment Shares are
to be purchased (the "Overallotment Closing Date") and when any post-effective
amendment to the Registration Statement becomes effective or any amendment or
supplement to the Prospectus is filed with the Commission, (i) the Registration
Statement and Prospectus, and any amendments or supplements thereto, will
contain all statements which are required to be stated therein by, and will
comply with the requirements of, the Act and the Rules and Regulations and (ii)
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. The foregoing representations and
warranties in this Section 2(a) do not apply to any statements or omissions made
in reliance on and in conformity with the information contained in the section
of the Prospectus entitled "Underwriting." The Company has not distributed any
offering material in connection with the offering or sale of the Shares other
than the Registration Statement, the Preliminary Prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
(b) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration Statement.
The Company is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction where the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure so to qualify would not have a material adverse effect on the business,
properties, prospects, financial condition or results of operations of the
Company and the Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect"). The Company has no subsidiaries (as defined in the
Rules and Regulations) other than its wholly owned subsidiaries, CLEC
Communications Corporation, iShop Networks, Inc. (formerly, "Frontline
Commerce Corporation"), WOW Factor, Inc. and Webprime, Inc.
(the "Subsidiaries"). The Company does not own, directly or indirectly,
any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity other than the
Subsidiaries. Complete and correct copies of the certificates of incorporation
and of the bylaws of the Company and the Subsidiaries and all amendments thereto
have been delivered to the Representative and no changes therein will be made
subsequent to the date hereof and prior to the Closing Date or, if later, the
Overallotment Closing Date. Each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement. All of the outstanding shares of capital stock of
the Subsidiaries have been duly authorized and validly issued and are fully paid
and non-assessable. The Company owns all of the outstanding shares of capital
stock of the Subsidiaries. None of the outstanding shares of capital stock of
the Subsidiaries is subject to a lien, security interest, other encumbrance or
adverse claim. No options, warrants or other rights to purchase, agreements or
other obligation to issue or other rights to convert any obligation into shares
of capital stock or ownership interests in the Subsidiaries are outstanding.
(c) The Company has full power and authority (corporate and
other) to enter into this Agreement and the agreement between the Company and
the Representative relating to issuance of the Representative's Warrants (as
hereinafter defined) (the "Representative's Warrant Agreement"), which is being
executed concurrently herewith, and to perform the transactions contemplated
hereby and thereby to be performed by it. Each of this Agreement and the
Representative's Warrant Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company, enforceable against the Company in accordance with its terms, except as
rights to indemnity and contribution hereunder or thereunder may be limited by
applicable laws, the public policies underlying such laws, or equitable
principles and except as enforcement hereof or thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or affecting creditors' rights generally or by general equitable principles.
The performance of this Agreement and the Representative's Warrant Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, (i) any indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note agreement or other evidence
of indebtedness, or any lease, contract or other agreement or instrument to
which the Company or any of the Subsidiaries are a
party or by which any of their respective properties are bound, (ii) the
certificate of incorporation or bylaws of the Company or any of the Subsidiaries
or (iii) any law, order, rule, regulation, writ, injunction or decree of any
court or governmental agency or body to which the Company or any of the
Subsidiaries is subject. The Company is not required to obtain or make (as the
case may be) any consent, approval, authorization, order, designation or filing
by or with any court or regulatory, administrative or other governmental agency
or body as a requirement for the consummation by the Company of the transactions
contemplated by this Agreement or the Representative's Warrant Agreement, except
such as may be required under the Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or under state securities or blue sky ("Blue Sky")
laws or under the rules and regulations of The American Stock Exchange, Inc.
(the "AMEX").
(d) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim, proceeding or investigation against the
Company or any of the Subsidiaries or any of their respective officers or any of
their respective properties, assets or rights before any court or governmental
agency or body or otherwise which might result in a Material Adverse Effect or
prevent consummation of the transactions contemplated hereby. There are no
statutes, rules, regulations, agreements, contracts, leases or documents that
are required to be described in the Prospectus, or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations that have
not been accurately described in all material respects in the Prospectus or
filed as exhibits to the Registration Statement.
(e) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right. The authorized and outstanding
capital stock of the Company conforms in all material respects to the
description thereof contained in the Registration Statement and the Prospectus
(and such description correctly states the substance of the provisions of the
instruments defining the capital stock of the Company). Prior to the Closing
Date, the Certificate of Designation relating to the Shares (the "Certificate
of Designation") will be duly authorized and executed by the Company and
will be filed with the Secretary of State of the State of Delaware and,
when the Shares are issued, delivered and paid for pursuant to the terms of
the Certificate of Designation and this Agreement, will constitute a valid and
legally binding obligation of the Company in accordance with its terms,
except to the extent that
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting
creditors' rights or by general principles of equity, whether considered at law
or in equity. The Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company against payment therefor in accordance with the terms of this Agreement,
will be duly and validly issued and fully paid and nonassessable. The shares of
Common Stock issuable upon conversion of the Shares (the "Conversion Shares")
have been duly authorized, and when issued upon such conversion in accordance
with the terms of the Certificate of Designation, will be duly and validly
issued and fully paid and nonassessable. Any shares of Common Stock issuable as
dividends on the Shares or on the Warrant Shares in accordance with the terms
of the Certificate of Designation (the "Dividend Shares"), upon such issuance
will be duly and validly issued and fully paid and nonassessable. No preemptive
right, co-sale right, right of first refusal or other similar rights of
security holders exists with respect to any of the Shares, the Conversion Shares
or the Dividend Shares or the issue and sale thereof other than those that have
been expressly waived prior to the date hereof. No holder of securities of the
Company has the right to cause the Company to include such holder's securities
in the Registration Statement except for any such rights that have been waived
or previously satisfied. The Representative's Warrant Agreement and the
Representative's Warrants conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. The shares
of Series B Preferred Stock issuable upon exercise of the Representative's
Warrants (the "Warrant Shares") have been duly authorized for issuance and sale
to the holders of the Representative's Warrants pursuant to the Representative's
Warrant Agreement and, when issued and delivered by the Company against payment
therefor in accordance with the terms of the Representative's Warrant Agreement,
will be duly and validly issued and fully paid and nonassessable. The shares of
common stock issuable upon conversion of the Warrant Shares (the "Warrant
Conversion Shares") have been duly authorized and when issued upon such
conversion in accordance with the terms of the Certificate of Designation, will
be duly and validly issued and fully paid and nonassessable. No further approval
or authorization of any security holder, the Board of Directors or any duly
appointed committee thereof or others is required for the issuance and sale or
transfer of the Shares, the Conversion Shares, the Dividend Shares, the Warrant
Shares or the Warrant Conversion Shares, except as may be required under the
Act, the Exchange Act or Blue Sky laws. Except as disclosed in or contemplated
by the Prospectus and the consolidated financial statements of the Company and
the related notes thereto included in the Prospectus, the Company does not have
outstanding any options or warrants to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option and other plans or
arrangements, and the options or other rights which may be or have been granted
and/or exercised thereunder, as set forth in the Prospectus, accurately and
fairly presents, in all material respects, the information required to be shown
with respect to such plans, arrangements, options and rights.
(f) BDO Xxxxxxx LLP (the "Accountants") who have examined the
consolidated financial statements of the Company, and the financial statements
of WOWFactor, Inc. and Roxy Systems, Inc., together with the respective related
schedules and notes, filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent public
accountants within the meaning of the Act and the Rules and Regulations. Xxxxxx
X. Xxxxx, CPA, who has examined the financial statements of U.S. Online, Inc.,
together with the related schedules and notes of U.S. Online, Inc., filed with
the Commission as part of the Registration Statement which are included in the
Prospectus, is an independent public accountant within the meaning of the Act
and the Rules and Regulations. Xxxxxx X. Xxxxxxxxxxx, CPA, who has examined the
financial statements of Webspan, Inc., together with the related schedules and
notes of Webspan, Inc., filed with the Commission as part of the Registration
Statement which are included in the Prospectus, is an independent public
accountant within the meaning of the Act and the Rules and Regulations. The
consolidated financial statements of the Company, together with the related
schedules and notes, forming part of the Registration Statement and the
Prospectus, fairly present the consolidated financial position and the
consolidated results of operations of the Company at the respective dates and
for the respective periods to which they apply. The financial statements of
WOWFactor, Inc., Roxy Systems, Inc., U.S. Online, Inc. and Webspan, Inc.,
together with the related respective schedules and notes forming part of the
Registration Statement and the Prospectus, fairly present the respective
financial position and results of operations of WOWFactor, Inc., Roxy Systems,
Inc., U.S. Online, Inc. and Webspan, Inc. at the respective dates and for the
respective periods to which they apply. All financial statements, together with
the related schedules and notes, filed with the Commission as part of the
Registration Statement have been prepared in accordance with generally accepted
accounting principles as in effect in the United States consistently applied
throughout the periods involved except as may be otherwise stated in the
Registration Statement. The selected and summary financial and statistical data
included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the consolidated
financial statements included therein. No other financial statements or
schedules are required by the Act or the Rules and Regulations to be included in
the Registration Statement.
(g) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has not been,
except as described in the Prospectus, (i) any material adverse change, or any
development which, in the Company's reasonable judgment, is likely to cause a
material adverse change, in the business, prospects, properties or assets
described or referred to in the Registration Statement, or the results of
operations, condition (financial or otherwise), business or operations of the
Company, and the Subsidiaries taken as a whole, (ii) any transaction which is
material to the Company
and the Subsidiaries, taken as a whole, except transactions in the ordinary
course of business, (iii) any obligation, direct or contingent, which is
material to the Company and the Subsidiaries taken as a whole, incurred by the
Company or any of the Subsidiaries, except obligations incurred in the ordinary
course of business, (iv) any change in the capital stock, ownership interests or
outstanding indebtedness of the Company or any of the Subsidiaries or (v) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company. Neither the Company nor any of the Subsidiaries has any material
contingent obligation which is not disclosed in the Registration Statement.
(h) Except as set forth in the Prospectus, (i) the Company and
the Subsidiaries have good and marketable title to all material properties and
assets described in the Prospectus as owned by them, free and clear of any
pledge, lien, security interest, charge, encumbrance, claim, equitable interest
or restriction, (ii) the agreements to which the Company or any of the
Subsidiaries is a party described in the Prospectus are valid agreements,
enforceable against the Company or the Subsidiaries in accordance with their
respective terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and
except as rights to indemnity and contribution thereunder may be limited by
applicable laws or equitable principles, and, to the Company's knowledge, the
other contracting party or parties thereto are not in material breach or default
under any of such agreements and (iii) each of the Company and the Subsidiaries
has valid and enforceable leases for the properties described in the Prospectus
as leased by it, and such leases conform in all material respects to the
description thereof, if any, set forth in the Registration Statement.
(i) The Company and the Subsidiaries now hold, and at the
Closing Date and any later Overallotment Closing Date, as the case may be, will
hold, all licenses, certificates, approvals and permits from all federal, state,
foreign and other regulatory authorities that are material to the conduct of the
business of the Company (as such business is currently conducted), except for
such licenses, certificates, approvals and permits the failure of which to hold
would not have a Material Adverse Effect, all of which are valid and in full
force and effect (and there is no proceeding pending or, to the knowledge of the
Company, threatened which may cause any such license, certificate, approval or
permit to be withdrawn, canceled, suspended or not renewed). Neither the Company
nor any of the Subsidiaries is in violation of its certificate of incorporation
or bylaws, or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, joint venture or other agreement or instrument to which it is a party
or by which it or any of its properties are bound (except for defaults which
would not have a Material Adverse Effect), or in violation of any law, order,
rule, regulation, writ, injunction or decree of any court or governmental agency
or body.
(j) The Company and the Subsidiaries have filed on a timely
basis all necessary federal, state and foreign income, franchise and other tax
returns and has paid all taxes shown thereon as due, and the Company has no
knowledge of any tax deficiency which has been or might be asserted against the
Company or the Subsidiaries which might have a Material Adverse Effect. All
material tax liabilities are adequately provided for within the financial
statements of the Company.
(k) The Company and the Subsidiaries maintain insurance of the
types and in the amounts that the Company believes are adequate for their
business and consistent with insurance coverage maintained by similar companies
in similar businesses, including, but not limited to, business interruption
insurance and insurance for the material real and personal property owned or
leased against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
(l) Neither the Company nor the Subsidiaries is involved in
any material labor dispute or disturbance nor, to the knowledge of the Company,
is any such material dispute or disturbance threatened.
(m) The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, know-how, franchises, and other material
intangible property and assets (collectively, "Intellectual Property") necessary
to the conduct of their business as conducted and as proposed to be conducted as
described in the Prospectus. The Company has no knowledge that it or the
Subsidiaries lack or will be unable to obtain any rights or licenses to use any
of the Intellectual Property necessary to conduct the business now conducted or
proposed to be conducted by them as described in the Prospectus. The Prospectus
fairly and accurately describes the Company's rights with respect to the
Intellectual Property. The Company has not received any notice of infringement
of or conflict with rights or claims of others with respect to any Intellectual
Property.
(n) The Company is not an "investment company," or a
"promoter" or "principal underwriter" for a registered investment company, as
such terms are defined in the Investment Company Act of 1940, as amended.
(o) Neither the Company nor the Subsidiaries has incurred any
liability for a fee, commission or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement other than the underwriting discounts and
commissions contemplated hereby.
(p) The Company and the Subsidiaries (i) are in compliance
with any and all applicable federal, state, foreign and local environmental
laws, rules, regulations, treaties, statutes and codes promulgated by any and
all governmental authorities relating to the protection of human health and
safety, the environment or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
their business as currently conducted and (iii) are in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permit
licenses or other approvals would not, individually or in the aggregate, have a
Material Adverse Effect. No action, proceeding, revocation proceeding, writ,
injunction or claim is pending or threatened relating to the Environmental Laws
or to the Company's or the Subsidiaries' activities involving Hazardous
Materials. "Hazardous Materials" means any material or substance (y) that is
prohibited or regulated by any environmental law, rule, regulation, order,
treaty, statute or code promulgated by any governmental authority, or any
amendment or modification thereto, or (z) that has been designated or regulated
by any governmental authority as radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment.
(q) Neither the Company nor the Subsidiaries has engaged in
the generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the Company's or any of the Subsidiaries' properties or
former properties, except where such use, manufacture, transportation or storage
is in compliance with Environmental Laws. No Hazardous Materials have been
treated or disposed of on any of the Company's or any of the Subsidiaries'
properties or on properties formerly owned or leased by the Company or any of
the Subsidiaries during the time of such ownership or lease, except in
compliance with Environmental Laws. No spills, discharges, releases, deposits,
emplacements, leaks or disposal of any Hazardous Materials have occurred on or
under or have emanated from any of the Company's
properties or former properties.
(r) Neither the Company nor the Subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any foreign, United States or state
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States.
(s) The Shares have been duly authorized for listing on the
AMEX upon notice of issuance and the Common Stock has been duly authorized for
listing on the AMEX concurrently therewith. The Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Series B Preferred Stock or the Common Stock under the Exchange Act or
delisting the Series B Preferred Stock or the Common Stock from the AMEX, nor
has the Company received any notification that the Commission, or the AMEX is
contemplating terminating such registrations or listings.
(t) Neither the Company nor, to its knowledge, any of its
officers, directors or affiliates has taken, and at the Closing Date and at any
later Overallotment Closing Date, neither the Company nor, to its knowledge, any
of its officers, directors or affiliates will have taken, directly or
indirectly, any action which has constituted, or might reasonably be expected to
constitute, the stabilization or manipulation of the price of sale or resale of
the Shares.
(u) The Company has obtained and delivered to the
Representative agreements (the "Lock-Up Agreements") from each of the persons
and entities listed on Schedule B hereto, representing all of the Company's
executive officers, directors and the stockholders of the Company who
beneficially own 5% or more of the outstanding shares of Common Stock (or
securities convertible into or exchangeable or exercisable for equity securities
of the Company), providing that, subject to certain exceptions contained in the
Lock-Up Agreements, such person or entity will not, commencing on the effective
date of the Registration Statement and continuing for a 12-month period
thereafter, without the Representative's prior written consent, directly or
indirectly, offer to sell, sell, pledge, solicit an offer to buy, contract to
sell, grant any option for the sale thereof, or otherwise encumber, or cause the
transfer or disposition of, or enter into any swap or other similar arrangement
relating to, any shares of Common Stock or Series B Preferred Stock, any
securities convertible into or exchangeable or exercisable for, Common Stock or
Series B Preferred Stock or
other securities of the Company, or exercise any registration rights with
respect to any shares of Common Stock or Series B Preferred Stock or any
securities convertible into or exchangeable or exercisable for any shares of
Common Stock or Series B Preferred Stock.
(v) The Company agrees that it will not, without the
Representative's prior written consent, amend or grant waivers with respect to
any existing agreement between the Company and its executive officers, directors
or stockholders (or holders of securities convertible into or exchangeable or
exercisable for equity securities of the Company) who have not entered into a
Lock-Up Agreement with the Representative and under which such securityholders'
ability to transfer their securities is restricted (the "Existing Lock-Up
Agreements"); the Company further acknowledges and agrees, and will promptly
give written notice to the parties to the Existing Lock-Up Agreements, that the
Representative has specified that the one-year period commencing on the
Effective Date shall be the period during which such securityholders' ability to
transfer their securities shall be restricted under the Existing Lock-Up
Agreements; and the Company agrees that it will, at its own expense, strictly
enforce the Existing Lock-Up Agreements and, if the Company fails to do so, it
will be deemed to have assigned to the Representative all of the Company's
rights under the Existing Lock-Up Agreements and will indemnify the
Representative for all expenses, as and when incurred, arising out of the
Representative's enforcement of the Existing Lock-Up Agreements.
(w) The Company has not distributed and, prior to the latest
to occur of (i) the Closing Date, (ii) the Overallotment Closing Date and (iii)
the completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or other
materials, if any, as permitted by the Act.
3. Purchase of the Shares by the Underwriters.
(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell the Firm Shares to the several Underwriters, and each of the
Underwriters agrees to purchase from the Company the respective aggregate number
of Firm Shares set forth opposite its name on Schedule A, plus such additional
number of Firm Shares which such Underwriter may become obligated to purchase
pursuant to Section 3(b) hereof. The price at which such Firm Shares shall be
sold by the Company and purchased by the several Underwriters shall be $______
per share. In making
this Agreement, each Underwriter is contracting severally and not jointly;
except as provided in Sections 3(b) and 3(c), the agreement of each Underwriter
is to purchase only the respective number of Firm Shares specified on Schedule
A.
(b) If for any reason one or more of the Underwriters shall
fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10 hereof) to
purchase and pay for the number of Shares agreed to be purchased by such
Underwriter or Underwriters, the non-defaulting Underwriters shall have the
right within 24 hours after such default to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between the Representative and such purchasing Underwriter or Underwriters and
upon the terms herein set forth, all or any part of the Shares which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such Shares
and portion, the number of Shares which each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis (as adjusted by the Representative in such manner
as the Representative deems advisable to avoid fractional shares) to absorb the
remaining shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting Underwriters
shall not be obligated to purchase the Shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
Shares exceeds 10% of the total number of Shares which all Underwriters agreed
to purchase hereunder. If the total number of Shares which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company shall have
the right, within 24 hours next succeeding the 24-hour period referred to above,
to make arrangements with other underwriters or purchasers reasonably
satisfactory to the Representative for purchase of such Shares and portion on
the terms herein set forth. In any such case, either the Representative or the
Company shall have the right to postpone the Closing Date determined as provided
in Section 5 hereof for not more than seven business days after the date
originally fixed as the Closing Date pursuant to said Section 5 in order that
any necessary changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made. If the aggregate number of Shares which
the defaulting Underwriter or Underwriters agreed to purchase exceeds 10% of the
total number of Shares which all Underwriters agreed to purchase hereunder, and
if neither the non-defaulting Underwriters nor the Company shall make
arrangements within the 24-hour periods stated above for the purchase of all the
Shares which the defaulting
Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall
be terminated without further act or deed and without any liability on the part
of the Company to any non-defaulting Underwriter and without any liability on
the part of any non-defaulting Underwriter to the Company. Nothing in this
Section 3(b), and no action taken hereunder, shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
(c) On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase up to 150,000 shares of Series B Preferred Stock at the same price per
share as the Underwriters shall pay for the Firm Shares. Such option may be
exercised only to cover overallotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time, or from time
to time, on or before the 45th day after the date of the Prospectus upon written
or telegraphic notice by the Representative to the Company setting forth the
aggregate number of Overallotment Shares as to which the Underwriters are
exercising the option. Delivery of certificates for the Overallotment Shares,
and payment therefor, shall be made as provided in Section 5 hereof. Each
Underwriter shall purchase such percentage of the Overallotment Shares as is
equal to the percentage of Firm Shares that such Underwriter is purchasing, the
exact number of shares to be adjusted by the Representative in such manner as
the Representative deems advisable to avoid fractional shares.
(d) On the Closing Date, the Company shall issue and deliver
to the Representative, or at the direction of the Representative, to its
designees as provided in the Representative's Warrant Agreement, for a purchase
price of $.0001 per Representative's Warrant (an aggregate of $10), the
Representative's Warrants entitling the holder thereof to purchase 100,000
shares of Series B Preferred Stock on the terms and conditions set forth in the
Representative's Warrant Agreement.
4. Offering by Underwriters.
The terms of the offering of the Shares by the Underwriters
shall be as set forth in the Prospectus.
5. Delivery of and Payment for the Shares and the Representative's
Warrants.
(a) Delivery of certificates for the Firm Shares, the
Overallotment Shares (if the option granted pursuant to Section 3(c) hereof
shall have been exercised not later than
1:00 p.m., New York time, on the date at least two business days preceding the
Closing Date) and the Representative's Warrants, and payment therefor, shall be
made at the office of Proskauer Rose LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000 at 9:00 a.m., New York City time, on the fourth business day after
the date of this Agreement, or at such time on such other day, not later than
seven full business days after such fourth business day, as shall be agreed upon
in writing by the Company and the Representative (the "Closing Date").
(b) If the option granted pursuant to Section 3(c) hereof
shall be exercised after 1:00 p.m., New York City time, on the date two business
days preceding the Closing Date, and on or before the 45th day after the date of
this Agreement, delivery of certificates for the Overallotment Shares, and
payment therefor, shall be made at the office of Proskauer Rose LLP, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 at 9:00 a.m., New York City time, on the
third business day after the exercise of such option.
(c) Payment for the Shares shall be made to the Company, by
either a same day funds check or federal funds wire transfer. Such payment shall
be made upon delivery of certificates for the Shares to the Representative for
the respective accounts of the several Underwriters against receipt therefor
signed by the Representative. Certificates for the Shares to be delivered to the
Representative shall be registered in such name or names and shall be in such
denominations as the Representative may request at least three business days
before the Closing Date, in the case of Firm Shares, and at least two business
days prior to the Overallotment Closing Date, in the case of the Overallotment
Shares. Such certificates will be made available to the Underwriters for
inspection, checking and packaging at a location in New York, New York,
designated by the Underwriters not less than one full business day prior to the
Closing Date or, in the case of the Overallotment Shares, by 3:00 p.m., New York
time, on the business day preceding the Overallotment Closing Date.
It is understood that the Representative, individually and not
on behalf of the Underwriters, may (but shall not be obligated to) make payment
to the Company for shares to be purchased by any Underwriter whose check shall
not have been received by the Representative on the Closing Date or any later
Overallotment Closing Date. Any such payment by the Representative shall not
relieve such Underwriter from any of its obligations hereunder.
(d) Payment for the Representative's Warrants shall be made to
the Company or its order, by either a same day funds check or federal funds wire
transfer. Such payment shall be made
upon delivery of certificates for the Representative's Warrants to the
Representative against receipt therefor signed by the Representative.
Certificates for the Representative's Warrants to be delivered to the
Representative shall, subject to the terms and provisions of the
Representative's Warrant Agreement, be registered in such name or names as
permitted by the Representative's Warrant Agreement and shall be in such
denominations as the Representative may request at least three business days
before the Closing Date.
6. Further Agreements of the Company. The Company covenants and agrees
as follows:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; it will notify the Representative,
promptly after it shall receive notice thereof, of the time when the
Registration Statement or any subsequent amendment to the Registration Statement
has become effective or any supplement to the Prospectus has been filed. If the
Company omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a), the Company will
provide evidence satisfactory to the Representative that the Prospectus contains
such information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission. If for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to the Representative that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed. The Company will notify the Representative promptly of any request
by the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information. Promptly upon the
Representative's request, the Company will prepare and file with the Commission
any amendments or supplements to the Registration Statement or Prospectus which,
in the reasonable opinion of counsel to the Representative, may be necessary or
advisable in connection with the distribution of the Shares by the Underwriters.
The Company will promptly prepare and file with the Commission, and promptly
notify the Representative of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act,
any event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In case any Underwriter is required to deliver a
prospectus within the nine-month period referred to in Section 10(a)(3) of the
Act in connection with the sale of the Shares, the Company will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act. The Company will file no amendment or supplement to the Registration
Statement or Prospectus that shall not previously have been submitted to the
Representative a reasonable time prior to the proposed filing thereof or to
which the Representative shall reasonably object in writing or which is not in
compliance with the Act and Rules and Regulations or the provisions of this
Agreement.
(b) The Company will advise the Representative, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the initiation or threat of any
proceeding for that purpose; and it will promptly use its best efforts to
prevent the issuance of any such stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for offering and sale under the securities
laws of such jurisdictions as the Representative may designate and to continue
such qualifications in effect for so long as may be required for purposes of the
distribution of the Shares, except that the Company shall not be required in
connection therewith or as a condition thereof to qualify as a foreign
corporation, or to execute a general consent to service of process in any
jurisdiction, or to make any undertaking with respect to the conduct of its
business. In each jurisdiction in which the Shares shall have been qualified,
the Company will make and file such statements, reports and other documents in
each year as are or may be reasonably required by the laws of such jurisdictions
so as to continue such qualifications in effect for so long a period as the
Representative may reasonably request for distribution of the Shares, or as
otherwise may be required by law.
(d) The Company will furnish to the Representative, as soon as
available, copies of the Registration Statement (three of
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus, and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as the Representative may from time to time
reasonably request.
(e) The Company will make generally available to its
stockholders as soon as practicable, but in any event not later than the 45th
day following the end of the fiscal quarter first occurring after the first
anniversary of the Effective Date, an earnings statement (which will be in
reasonable detail but need not be audited) complying with the provisions of
Section 11(a) of the Act and Rule 158 of the Rules and Regulations and covering
a 12-month period beginning after the Effective Date .
(f) During a period of two years after the date hereof, the
Company, as soon as practicable after the end of each respective period, will
furnish to its stockholders annual reports (including financial statements
audited by independent certified public accountants) and will make available to
its stockholders unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will, upon request, furnish to the
Representative and the other several Underwriters hereunder (i) concurrently
with making such reports available to its stockholders, statements of operations
of the Company for each of the first three quarters in the form made available
to the Company's stockholders; (ii) concurrently with the furnishing thereof to
its stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity and of
cash flow of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of its current or other nationally recognized
independent certified public accountants; (iii) concurrently with the furnishing
of such reports to its stockholders, copies of all reports (financial or other)
mailed to stockholders; (iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
securities exchange or automated quotation system by the Company (except for
documents for which confidential treatment is requested); and (v) every material
press release and every material news item or article in respect of the Company
or its affairs which was generally released to stockholders or prepared for
general release by the Company. During such two-year period, if the Company
shall have any active subsidiaries, the foregoing financial statements shall be
on a consolidated basis to the extent that the accounts of the Company are
consolidated with any subsidiaries, and shall be accompanied by similar
financial statements for any significant subsidiary that is not so consolidated.
(g) The Company shall not, during the 12 months following the
Effective Date, except with the Representative's prior written consent, file, or
announce an intent to file, a registration statement covering any of its shares
of capital stock other than (i) a registration statement on Form S-8 registering
shares of Common Stock issued or issuable under its stock option plans existing
on the date hereof, as described in the Prospectus, (ii) pursuant to existing
agreements granting registration rights to the current holders of the Company's
securities (subject to the Lock-Up Agreements or Existing Lock-Up Agreements to
which such holders are parties) and (iii) registration statements registering
shares of Common Stock issued or issuable pursuant to Section 6(h)(v), provided
that such registation statement may not be utilized by an officer, director or
5% stockholder of the Company for resale of securities until February __, 2001.
(h) The Company shall not, during the 12 months following the
Effective Date, except with the prior written consent of the Representative, in
its individual capacity and not in its capacity as representative of the
Underwriters, issue, sell, offer or agree to sell, grant, distribute or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
Series B Preferred Stock, or any options, rights or warrants with respect to
shares of Common Stock or Series B Preferred Stock, or any securities
convertible into or exchangeable for Common Stock or Series B Preferred Stock,
other than the issuance of (i) the Overallotment Shares, (ii) the
Representative's Warrants, (iii) options which may be granted under the
Company's stock option plans existing on the date hereof, as described in the
Prospectus, (iv) shares of Common Stock issuable upon exercise of (A) options
issued or issuable under the Company's stock option plans existing on the date
hereof, as described in the Prospectus, or (B) warrants and repricing rights
outstanding on the date hereof as described in the Prospectus and (v) not more
than an aggregate of 1,000,000 shares of Common Stock issuable in connection
with one or more acquisitions by the Company.
(i) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) The Company will maintain a transfer agent and a registrar
(which may be the same entity as the transfer agent) for the Series B Preferred
Stock.
(k) The Company will use its best efforts to maintain listing
of its shares of Common Stock and its Series B Preferred Stock on the AMEX.
(l) The Company is familiar with the Investment Company Act of
1940, as amended, and the rules and regulations
thereunder, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner so as to ensure that the Company was not
and will not be an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.
(m) The Company will, at the option of the Representative,
during a period of five years from the Effective Date, (i) use its best efforts
to nominate and cause to be elected and reelected to the Board of Directors of
the Company a designee of the Representative or (ii) permit an agent of the
Representative to attend all meetings of the Board of Directors of the Company
as a non-voting observer, and will give such agent notice of all meetings of the
Board of Directors at the same time and in the same manner that directors are
notified and will reimburse such agent for all expenses incurred in attending
such meetings, including, but not limited to food, transportation and lodging.
7. Expenses.
The Company agrees with each Underwriter that:
(a) The Company will pay and bear all costs, fees and expenses
in connection with the preparation, printing and filing of the Registration
Statement (including all amendments, supplements, financial statements,
schedules and exhibits), as many Preliminary Prospectuses and final Prospectuses
and any amendments or supplements thereto that the Representative reasonably
deems necessary; the reproduction of this Agreement; the issuance and delivery
of the Shares and the Representative's Warrants, including stock transfer taxes,
if any; the cost of all stock certificates representing the Shares and transfer
agents' and registrars' fees; the fees and disbursements of counsel for the
Company; all fees and other charges of the Company's independent public
accountants; the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectuses and the Prospectus; NASD filing fees and expenses incident to
securing any required review; all fees and expenses relating to the listing of
the Common Stock, the Shares and the Warrant Shares on the AMEX; all fees,
expenses and disbursements relating to the registration or qualification of the
Shares under the securities laws of such states and other jurisdictions as the
Representative may reasonably designate (including, without limitation, all
filing and registration fees and fees and disbursements of the Representative's
counsel in connection with Blue Sky matters, such as the Preliminary Blue Sky
Memoranda and any supplemental Blue Sky Memoranda and any instruments relating
to any of the foregoing; the fees and disbursements of counsel to
the Underwriters (not to exceed $120,000) in connection with the offering, this
Agreement and the transactions contemplated hereby; the costs of all mailing and
printing of the underwriting documents (including, but not limited to, the
Underwriting Agreement, any Blue Sky surveys and memoranda and, if appropriate,
any Agreement Among Underwriters, Selected Dealers Agreement, Underwriter's
Questionnaire and Power of Attorney); the costs of preparing, printing and
delivering certificates representing the Shares and the Representative's
Warrants; and all other expenses directly incurred by the Company in connection
with the performance of its obligations hereunder.
(b) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, the Company
will, in addition to paying the expenses described in Section 7(a), reimburse
the several Underwriters for all out-of-pocket expenses (including fees and
disbursements of Underwriters' counsel without the limitations therein set forth
in Section 7(a)) incurred by the Underwriters in reviewing the Registration
Statement and the Prospectus and in otherwise investigating, preparing to market
or marketing the Shares.
(c) The Representative, in its individual capacity and not as
representative of the Underwriters, shall also be entitled to a non-accountable
expense allowance equal to 3% of the aggregate offering price of the Shares. The
Company has previously paid the Representative an aggregate of $100,000 in
partial payment of such non-accountable expense allowance, or, in the event of
termination of this Agreement prior to consummation of the transactions
contemplated hereby, such amounts previously paid shall be credited toward
actual accountable expenses of the Representative.
8. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters to purchase and pay for the
Shares, as provided herein, shall be subject: (x) to the accuracy, as of the
date hereof and the Closing Date and any later Overallotment Closing Date, as
the case may be, of the representations and warranties of the Company herein and
to the performance by the Company of its obligations hereunder; and (y) to the
following additional conditions:
(a) The Registration Statement shall have become effective not
later than 9:00 a.m., New York City time, on the day immediately following the
date of this Agreement, or such later time or date as shall be consented to in
writing by the
Representative. If the filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b) and Rule 430A of the Rules and Regulations, the
Prospectus shall have been filed in the manner and within the time period
required by Rule 424(b) and Rule 430A of the Rules and Regulations. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of counsel to the Underwriters.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement, and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares shall have been reasonably satisfactory to counsel to the Underwriters,
and such counsel shall have been furnished with such papers and information as
they may reasonably have requested to enable them to pass upon the matters
referred to herein.
(c) The Representative shall have received, at no cost to it,
on the Closing Date and on any later Overallotment Closing Date, as the case may
be, (i) the opinion of Blank Rome Xxxxxx Xxxxxxxxxx LLP, counsel to the Company,
dated the Closing Date or such later Overallotment Closing Date, in the form
attached hereto as Appendix A, and addressed to the Underwriters and with
reproduced copies of signed counterparts thereof for the Representative.
(d) The Representative shall have received from Proskauer Rose
LLP, Underwriters' Counsel, an opinion or opinions, dated the Closing Date or on
any later Overallotment Closing Date, as the case may be, in form and substance
reasonably satisfactory to the Representative, with respect to certain legal
matters as the Representative may reasonably require, and the Company shall have
furnished to such counsel such documents as it may have reasonably requested for
the purpose of enabling it to pass upon such matters.
(e) The Representative shall have received on the Closing Date
and on any later Overallotment Closing Date, as the case may be, a letter from
the Accountants addressed to the Company and the Underwriters, dated the Closing
Date or such later Overallotment Closing Date, as the case may be, confirming
that it is an independent certified public accountant with respect to the
Company within the meaning of the Act and the Rules and Regulations thereunder
and based upon the procedures
described in its letter delivered to the Representative concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date not more than three days prior to the Closing Date or any such
later Overallotment Closing Date, as the case may be, (i) confirming that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date or such later Overallotment Closing Date, as the case may be;
and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since the date of such
letter, or to reflect the availability of more recent financial statements, data
or information. The letter shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in the Representative's reasonable judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. All such letters shall be in a form
reasonably satisfactory to the Representative and its counsel.
(f) The Representative shall have received on the Closing Date
and on any later Overallotment Closing Date, as the case may be, a certificate
of the President and the Chief Financial Officer of the Company, dated the
Closing Date or such later date, to the effect that as of such date (and the
Representative shall be satisfied that as of such date):
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or any later Overallotment Closing Date, as the case may be; and the Company has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied at or prior to the Closing Date or any later
Overallotment Closing Date, as the case may be;
(ii) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of the Prospectus has been issued,
and no proceedings for that purpose have been instituted or are pending or, to
the best of their knowledge, threatened under the Act;
(iii) They have carefully reviewed the Registration
Statement and the Prospectus; and, when the Registration Statement became
effective and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and any amendments or supplements
thereto contained all statements and information required to be included therein
or necessary to make the statements therein not
misleading; and when the Registration Statement became effective, and at all
times subsequent thereto up to the delivery of such certificate, (a) none of the
Registration Statement or any amendment thereto included any untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, not misleading,
and (b) none of the Prospectus, any amendment and supplement thereto included
any untrue statement of a material fact or omittedto state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading; and,
since the Effective Date, there has occurred no event required to be set
forth in an amended or supplemented Prospectus that has not been so set
forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement, and the Prospectus, there
has not been (A) any material adverse change in the properties or assets
described or referred to in the Registration Statement and the Prospectus or in
the condition (financial or otherwise), operations, business or prospects of the
Company and the Subsidiaries, (B) any transaction which is material to the
Company and the Subsidiaries, except transactions entered into in the ordinary
course of business, (C) any obligation, direct or contingent, incurred by the
Company or any of the Subsidiaries, which is material to the Company or the
Subsidiaries, except obligations incurred in the ordinary course of business in
accordance with past practices,(D) any change in the capital stock, ownership
interest or outstanding indebtedness of the Company which is material to the
Company and the Subsidiaries taken as a whole or (E) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company, except as specifically described in the Prospectus.
(g) The Company shall have furnished to the Representative
such further certificates and documents as the Representative shall reasonably
request as to the accuracy of the representations and warranties of the Company
herein, as to the performance by the Company of its obligations hereunder and as
to the other conditions precedent to the obligations of the Underwriters
hereunder.
(h) The Firm Shares and the Overallotment Shares, if any,
shall have been approved for listing upon notice of issuance on the AMEX
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to counsel to the Underwriters. The
Company will furnish the Representative with such number of conformed copies of
such opinions, certificates, letters and documents as the Representative shall
reasonably request.
9. Indemnification and Contribution.
(a) Subject to the provisions of Section 9(f), the Company
agrees to indemnify and hold harmless each Underwriter and each person
(including each partner or officer thereof) who controls any Underwriter within
the meaning of Section 15 of the Act from and against any and all losses,
claims, damages or liabilities, joint or several, to which such indemnified
parties or any of them may become subject under the Act, the Exchange Act, the
common law or otherwise, and the Company agrees to reimburse each such
Underwriter and controlling person for any legal or other out-of-pocket expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any 462(b) registration statement)
or any post-effective amendment thereto (including any 462(b) registration
statement), or 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, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
contained in this Section 9(a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission is contained in
the section of the Prospectus entitled "Underwriting," and (2) the indemnity
agreement contained in this Section 9(a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages, liabilities or expenses
purchased the Shares which is the subject thereof (or to the benefit of any
person controlling such Underwriter) if at or prior to the written confirmation
of the sale of such Shares a copy of the Prospectus (or the Prospectus as
amended or supplemented) was not sent or delivered to such person and the
untrue statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the Company
with Section 6(a) hereof. The indemnity agreements of the Company contained in
this Section 9(a) and the representations and warranties of the Company
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of any payment for the Shares.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its executive officers, each of its directors,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Act, from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Act, the Exchange Act, the common law
or otherwise and to reimburse each of them for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any 462(b)
registration statement) or 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 or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that in the cases of clauses (i) and (ii) above,
such statement or omission is contained in the section of the Prospectus
entitled "Underwriting." The indemnity agreement of each Underwriter contained
in this Section 9(b) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified party
and shall survive the delivery of any payment for the Shares.
(c) Each party indemnified under the provisions of Section
9(a) or (b) agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against it, in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (a "Notice") of such service or notification to the party or
parties from whom indemnification may be sought hereunder. No indemnification
provided for in such Section 9(a) or (b) shall be available to any party who
shall fail so to give the Notice if the party to whom such Notice was not given
was unaware of the action, suit, investigation, inquiry or proceeding to which
the Notice would have related and was prejudiced by the failure to give the
Notice, but the omission so to notify such indemnifying party or parties of any
such service or notification shall not relieve such 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 such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (the "Notice of Defense") to the indemnified party, to assume (alone or
in conjunction with any other indemnifying party or parties) the entire defense
of such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the indemnifying party or parties,
by counsel chosen by such indemnifying party or parties and reasonably
satisfactory to the indemnified party or parties; provided, however, that (i) if
the indemnified party or parties reasonably determine, pursuant to an opinion of
counsel, that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses available to such indemnified party or parties different
from or in addition to those available to the indemnifying party or parties,
then counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be necessary
to protect the interests of the indemnified party or parties and (ii) in any
event, the indemnified party or parties shall be entitled, at its or their own
expense to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. It is understood that the indemnifying parties
shall not, in respect of the legal defenses of any indemnified party in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (y) the fees and expenses of more than one separate
firm (in addition to any local counsel) for all of the Underwriters and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or, as the case may be, (z) the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Company, its directors,
its officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under Section 9(a) or (b) for any legal or
other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear the
legal and other expenses incurred in connection with the conduct of the defense
as referred to in clause (i) of the proviso to the sentence before the preceding
sentence and (B) the indemnifying party or parties shall bear such other
expenses as it or they have authorized to be incurred by the indemnified party
or parties. If, within a reasonable time after receipt of the Notice, no Notice
of Defense has been given, the indemnifying party or parties shall be
responsible for any reasonable legal or other expenses incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding. The indemnifying party or parties shall
not be liable for any settlement of any proceeding effected without its or their
written consent, provided such consent has not been unreasonably withheld.
(d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under Section
9(a) or (b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities referred to in
Section 9(a) or (b),(i) in such proportion as is appropriate to reflect the
relative benefits received by each indemnifying party from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each indemnifying party in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, or actions in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other, shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Shares received by the Company and the total
underwriting discount received by the Underwriters, as set forth in the table on
the cover page of the Prospectus, bear to the aggregate public offering price of
the Shares. 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 each indemnifying party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this Section 9(d) were to be 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 into account
the equitable considerations referred to in the first sentence of this Section
9(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities or actions in respect thereof, referred to in the first
sentence of this Section 9(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparation to defend or defense against any action or claim
which is the subject of this Section 9(d). Notwithstanding the provisions of
this Section 9(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Shares purchased by such
Underwriter. 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 9(d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 9(c)).
(e) The Company will not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
or any person who controls such Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act is a party to such claim, action, suit
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of such Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including without limitation the
provisions of this Section 9 and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
10. Termination. This Agreement may be terminated by the Representative
at any time on or prior to the Closing Date or on or prior to any later
Overallotment Closing Date, as the case may be, (i) if the Company shall have
failed, refused or been unable, at or prior to the Closing Date, or on or prior
to any later Overallotment Closing Date, as the case may be, to perform any
agreement on its part to be performed hereunder, or because any other condition
of the Underwriters' obligations hereunder required to be fulfilled by the
Company is not fulfilled, or (ii) if trading on the New York Stock Exchange, the
AMEX or the Nasdaq Stock Market, shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required on the New York Stock Exchange, AMEX or
Nasdaq Stock Market by such trading exchanges or by order of the Commission or
any other governmental authority having jurisdiction, or if a banking moratorium
shall have been declared by federal or New York authorities, or (iii) if the
Company shall have sustained a loss by strike, fire, flood, accident or other
calamity of such character as to have a Material Adverse Effect regardless of
whether or not such loss shall have been insured, or (iv) if there shall have
occurred an outbreak or escalation of hostilities between the United States and
any foreign power or of any other insurrection or armed conflict involving the
United States or other national or international calamity, hostilities or crisis
or the declaration by the United States of a national emergency which, in the
reasonable judgment of the
Representative, adversely affects the marketability of the Shares, or (v) if
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there shall have occurred any material adverse
change or any development involving a material adverse change in or affecting
the condition, financial or otherwise, of the Company or the business, affairs,
management, or prospects of the Company, whether or not arising in the ordinary
course of business, or (vi) if any foreign, federal or state statute,
regulation, rule or order of any court or other governmental authority shall
have been enacted, published, decreed or otherwise promulgated which in the
reasonable judgment of the Representative materially and adversely affects or
will materially and adversely affect the business or operations of the Company,
or trading in the Series B Preferred Stock or Common Stock shall have been
suspended, or (vii) action shall be taken by any foreign, federal, state or
local government or agency in respect of its monetary or fiscal affairs which,
in the judgment of the Representative, has a material adverse effect on the
securities markets in the United States and on the marketability of the Shares.
If this Agreement shall be terminated in accordance with this Section 10, there
shall be no liability of the Company to the Underwriters and no liability of the
Underwriters to the Company; provided, however, that in the event of any such
termination the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of the
Company under this Agreement, including all costs and expenses referred to in
Section 7; provided, further, that if such termination is pursuant to clause
(ii), (iv) or (vii), the Company's liability for such costs and expenses of the
Underwriters shall not exceed $175,000.
If the Representative elects to terminate this Agreement as provided in
this Section 10, the Company shall be notified promptly by the Representative by
telephone, telecopy or telegram, confirmed by letter.
11. Reimbursement of Certain Expenses.
(a) Subject to Section 9 of this Agreement, the Company hereby
agrees to reimburse on a monthly basis the Underwriters for all reasonable legal
and other expenses incurred in connection with investigating or defending any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in Section 9(a), notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the obligations under
this Section 11 and the possibility that such payments might later be held to be
improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
(b) Subject to Section 9 of this Agreement, the Underwriters
hereby agree to reimburse on a monthly basis the Company for all reasonable
legal and other expenses incurred in connection with investigating or defending
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or
omission, described in Section 9(b) of this Agreement, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the obligations under this Section 11 and the possibility that such payments
might later be held to be improper; provided, however, that (i) to the extent
any such payment is ultimately held to be improper, the Company shall promptly
refund it and (ii) the Company shall provide to the Representative, upon
request, reasonable assurances of its ability to effect any refund, when and if
due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 9 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 9, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Shares from any of the several Underwriters.
(a) Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Prime Charter Ltd., 000 Xxxx Xxx. - 00xx
Xxxxx Xxx Xxxx, Xxx Xxxx, 00000, Attention: Xx. Xxxxxx X. Xxxxxx; and if to the
Company, shall be mailed, telegraphed or delivered to it at its office,
Frontline Communications Corporation, Xxx Xxxx Xxxx Xxxxx, Xxxxx Xxxxx, Xxx Xxxx
00000, Attn: President, with a copy to Blank Rome Xxxxxx Xxxxxxxxxx LLP,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxx X. Xxxxxxx, Esq.
(b) Jurisdiction; Venue; Service of Process. Each of the Representative
and the Company (a) agrees that any legal suit, action or proceeding arising out
of or relating to this letter shall be instituted exclusively in New York State
Supreme Court, County of New York or in the United States District Court for the
Southern District of New York, (b) waives any objection to the venue of any such
suit, action or proceeding and (c) irrevocably consents to the jurisdiction of
the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York, in any such suit, action
or proceeding. Each of the Representative and the Company further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District of
New
York. Each of the Representative and the Company further agrees that service of
process upon it mailed by certified mail to its address shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding.
(c) Counterparts. 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.
(d) 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
(i) any investigation made by or on behalf of any Underwriter or controlling
person thereof, or by or on behalf of the Company or its respective directors or
officers and (ii) delivery of and payment for the Shares under this Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO RULES GOVERNING THE
CONFLICT OF LAWS.
Please sign and return to the Company the enclosed duplicate of this
letter, whereupon this letter will become a binding agreement among the Company
and the several Underwriters in accordance with its terms.
Very truly yours,
FRONTLINE COMMUNICATIONS CORPORATION
By
------------------------------
Name:
---------------------------
Title:
--------------------------
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
PRIME CHARTER LTD.
By
---------------------------
Xxxxxx X. Xxxxxx
Managing Director
Acting on behalf of the several
Underwriters, including themselves,
named on Schedule A hereto.
SCHEDULE A
UNDERWRITERS
Number of
Shares
to be
Underwriters Purchased
------------ ---------
1. Prime Charter Ltd.
Total 1,000,000
---------
SCHEDULE B
Lock-up Agreements
------------------
Name
----
1.
2.
3.
4.
5.
6.
7.
8.
Existing Lock-up Agreements
Name
1.
2.
3.
4.
5.
6.
APPENDIX A
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