SPORTSTRAC, INC.
675,000 Shares of Common Stock, $.01 par value
per share
UNDERWRITING AGREEMENT
, 1997
IAR Securities Corp.
As Representative of the
Several Underwriters
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Sportstrac, Inc., a Delaware corporation (the "Company"), confirms its
agreement with IAR Securities Corp. ("IAR") and each of the other underwriters
named in Schedule I hereto (collectively, the "Underwriters," which term shall
also include any underwriter substituted as hereinafter provided in Section
12), for whom IAR is acting as representative (in such capacity, IAR shall
hereinafter be referred to as the "Representative"), with respect to the
proposed sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of the Company's
common stock, par value $.01 per share (the "Common Stock") set forth in said
Schedule I, and with respect to the grant by the Company to the Underwriters,
acting severally and not jointly, of the option described in Section 3(b)
hereof to purchase all or any part of the additional shares of Common Stock for
the purpose of covering over-allotments, if any. The aforesaid 675,000 shares
of Common Stock (the "Firm Securities") and all or any part of the 101,250
shares of Common Stock subject to the option described in Section 3(b) hereof
(the "Option Securities") are hereinafter collectively referred to as the
"Securities." The Company also proposes to issue and sell to the Representative
warrants (the "Representative's Warrants") pursuant to the Representative's
Warrant Agreement (the "Representative's Warrant Agreement") for the purchase
of an aggregate of 67,500 additional shares of Common Stock. The shares of
Common Stock issuable upon exercise of the Representative's Warrants are
hereinafter sometimes referred to as the "Warrant Shares." The Common Stock and
the Warrant Shares are more fully described in the Registration Statement and
the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters as of the
date hereof, and as of the Closing Date (as defined in subsection 3(c) hereof)
and the Option Closing Date (as defined in Subsection 3(b) hereof, if any, as
follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333-1634), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Securities under the Securities Act of 1933, as amended (the "Act"),
which Registration Statement and amendment or amendments and Preliminary
Prospectuses have been prepared by the Company in conformity with the
requirements of the Act, and the rules and regulations (the "Regulations") of
the Commission under the Act. The Company will promptly file a further
amendment to said Registration Statement in the form heretofore delivered to
the Underwriters and will not, before the Registration Statement becomes
effective (the "Effective Date"), file any other amendment thereto unless the
Underwriters shall have consented thereto after having been furnished with a
copy thereof. Except as the context may otherwise require, such Registration
Statement, as amended, on file with the Commission at the time the Registration
Statement becomes effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein (including, but not limited to those documents or
information incorporated by reference therein under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and all information deemed to be a
part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement" and the form
of prospectus in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Rules and Regulations" mean the rules and regulations adopted by the
Commission under either the Act or the Exchange Act, as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or part thereof and no
proceedings for a stop order have been instituted or are pending or, to the
best knowledge of the Company, threatened. Each of the Preliminary Prospectus,
the Registration Statement and Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Act and the
Rules and Regulations, and none of the Preliminary Prospectus, the Registration
Statement or Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made in reliance upon
and in conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters expressly for
use in such Preliminary Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing
Date (as defined in Subsection 3(c) hereof, if any, and during such longer
period as the Prospectus may be required to be delivered in connection with
sales by the Underwriters or a dealer, the Registration Statement and the
Prospectus will contain all material statements which are required to be stated
therein in compliance with the Act and the Rules and Regulations, and will in
all material respects conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement or the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information
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supplied to the Company in writing by or on behalf of any Underwriter expressly
for use in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(d) The Company and its subsidiaries have been duly
authorized and are validly existing as corporations in good standing under the
laws of the states of their respective incorporation. Except as set forth in
the Registration Statement or the Prospectus, the Company does not own an
interest in any corporation, partnership, trust, joint venture or other
business entity. The Company and its subsidiaries are duly qualified and
licensed and in good standing as foreign corporations in each jurisdiction in
which their ownership or leasing of properties or the character of their
operations require such qualification or licensing. Except as set forth in the
Prospectus, the Company does not, directly or indirectly own any equity
securities in any other company. The Company and its subsidiaries have all
requisite power and authority (corporate and other), and have obtained any and
all necessary applications, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease their properties and conduct
their business as described in the Prospectus; the Company and its subsidiaries
are and have been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates, franchises and permits and all
federal, state, local and foreign laws, rules and regulations; and the Company
has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties, business or results of
operation of any of the Company or its subsidiaries. The disclosures in the
Registration Statement and the Prospectus concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the businesses of the
Company and its subsidiaries as currently conducted and as contemplated are
correct in all respects and do not omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and will
have the adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth therein, and
except as set forth in the Prospectus neither the Company nor any of its
subsidiaries is a party to or are bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and as described in the
Prospectus. The Securities, the Representative's Warrants, and the Warrant
Shares and all other securities issued or issuable by the Company conform, or
when issued and paid for will conform, in all respects to all statements with
respect thereto contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company and its subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable; the
holders thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or any of its subsidiaries, or similar contractual
rights granted by the Company or any of its subsidiaries. The Common Stock and
the Representative's
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Warrants to be issued and sold by the Company hereunder and the Warrant Shares
issuable upon exercise of the Representative's Warrants, are not and will not
be subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and non-assessable
and will conform to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any personal liability solely by reason
of being such holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities, the Representative's Warrants,
and the Warrant Shares has been duly and validly taken; and the certificates
representing the Common Stock, the Representative's Warrants, and the Warrant
Shares will be in due and proper form. Upon the issuance and delivery pursuant
to the terms hereof of the Common Stock to be sold by the Company hereunder,
the Underwriters will acquire good and marketable title to such Common Stock
free and clear of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with
the related notes and schedules thereto, included in the Registration
Statement, the Preliminary Prospectus and the Prospectus fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles and the Rules and Regulations, consistently applied
throughout the periods involved. There has been no material adverse change or
development involving a prospective change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business, or results of operation of any of the Company,
whether or not arising in the ordinary course of business, since the date of
the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company, conform in all respects to the
descriptions thereof contained in the Registration Statement and in the
Prospectus.
(g) The Company and each of its subsidiaries (i) have paid
all federal, state, local, and foreign taxes for which it is liable, including,
but not limited to, withholding taxes and taxes payable under Chapters 21
through 24 of the Internal Revenue Code of 1986, as amended (the "Code"), and
has furnished all information returns it is required to furnish pursuant to the
Code, and has established adequate reserves for such taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Securities, (ii) the purchase by the Underwriters of the
Securities from the Company or (iii) the consummation by the Company of any of
its obligations under this Agreement.
(i) The Company and each of its subsidiaries maintain
insurance of the types and in the amounts which they reasonably believe to be
adequate for their businesses, all of which insurance is in full force and
effect.
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(j) Except as disclosed in the Prospectus, there is no
action, suit, proceeding, inquiry, investigation, litigation or governmental
proceeding (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or threatened
against (or circumstances that may give rise to the same), or involving the
properties or business of the Company or its subsidiaries which (i) questions
the validity of the capital stock of the Company or any of its subsidiaries or
this Agreement or of any action taken or to be taken by the Company pursuant to
or in connection with this Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in all
respects), or (iii) might materially and adversely affect the condition,
financial or otherwise, or in the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operations of
the Company or its subsidiaries.
(k) The Company has full legal right, power and authority to
enter into this Agreement, the Representative's Warrant Agreement and the
Consulting Agreement (as defined in Section 7(n) hereof) and to consummate the
transactions provided for in such agreements; and this Agreement, the
Representative's Warrant Agreement and the Consulting Agreement have each been
duly and properly authorized, executed and delivered by the Company. Each of
this Agreement, the Representative's Warrant Agreement and the Consulting
Agreement, constitute a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law), and none of the Company's
execution or delivery of this Agreement, the Representative's Warrant Agreement
and the Consulting Agreement, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein, or the
conduct of its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or violation of any of
the terms or provisions of, or constitutes or will constitute a default under,
or result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity
of any kind whatsoever upon, any property or assets (tangible or intangible) of
the Company pursuant to the terms of (i) the articles of incorporation or
by-laws of the Company, (ii) any license, contract, indenture, mortgage, deed
of trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which any of their respective
properties or assets (tangible or intangible) is or may be subject to any
indebtedness, or (iii) any statute, judgment, decree, order, rule or regulation
applicable to the Company of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or any of their
respective activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities pursuant to
the Prospectus and the Registration Statement, the
5
performance of this Agreement and the transactions contemplated hereby, except
such as have been or may be obtained under the Act or may be required under
state securities or Blue Sky laws in connection with the Underwriters' purchase
and distribution of the Securities to be sold by the Company hereunder.
(m) All executed material agreements or copies of executed
material agreements filed as exhibits to the Registration Statement to which
the Company or any of its subsidiaries are a party or by which any of them may
be bound or to which any of their respective assets, properties or businesses
may be subject have been duly and validly authorized, executed and delivered by
the Company and/or its subsidiaries, and constitute the legal, valid and
binding agreements of the Company or a subsidiary of the Company, as the case
may be, enforceable against them in accordance with their respective terms. The
descriptions in the Registration Statement and the Prospectus of contracts and
other documents are accurate and fairly present the information required to be
shown with respect thereto by Form SB-2 and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement and the Prospectus or filed as exhibits to the Registration Statement
which are not described or filed as required, and the Exhibits which have been
filed are complete and correct copies of the documents of which they purport to
be copies.
(n) Subsequent to the respective dates as of which
information is set forth in the Registration Statement and Prospectus, and
except as may otherwise be indicated or contemplated herein or therein, neither
the Company nor any of its subsidiaries has (i) issued any securities or
incurred any liability or obligation, direct or contingent, for borrowed money,
(ii) entered into any transaction other than in the ordinary course of
business, or (iii) declared or paid any dividend or made any other distribution
on or in respect of its capital stock.
(o) No default exists in the due performance and observance
of any term, covenant or condition of any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company or any of its subsidiaries
are a party or by which the Company or any of its subsidiaries may be bound or
to which any of the property or assets (tangible or intangible) of the Company
or any of its subsidiaries are subject or affected.
(p) The Company and its subsidiaries have generally enjoyed
satisfactory employer-employee relationships with their employees and are in
compliance in all material respects with all federal, state, local, and foreign
laws and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours. There are no pending
investigations involving the Company or to the Company's best knowledge of any
of its subsidiaries, by the U.S. Department of Labor, or any other governmental
or foreign agency responsible for the enforcement of such federal, state,
local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company or to the Company's best knowledge of
its subsidiaries, pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company or to the Company's best knowledge of its
subsidiaries, or any predecessor entity of any of them, and none has ever
occurred. No representation question
6
exists respecting the employees of the Company or any of its subsidiaries, and
no collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of its subsidiaries. No labor dispute with the
employees of the Company or any of its subsidiaries exists, or, to the best
knowledge of the Company, is imminent; and the Company and its subsidiaries are
not aware (having made no independent investigation for purposes of this
statement) of any existing or imminent labor disturbance by the employees of
any of their principal suppliers, manufacturers or contractors which might be
expected to result in any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company or any
of its subsidiaries.
(q) Since its inception, neither the Company nor any of its
subsidiaries has incurred any material liability arising under or as a result
of the application of the provisions of the Act.
(r) Neither the Company nor any of its subsidiaries maintain,
sponsor or contribute to any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multi-employer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively,
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Neither the Company nor any of its subsidiaries maintain or contribute, now or
at any time previously, to a defined benefit plan, as defined in Section 3(35)
of ERISA. Neither the Company nor any of its subsidiaries have completely or
partially withdrawn from a "multi-employer plan."
(s) The Company and to the Company's best knowledge its
subsidiaries are not (nor the manner in which any of them conducts their
business or proposes to conduct their business) in violation of any domestic or
foreign laws ordinances or governmental rules or regulations to which they may
be subject.
(t) Except as provided for in the Registration Statement and
Prospectus, no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any Registration Statement to be filed by the Company
within eighteen (18) months of the date hereof or to require the Company to
file a Registration Statement under the Act during such eighteen (18) month
period.
(u) None of the Company, nor any of its respective employees,
officers, directors, stockholders or affiliates (within the meaning of the
Rules and Regulations) has taken or will take, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(v) Except as described in the Prospectus, neither the
Company nor any of its subsidiaries has any patents, patent applications,
trademarks, service marks, trade names and
7
copyrights, and licenses and rights to the foregoing, which are in dispute so
far as known by the Company or are in any conflict with the right of any other
person or entity. To the best of the Company's knowledge, except as disclosed
in the Prospectus, (i) the Company and each of its subsidiaries owns or has the
right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all trademarks used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing, and (ii) except as
set forth in the Prospectus, neither the Company nor any of its subsidiaries is
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service xxxx, trade name, copyright, know-how,
technology or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
(w) The Company and each of its subsidiaries owns and has the
unrestricted right to use all trade secrets know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "intellectual
properly") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by it, free
and clear of and without violating any right, lien, or claim of others,
including without limitation, former employers of its employees; provided,
however, that the possibility exists that other persons or entities, completely
independently of the Company or any subsidiary of the Company, as the case may
be, or their respective employees or agents, could have developed trade secrets
or items of technical information similar or identical to those of the Company
or any of its subsidiaries. The Company and its subsidiaries are not aware of
any such development of similar or identical trade secrets or technical
information by others.
(x) The Company and each of its subsidiaries has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all the intellectual property.
(y) The Company and each of its subsidiaries has good and
marketable title to, or valid and enforceable leasehold estates in, all items
of real and personal property stated in the Prospectus, owned or leased by it
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not yet due
and payable.
(z) Xxxxx Xxxxxxxxxx & Co., LLP, independent certified public
accountants, whose report is filed with the Commission as a part of the
Registration Statement, are independent certified public accountants as
required by the Act and the Rules and Regulations.
(aa) On or before the Effective Date of the Registration
Statement, the Company shall cause to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors and 5% or greater shareholders, or any person or entity deemed to be
an affiliate of the Company pursuant to the Rules and Regulations, has agreed
not to, directly or indirectly, offer to sell, sell, grant any option for the
sale of, assign,
8
transfer, pledge, hypothecate or otherwise encumber any of their shares of
Common Stock or any of their options, warrants or other securities exercisable
for or convertible into or exchangeable for Common Stock (either pursuant to
Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than 24 months following
such Effective Date without the prior written consent of the Representative.
The Company will cause the Transfer Agent, as defined below, to xxxx an
appropriate legend on the face of stock certificates representing all of such
shares of Common Stock.
(bb) There are no claims, payments, issuances, arrangements
or understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or any other arrangements,
agreements, understandings, payments or issuance with respect to the Company or
any of its officers, directors, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers Inc. ("NASD").
(cc) The Securities have not been approved for quotation on
the SmallCap Market of the Nasdaq Stock Market.
(dd) None of the Company or any of its subsidiaries, nor any
of its respective officers, employees agents or any other person acting on
behalf of the Company or any of its subsidiaries, has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company or any of its
subsidiaries (or assist the Company or any of its subsidiaries, in connection
with any actual or proposed transaction) which (a) might subject the Company or
any of its subsidiaries, or any other such person to any damage or penalty in
any civil, criminal or governmental litigation or proceeding (domestic or
foreign), (b) if not given in the past, might have had a materially adverse
effect on the assets, business or operations of the Company or any its
subsidiaries, or (c) if not continued in the future, might adversely affect the
assets, business, operations or prospects of the Company or any of its
subsidiaries. The internal accounting controls of the Company and its
subsidiaries are sufficient to cause the Company and its subsidiaries to comply
with the Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company or any of its subsidiaries, or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the Rules and Regulations) of any such person or entity or the Company or
any of its subsidiaries, has or has had, either directly or indirectly, (i) an
interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company or any of its subsidiaries, or (B) purchases from or sells or
furnishes to the Company or any of its subsidiaries any goods or services, or
(ii) a beneficiary interest in any contract or agreement to which the Company
or any of its subsidiaries are a party or by which any of them may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no
9
existing material agreements, arrangements, understandings or transactions, or
proposed material agreements, arrangements, understandings or transactions,
between or among the Company or any of its subsidiaries, and any officer,
director, or principal stockholder of the Company or any of its subsidiaries,
or any affiliate or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
(gg) Neither the Company nor any of its subsidiaries has
entered into any employment agreements, except as described in the Prospectus.
(hh) The Company has granted the Underwriter and its counsel
access to all material agreements entered into by the Company or any of its
subsidiaries.
2. [Intentionally omitted]
3. Purchase, Sale and Delivery of the Securities and
Representative's Warrants.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter and
each Underwriter, severally and not jointly, agrees to purchase from the
Company at the price per Share as set forth below in subsection (c), that
proportion of the number of Firm Securities set forth in Schedule I opposite
the name of such Underwriter, as bears to the total number of Firm Securities,
subject to such adjustment as the Representative in its discretion shall make
to eliminate any sales or purchases of fractional shares, plus any additional
numbers of Firm Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 12 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option to
the Underwriters, severally and not jointly, to purchase up to an additional
101,250 shares of Common Stock at the price per share set forth below in
subsection (c). The option granted hereby will expire 30 days after the date of
this Agreement, and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Firm Securities upon notice by the
Representative to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for such Option Securities. Any such time and
date of delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to Closing Date, as hereinafter
defined, unless otherwise agreed to between the Representative and the Company.
In the event such option is exercised, each of the Underwriters, acting
severally and not jointly, shall purchase that percentage of the total number
of Option Securities then being purchased which the number of Firm Securities
set forth in Schedule I hereto opposite the name of such Underwriter bears to
the total number of Firm Securities, subject in each case to such
10
adjustments as the Representative in its discretion shall make to eliminate any
sales or purchases of fractional shares. Nothing herein contained shall
obligate the Underwriters to purchase any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Representative, or at such other place as shall be agreed upon by the
Representative and the Company. Such delivery and payment shall be made at 10:00
a.m. (New York City time) on , 1997 or at such other time and date as
shall be agreed upon by the Representative and the Company but not less than
three (3) nor more than ten (10) business days after the Effective Date of the
Registration Statement (such time and date of payment and delivery being
hereafter called "Closing Date"). In addition, in the event that any or all of
the Option Securities are purchased by the Underwriters, payment of the purchase
price for, and delivery of certificates for such Option Securities shall be made
at the above mentioned office of the Representative or at such other place as
shall be agreed upon by the Representative and the Company on each Option
Closing Date as specified in the notice from the Representative to the Company.
Delivery of the certificates for the Firm Securities and the Option Securities,
if any, shall be made to Representative for the respective accounts of the
several Underwriters against payment by the several Underwriters through the
Representative of the purchase price for the Firm Securities and the Option
Securities, if any, to the order of the Company by New York Clearing House
funds. Certificates for the shares of Common Stock underlying the Firm
Securities and the Option Securities, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Representative may request in
writing at least two (2) business days prior to Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the shares of
Common Stock underlying the Firm Securities and the Option Securities, if any,
shall be made available to the Underwriters at such office or such other place
as the Representative may designate for inspection, checking and packaging no
later than 9:30 a.m. on the last business day prior to Closing Date or the
relevant Option Closing Date, as the case may be.
The purchase price per share of Common Stock to be paid by
the Underwriters, severally and not jointly, to the Company for the Securities
purchased hereunder will be the same for each share sold, and will be $5.40.
The Company shall not be obligated to sell any Securities hereunder unless all
Firm Securities to be sold by the Company are purchased hereunder. The Company
agrees to issue and sell 675,000 shares to the Underwriters and the Company
agrees to issue and sell up to an aggregate of 101,250 shares of Common Stock
to cover over-allotments.
(d) On Closing Date, the Company shall issue and sell to the
Representative, Representative's Warrants at a purchase price of $67.50, which
shall entitle the holders thereof to purchase an aggregate of 67,500 shares of
Common Stock. The Representative's Warrants shall be exercisable for a period
of four (4) years commencing one (1) year from the Effective Date of the
Registration Statement at initial exercise prices equal to $9.90 per share. The
Representative's Warrant Agreement and form of Warrant Certificates shall be
substantially in
11
the form filed as an Exhibit to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
4. Public Offering of the Securities. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representative may from time to time increase
or decrease the public offering price after distribution of the Securities has
been completed to such extent as the Representative, in its sole discretion
deems advisable.
5. Covenants of the Company. The Company covenants and agrees with
the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
Effective Date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act before termination of the offering of the Securities by
the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Rules and Regulations.
(b) As soon as the Company or any of its subsidiaries are
advised or obtains knowledge thereof, the Company will advise the
Representative and confirm the notice in writing, (i) when the Registration
Statement, as amended, becomes effective, if the provisions of Rule 430A
promulgated under the Act will be relied upon, when the Prospectus has been
filed in accordance with said Rule 430A and when any post-effective amendment
to the Registration Statement becomes effective, (ii) of the issuance by the
Commission of any stop order or of the initiation, or the threatening of any
proceeding, suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution or
proceeding for that purpose, (iii) of the issuance by any state securities
commission of any proceedings for the suspension of the qualification of the
Securities for offering or sale in any jurisdiction or of the initiation, or
the threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission pursuant to
Rule 424(b)(1) (or, if applicable and if consented to by the Representative
pursuant to Rule 424(b)(4)) not later than the Commission's close of business
on
12
the earlier of (i) the second business day following the execution and delivery
of this Agreement and (ii) the fifth business day after the Effective Date of
the Registration Statement.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), will furnish the Representative and its counsel with copies of
any such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such
prospectus to which the Representative or its counsel shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as the Representative may reasonably
designate, and shall make such applications, file such documents and furnish
such information as may be required for such purpose; provided, however, the
Company shall not be required to qualify as a foreign corporation or file a
general or limited consent to service of process in any such jurisdiction. In
each jurisdiction where such qualification shall be effected, the Company will,
unless the Representative agrees that such action is not at the time necessary
or advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Representative promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act, each such amendment or supplement to be
reasonably satisfactory to Underwriters' counsel, and the Company will furnish
to the Underwriters a sufficient number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than
45 days after the end of the 12-month period beginning on the day after the end
of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that
13
the end of such fiscal quarter is the end of the Company's fiscal year), the
Company shall make generally available to its security holders, in the manner
specified in Rule 158(b) of the Rules and Regulations, and to the
Representative, an earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the Act and
Rule 158(a) of the Rules and Regulations, which statement need not be audited
unless required by the Act, covering a period of at least 12 consecutive months
after the Effective Date of the Registration Statement.
(h) During a period of five years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports (if requested by the
Representative) of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company for each
quarter in the form furnished to the Company's stockholders and certified by
the Company' s principal financial or accounting officer;
(ii) concurrently with furnishing such annual
reports to its stockholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of independent public
accountants;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(v) every press release and every material news item
or article of interest to the financial community in respect of the Company or
any of its subsidiaries or their respective affairs which is intended for
release by the Company; and
(vi) any additional information of a public nature
concerning the Company or any of its subsidiaries, and any future subsidiaries
or their respective businesses which the Representative may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are consolidated,
and will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
14
(j) The Company will furnish to the Representative or on the
Representatives's order, without charge, at such place as the Representative
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto (two of
which copies will be signed and will include all financial statements and
exhibits), the Prospectus, and all amendments and supplements thereto,
including any prospectus prepared after the Effective Date of the Registration
Statement, in each case as soon as available and in such quantities as the
Representative reasonably request.
(k) Except for the offering contemplated by this Agreement,
for a period of 24 months from the Effective Date of the Registration Statement
none of the Company, its officers or directors, or holders of 5% or more of the
Company's securities, including options, warrants and other like rights, prior
to the Effective Date, or any person or entity deemed to be an affiliate of the
Company pursuant to the Rules and Regulations, will, directly or indirectly,
issue, offer to sell, sell, grant an option for the sale of, assign, transfer,
pledge, hypothecate or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein without the prior written consent of the
Representative (the "Lockup"). On or before the Effective Date of the
Registration Statement, the Company shall cause to be duly executed legally
binding and enforceable agreements pursuant to which each of persons enumerated
in the preceding sentence who are subject to the Lock-up, has agreed to be
bound by the Lock-up. During the 24 month period commencing with the Effective
Date of the Registration Statement, the Company shall issue no shares of
capital stock, or securities convertible into or exchangeable for shares of
Common Stock, except (i) shares issuable upon the exercise of options or
warrants referred to in the Registration Statement or in conformity and
compliance with the terms of this Agreement (including without limitation an
aggregate of 480,000 shares of Common Stock pursuant to options which may be
granted under the Company's stock option plan) or (ii) in connection with any
acquisition from, or business combination with, an unaffiliated entity.
(l) None of the Company or any of its subsidiaries, nor any
of their respective officers or directors, nor affiliates of any of them
(within the meaning of the Rules and Regulations) will take, directly or
indirectly, any action designed to, or which might in the future reasonably be
expected to, cause or result in, stabilization or manipulation of the price of
any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of
the Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be
used directly or indirectly to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including but not limited to a Form SR as
may be required pursuant to Rule 463 under the Act) from time to time, under
the Act, the Exchange Act, and the Rules and Regulations, and all such reports,
forms and documents filed will comply as to form and
15
substance with the applicable requirements under the Act, the Exchange Act, and
the Rules and Regulations.
(o) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company which have been read by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to Section
7(j) hereof.
(p) The Company shall cause the Securities to be quoted on
the SmallCap Market of the Nasdaq Stock Market at such time as the Securities
are accepted for listing.
(q) For a period of three (3) years from the Closing Date,
the Company shall furnish to the Representative at the Company's sole expense,
(i) daily consolidated transfer sheets relating to the Common Stock; (ii) a
list of holders of Common Stock upon the Representative's reasonable requests;
and (iii) a list of the securities positions of participants in the Depository
Trust Company.
(r) For a period of five (5) years commencing during fiscal
1997 the Representative has right to appoint a director or representative to
the Company's Board of Directors. In the event the Representative does not
designate a member to be elected as a director, the Company shall notify the
Representative of each meeting of the Board. An individual selected by the
Representative shall be permitted to attend all meetings of the Board and to
receive all notices and other correspondence and communications sent by the
Company to members of the Board. The Company shall reimburse the
Representative's designee for his or her out-of-pocket expenses reasonably
incurred in connection with his or her attendance at the Board meetings.
(s) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the Warrant Shares,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other
appropriate form) for the registration under the Act of the Warrant Shares.
(t) Intentionally omitted.
(u) Intentionally omitted.
(v) On or before the Effective Date of the Registration
Statement, retain or make arrangements to retain a financial public relations
firm reasonably satisfactory to the Representative which shall be continuously
engaged from such engagement date to a date twenty-four months from Closing
Date.
(w) As soon as practicable, but in no event more than 30
business days from the Effective Date of the Registration Statement, (i) file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Company's securities and (ii) take all necessary and appropriate
actions to be included in Standard and Poor's Corporation
16
Descriptions and Xxxxx'x OTC Manual and to continue such inclusion for a period
of not less than five (5) years.
(x) The Company shall furnish to the Representative, within
ninety (90) days following the Option Closing Date, three (3) bound volumes of
all papers and documents utilized in the public offering.
(y) Following the Effective Date of the Registration
Statement, the Company shall, at its sole cost and expense, prepare and file
such blue sky trading applications with such jurisdictions as the
Representative may reasonably request after consultation with the Company.
(z) The Company shall not amend or alter any term of any
written employment agreement, if any, between the Company and any executive
officer or director, during the term thereof, in a manner more favorable to
such employee or director, without the express written consent of the
Representative.
(aa) The Company shall engage the Company's legal counsel to
deliver to the Representative a memorandum detailing those states in which the
shares of Common Stock and Redeemable Warrants of the Company may be traded in
non-issuer transactions under the Blue Sky laws of the fifty states ("Secondary
Market Trading Memorandum"). The initial Secondary Market Trading Memorandum
shall be delivered to the Representative on the Effective Date of the
Registration Statement, which Memorandum shall be updated on the first
anniversary of the Effective Date. The Company will have its counsel prepare
and file a secondary trading application in each state, if required in such
state and if the Company meets the requirements for such application to be
approved, at the request of the Representative.
(bb) The Company shall not release any press releases for a
period of 90 days after the Effective Date of the Registration Statement
without the prior approval of the Underwriter and its counsel.
6. Payment of Expenses.
(a) The Company hereby agrees to pay on each of Closing Date
and the Option Closing Date (to the extent not paid at Closing Date) all
expenses and fees (other than fees of counsel to the Underwriters, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, including, without limitation, (i) the fees and
expenses of accountants and counsel for the Company, (ii) all costs and
expenses incurred in connection with the preparation, duplication, printing,
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments
and supplements thereto and the printing, mailing and delivery of this
Agreement, the Agreement Among Underwriters, Underwriters Questionnaires, the
Selected Dealer Agreements and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of the Securities including any transfer or other taxes payable
thereon, (iv) the qualification of the Securities under state or foreign
securities or "Blue Sky"
17
laws and determination of the status of such securities under legal investment
laws, including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and disbursements and fees of counsel in connection therewith,
(v) advertising costs and expenses, including but not limited to costs and
expenses in connection with the "road show", information meetings and
presentations, bound volumes and prospectus memorabilia, (vi) costs and
expenses in connection with due diligence investigations, including but not
limited to the fees of any independent counsel or consultant retained, (vii)
fees and expenses of the Transfer Agent, (viii) applications for assignments of
a rating of the Securities by qualified rating agencies, (ix) the fees payable
to the NASD, and (x) the fees and expenses incurred in connection with the
listing of the Securities on the Nasdaq Stock Market and any other exchange.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 7, Section 11 or Section 13, the
Company shall reimburse and indemnify the Underwriters for all of their
out-of-pocket expenses.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 6, it will pay to
the Representative a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds received by the Company from the sale of the Firm
Securities, $121,500 of which has been paid to date to the Representative. The
Company will pay the remainder on the Closing Date by certified or bank
cashier's check or, at the election of the Underwriter, by deduction from the
proceeds of the offering contemplated herein. In the event the Representative
elects to exercise the over-allotment option described in Section 3(b) hereof,
the Company further agrees to pay to the Representative on the Option Closing
Date (by certified or bank cashier's check or, at the Representatives's
election, by deduction from the proceeds of the offering) a non-accountable
expense allowance equal to three percent (3%) of the gross proceeds received by
the Company from the sale of the Option Securities.
7. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option
Closing Date, if any, of each of its or his covenants and obligations hereunder
and to the following further conditions:
(a) The Registration Statement shall have become effective
not later than 5:00 P.M., New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representative,
and, at Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and
18
Regulations, the price of the Securities and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) of the Rules and Regulations within the prescribed time period, and
prior to Closing Date the Company shall have provided evidence satisfactory to
the Representative of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A of the Rules and
Regulations.
(b) The Representative shall not have advised the Company
that the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received the favorable opinion of Xxxxxxxxx & Xxxxxxxxx, LLP, counsel to
the Company, addressed to the Representative and in form and substance
reasonably satisfactory to the Representative's Counsel, to the effect that:
(i) the Company and each of its subsidiaries (A) has
been duly organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction, (B) with full corporate power and authority
to own and operate its properties and to carry on its business as set forth in
the Registration Statement and Prospectus, and (C) is qualified as a foreign
corporation in each state in which its ownership of property or its conduct of
business requires such qualification and where the failure to so qualify would
have a material adverse effect on its business;
(ii) to the best of such counsel's knowledge, the
Company owns, directly or indirectly no subsidiaries except as disclosed in the
Prospectus;
(iii) except as described in the Prospectus, to the
best knowledge of such counsel, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity;
(iv) the Company has duly authorized, issued and
outstanding 15,000,000 shares of Common Stock, $.01 par value, of which
2,904,000 shares are issued and outstanding, and 100,000 shares of preferred
stock, of which no shares are issued and outstanding, as set forth in the
Prospectus, and any amendment or supplement thereto, under "Capitalization".
All issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable and contain no
pre-emptive rights; the Securities have been duly and validly authorized, and
upon issuance thereof and payment therefor in accordance with
19
this Agreement, will be duly and validly issued, fully paid and non-assessable,
and will not be subject to pre-emptive rights of any shareholder of the
Company.
(v) to the best of such counsel's knowledge the
Registration Statement is effective under the Act, and, if applicable, filing
of all pricing information has been timely made in the appropriate form under
Rule 424(b) and no stop order suspending the effectiveness of the Registration
Statement has been issued and to the best of such counsel's knowledge, no
proceedings for that purpose have been instituted or are pending or threatened
or contemplated under the Act and the Registration Statement and Prospectus
comply as to form in all material respects with the requirements of the Act and
Rules and Regulations thereunder, and such counsel has no reason to believe and
based upon a certificate of the Company's officer's has received no notice to
the effect that either the Registration Statement or the Prospectus contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which made (except that no
opinion need be expressed as to financial statements contained in the
Registration Statement or Prospectus); and such counsel is familiar with all
contracts referred to in the Registration Statement or Prospectus and such
contracts are sufficiently summarized or disclosed therein or filed as exhibits
thereto as required, and to the best knowledge of counsel, there are no
material contracts required to be summarized or disclosed or filed, nor to the
best of such counsel's knowledge are there any legal or governmental
proceedings pending or threatened to which the Company is the subject which are
required to be disclosed in the Registration Statement or the Prospectus which
are not disclosed and properly described therein.
(vi) to the best of such counsel's knowledge the
Company has full legal right, power and authority to enter into each of this
Agreement, the Representative's Warrant Agreement, the Warrant Agreement, and
the Consulting Agreement, and to consummate the transactions provided for
therein; and each of this Agreement, the Representative's Warrant Agreement,
the Warrant Agreement and the Consulting Agreement has been duly authorized,
executed and delivered by the Company. This Agreement, the Representative's
Warrant Agreement and the Consulting Agreement, assuming due authorization,
execution and delivery by each other party thereto and further assuming that
they are valid and binding agreements of the Underwriters and the
Representative, so as the case may be, constitute legal, valid and binding
agreements of the Company enforceable as against the Company in accordance with
their terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable
law).
(vii) to the best of such counsels knowledge no
consent, approval, authorization or order, and no filing with, any court,
regulatory body, government agency or other body, domestic or foreign, (other
than such as may be required under Blue Sky laws, as to which no opinion need
be rendered) is required in connection with the issuance of the Securities
pursuant to the Prospectus and the Registration Statement, the performance of
the Agreement, the Representative's Warrants, the Warrant Agreement and the
Consulting Agreement, and the transactions contemplated thereby;
20
(viii) the Securities have not been accepted for
quotation on the Nasdaq SmallCap Market of the Nasdaq Stock Market;
(ix) to the best of such counsel's knowledge, the
minute books of the Company and each of its subsidiaries has been made
available to Underwriters' counsel and to the best of such counsel's knowledge
contain a complete summary of all meetings and actions of their respective
directors and stockholders since the time of their respective incorporations
and reflect all transactions referred to in such minutes accurately in all
respects.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Representative's
counsel) of other counsel reasonably acceptable to Representative's counsel,
familiar with the applicable laws; and (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible
officers of the Company and certificates or other written statements of
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company and each of
its subsidiaries, provided that copies of any such statements or certificates
shall be delivered to Representative's counsel if requested. The opinion of
such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in their opinion, the
Underwriters and they are justified in relying thereon.
At each Option Closing Date, if any, the Representative shall have
received the favorable opinion of Xxxxxxxxx & Xxxxxxxxx, counsel to the
Company, dated the Option Closing Date, addressed to the Representative and in
form and substance satisfactory to Underwriter's counsel confirming as of
Option Closing Date the statements made by Xxxxxxxxx & Xxxxxxxxx in their
opinion delivered on the Closing Date.
(d) Intentionally omitted.
(e) On or prior to each of the Closing Date and the Option
Closing Date, Underwriters' counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (b)
of this Section 7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representation, warranties or conditions herein
contained.
(f) On or prior to each of the Closing Date and the Option
Closing Date, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
(g) Prior to each of Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in
21
the condition, financial or otherwise, prospects or the business activities of
the Company or any of its subsidiaries, whether or not in the ordinary course
of business, from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company or any of it's subsidiaries, from the latest date as of which the
financial condition of the Company and its subsidiaries are set forth in the
Registration Statement and Prospectus which is materially adverse to the
Company; (iii) neither the Company nor any of its subsidiaries shall be in
default under any provision of any instrument relating to any outstanding
indebtedness; (iv) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement
and Prospectus; (v) no action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company or any of
its subsidiaries, or affecting any of their respective properties or businesses
before or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company or any of its subsidiaries, except as set
forth in the Registration Statement and Prospectus; and (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have
been initiated, threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Representative shall have received a certificate of the Company
signed by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus
and each amendment and each supplement thereto, if any, contain all statements
and information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and
neither the Preliminary Prospectus nor any supplement thereto included any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and
22
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, neither
the Company nor any of its subsidiaries, shall have incurred up to and
including the Closing Date or the Option Closing Date, as the case may be,
other than in the ordinary course of its business, any material liabilities or
obligations, direct or contingent. Neither the Company nor any of its
subsidiaries have paid or declared any dividends or other distributions on
their capital stock; or have entered into any transactions not in the ordinary
course of business. There shall not have been any change in the capital stock
or long-term debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of business) of
the Company or any of its subsidiaries; neither the Company nor any of its
subsidiaries shall have sustained any material loss or damage to its property
or assets, whether or not insured; there shall not be any litigation which is
pending or threatened against the Company or any of its subsidiaries which is
required to be set forth in an amended or supplemented Prospectus which has not
been set forth; and there shall not have occurred any event required to be set
forth in an amended or supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (h) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriters shall have received
clearance from NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(j) At the time this Agreement is executed, the
Representative shall have received a letter, dated such date, addressed to the
Representative in form and substance satisfactory in all respects (including
the non-material nature of the changes or decreases, if any, referred to in
clause (iii) below) to the Representative and Representative's Counsel, from
Xxxxx Xxxxxxxxxx & Co., LLP, independent certified public accounts:
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion, the
consolidated financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the Rules
and Regulations thereunder and that the Underwriters may rely upon the opinion
of Xxxxx, Xxxxxx & Co., LLP, independent certified public accountants, with
respect to the financial statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the date of the
latest available unaudited interim financial statements), a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the boards of directors of the Company and its
subsidiaries, consultations with officers and other employees of the Company
and its subsidiaries responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their
23
attention which would lead them to believe that (A) the unaudited financial
statements and supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements of the Company included in the Registration Statement, or (B) at a
specified date not more than five (5) days prior to the Effective Date of the
Registration Statement, there has been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries, or any decrease in
the stockholders' equity or net current assets or net assets of the Company or
any of its subsidiaries as compared with amounts shown in the Company's balance
sheet included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any change or
decrease, setting forth the amount of such change or decrease, and (C) during
the period from December 31, 1996 to a specified date not more than five (5)
days prior to the Effective Date of the Registration Statement, there was any
decrease in net revenues, net earnings or net earnings per common share of the
Company, in each case as compared with the corresponding period, other than as
set forth in or contemplated by the Registration Statement, or, if there was
any such decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five
(5) days prior to the Effective Date of the Registration Statement, the amount
of liabilities of the Company (including a breakdown of commercial paper and
notes payable to banks);
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) stating that they have not during the
immediately preceding five (5) year period brought to the attention of the
Company's management any "weakness", as defined in Statement of Auditing
Standard No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit, " in the Company' s internal controls; and
(vii) Intentionally omitted.
(viii) statements as to such other matters incident
to the transaction contemplated hereby as the Underwriters may reasonably
request.
(k) On the Closing Date, and each Option Closing Date, if
any, the Underwriters shall have received from Xxxxx Xxxxxxxxxx & Co., LLP,
independent certified public accountants, a letter, dated as of the Closing
Date, and each Option Closing Date, if any, to the
24
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (j) of this Section, except that the specified date referred to
shall be a date not more than five days prior to Closing Date and each Option
Closing Date, if any, and, if the Company has elected to rely on Rule 430A of
the Rules and Regulations, to the further effect that they have carried out
procedures as specified in clause (v) of subsection (j) of this Section with
respect to certain amounts, percentages and financial information as specified
by the Representative and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
(l) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 5 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall have
been instituted or, to the knowledge of the Company, shall be contemplated.
(n) On or before the Closing Date the Company shall have (i)
executed and delivered to the Representative the consulting agreement and
mergers and acquisition agreement, substantially in the form as filed as
Exhibits to the Registration Statement (the "Consulting Agreement") and (ii)
paid to the Representative $100,000 representing the three year retainer fee
pursuant to the Consulting Agreement.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (including specifically each person who may be substituted for
an Underwriter as provided in Section 12 hereof) and each person, if any, who
controls any Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which such Underwriter or such controlling person may become
subject under the Act, the Exchange Act or any other statute or at common law
or otherwise or under the laws of foreign countries arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of Common Stock of the
25
Company issued or issuable upon exercise of the Underwriters's Warrants; or
(iii) in any application or other document or written communication (in this
Section 8 collectively called "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in order
to qualify the Common Stock under the securities laws thereof or filed with the
Commission, any state securities commission or agency, NASDAQ or any other
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be. The indemnity agreement in this subsection
(a) shall be in addition to any liability which the Company may have at common
law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of the Act to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof
or supplement thereto or in any application made in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to any Underwriter by such Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such written information or omissions only pertain to disclosures in the
Preliminary Prospectus, the Registration Statement or Prospectus directly
relating to the transactions effected by the Underwriters in connection with
this Offering; provided, further, that the liability of each Underwriter to the
Company under this Section 8(b) shall be limited to the product of the
Underwriter's discount or commission and the number of Securities sold by such
Underwriter hereunder. The Company acknowledges that the statements with
respect to the public offering of the Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against
one or more indemnifying parties under this Section 8. notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve
it from any liability which it may have under this Section 8 except to the
extent that it has been prejudiced in any material respect by such failure or
from any liability which it may have otherwise). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party or
parties or the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party. Notwithstanding
the foregoing the indemnified party or parties shall have the right to employ
its or their own
26
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the
indemnifying party, (ii) the indemnifying parties shall not have employed
counsel reasonably satisfactory to such indemnified party to have charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party
or parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section 8 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement
of any claim or action effected without its written consent; provided however,
that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution
in any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 8 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of
any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (A) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified parties the relative benefits
received by the Company, on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) referred to above in this subdivision (d) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the
27
provisions of this subdivision (d), the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls the Company within the meaning of the Act, each officer of
the Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any obligation it or they may have
hereunder or otherwise than under this subparagraph (d), or to the extent that
such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
9. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the date of
execution of this Agreement, the Closing Date and the Option Closing Date, as
the case may be, and such representations, warranties and agreements of the
Company and the indemnity agreements contained in Section 8 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Underwriter, the Company, or any controlling
person, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters.
10. Effective Date.
(a) This Agreement shall become effective at 10:00
a.m., New York City time, on the next full business day following the Effective
Date of the Registration Statement, or at such earlier time after the
Registration Statement becomes effective as the Underwriter, in its discretion,
shall release the Securities for the sale to the public, provided, however that
the provisions of Sections 6, 8 and 11 of this Agreement shall at all times be
effective. For purposes of this Section 10, the Securities to be purchased
hereunder shall be deemed to have been so released upon the earlier of dispatch
by the Representative of telegrams to securities dealers releasing such shares
for offering or the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the
Securities.
11. Termination.
(a) Subject to subsection (b) of this Section 11,
the Representative shall have the right to terminate this Agreement, (i) if any
calamitous domestic or international event or act or occurrence has materially
disrupted or in the Representative's opinion will in the immediate future
materially disrupt, general securities markets in the United States; or (ii) if
trading on the New York Stock Exchange, the American Stock Exchange, or in the
over-the-counter 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 over-
28
the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iii) if the United States shall
have become involved in a war or major hostilities; or (iv) if a banking
moratorium has been declared by a New York State or federal authority; or (v)
if a moratorium in foreign exchange trading has been declared; or (vi) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Securities; or (vii) if there shall have been such material
adverse change in the conditions or prospects of the Company, or such material
adverse general market conditions or such material adverse market conditions
concerning the trading of the Securities as in the Representative's judgment
would make it inadvisable to proceed with the offering, sale and/or delivery of
the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 11 and 12 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 6 and Section 8 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
12. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 7, Section 11 or
Section 13 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Firm Securities to be purchased on such date,
the non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds
10% of the total number of Firm Securities, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
13. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to
29
sell hereunder on such date, then this Agreement shall terminate (or, if such
default shall occur with respect to any Option Securities to be purchased on an
Option Closing Date), the Representative may at the Representative's option, by
notice from the Representative to the Company, terminate the Underwriters'
several obligations to purchase Securities from the Company on such date,
without any liability on the part of any non-defaulting party other than
pursuant to Section 6 and Section 8 hereof. No action taken pursuant to this
Section shall relieve the Company from liability, if any, in respect of such
default.
14. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative at its offices of IAR Securities Corp. 00 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, Attention: Syndicate Department. Notices to the Company shall
be directed to the Company at 0000 X. Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx
Xxxxxxxx 00000.
15. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 8 hereof and their
respective successors, heirs, legal representatives and assigns, and their
respective successors, heirs, legal representatives and assigns and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
16. Construction. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without
giving effect to the choice of law or conflict of laws principles.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
SPORTSTRAC, INC.
By: ___________________________
Xxxx Xxxxxxxxx, President
Confirmed and accepted as of the date first above written.
IAR SECURITIES CORP. For itself and as Representative of the other
Underwriters named in Schedule A hereto.
30
By:_____________________________
Name: __________________________ Title: _______________________
31
SCHEDULE A
Number of Firm Securities to be Purchased: 675,000 shares of Common Stock,
$.01 par value per share.
Name of Underwriters:
IAR Securities Corp.
32
