1
Exhibit 1.1
1,200,000 Units
(each Unit consisting of (i) one share of Common
Stock, par value $.001 per share; (ii) one redeemable
Class A warrant to purchase
one share of Common Stock and one redeemable Class B warrant
and (iii) one redeemable Class B warrant)
PIRANHA INTERACTIVE PUBLISHING, INC.
UNDERWRITING AGREEMENT
X.X. Xxxxx Investment Banking Corp. ___________, 1997
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
PIRANHA INTERACTIVE PUBLISHING, INC., a Nevada corporation
(the "Company"), proposes to issue and sell to X.X. Xxxxx Investment Banking
Corp. (the "Underwriter") subject to the terms and conditions of this
Underwriting Agreement (the "Agreement"), an aggregate of 1,200,000 Units, each
unit being hereinafter referred to as a "Unit" and consisting of (i) one shares
of Common Stock, par value $.001 per share, ("Shares"), (ii) one redeemable
Class A warrant ("Class A Warrant") to purchase one share of Common Stock and
one redeemable Class B warrant ("Class B Warrant") at a price of $6.50 from ,
1997 to _______, 2002 and (iii) one Class B Warrant exercisable to purchase one
share of Common Stock for $8.75 from _______, 1997 to _______, 2002. The Class A
Warrants and Class B Warrants are collectively referred to as the "Warrants".
The Warrants are subject to redemption, in certain instances commencing one year
from the date of this Agreement. In addition, the Company proposes to grant to
the Underwriter, the option referred to in Section 2(b) to purchase all or any
part of an aggregate of 180,000 additional Units. Unless the context otherwise
indicates, the term "Units" shall include the 180,000 additional Units referred
to above.
The aggregate of 1,200,000 Units to be sold by the Company,
together with all or any part of the 180,000 Units which the Underwriter has the
option to purchase, and the Shares and the Warrants comprising such Units, are
herein called the "Units." The Common Stock of the Company to be outstanding
after giving effect to the sale of the Shares is herein called the "Common
Stock." The Shares and Warrants included in the Units (including the Units which
the Underwriter has the option to purchase) are herein collectively called the
"Securities."
You have advised the Company that you desire to purchase the
Units. The Company confirms the agreements made by it with respect to the
purchase of the Units by you as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
2
(a) A registration statement (File No. 333-18605) on Form SB-2
relating to the public offering of the Units, including a form of prospectus
subject to completion, copies of which have heretofore been delivered to you,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act
and one or more amendments to such registration statement may have been so
filed. After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Units that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b) under the
Act or (B) if the Company does not rely on Rule 434 under the Act a prospectus
in the form most recently included in an amendment to such registration
statement (or, if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule 430A under
the Act or permitted by Rule 424(b) under the Act and in the case of either
clause (i)(A) or (i)(B) of this sentence, as has been provided to and approved
by the Underwriter prior to the execution of this Agreement, or (ii) if such
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the Act, an amendment to such registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Underwriter prior to the execution of this
Agreement.
As used in this Agreement, the term "Registration Statement" means such
registration statement, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means (A) if the Company relies on Rule 434 under the Act, the Term
Sheet relating to the Units that is first filed pursuant to Rule 424(b)(7) under
the Act, together with the Preliminary Prospectus identified therein that such
Term Sheet supplements; (B) if the Company does not rely on Rule 434 under the
Act, the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act or (C) if the Company does not rely on Rule 434 under the Act and
if no prospectus is required to be filed pursuant to said Rule 424(b), such term
means the prospectus included in the Registration Statement; except that if such
registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement and prior
to the Option Closing Date (as hereinafter defined), the terms "Registration
Statement" and "Prospectus" shall include such registration statement and
prospectus as so amended, and the term "Prospectus" shall include the prospectus
as so supplemented, or both, as the case may be; and the term "Term Sheet" means
any term sheet that satisfies the requirements of Rule 434 under the Act. Any
reference to the "date" of a Prospectus that includes a Term Sheet shall mean
the date of such Term Sheet.
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(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to and on the
Closing Date (as hereinafter defined) or the Option Closing Date, as the case
may be, (i) the Registration Statement and Prospectus will in all respects
conform to the requirements of the Act and the Rules and Regulations; and (ii)
neither the Registration Statement nor the Prospectus will include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make statements therein not misleading; provided,
however, that the Company makes no representations, warranties or agreements as
to information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriter specifically for use
in the preparation thereof. It is understood that the statements set forth in
the Prospectus on page 2 with respect to stabilization, under the heading
"Underwriting" and the identity of counsel to the Underwriter under the heading
"Legal Matters" constitute the only information furnished in writing by or on
behalf of the several Underwriter for inclusion in the Registration Statement
and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with full power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus and is
duly qualified to do business as a foreign corporation and is in good standing
in all other jurisdictions in which the nature of its business or the character
or location of its properties requires such qualification, except where failure
to so qualify will not materially affect the Company's business, properties or
financial condition.
(d) The authorized, issued and outstanding capital stock of
the Company as of December 31, 1996 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable; except as set forth in the Prospectus, no
options, warrants, or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company have been granted or entered into by the
Company; and the capital stock conforms to all statements relating thereto
contained in the Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized, and when
issued and delivered pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights of
any security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock,
except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and delivered
and will constitute valid
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and legally binding obligations of the Company enforceable in accordance with
their terms and entitled to the benefits provided by the warrant agreement
pursuant to which such Warrants are to be issued (the "Warrant Agreement"),
which will be substantially in the form filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the Warrants
have been reserved for issuance upon the exercise of the Warrants and when
issued in accordance with the terms of the Warrants and Warrant Agreement, will
be duly and validly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights and no personal liability will attach to the
ownership thereof. The Warrant Agreement has been duly authorized and, when
executed and delivered pursuant to this Agreement, will have been duly executed
and delivered and will constitute the valid and legally binding obligation of
the Company enforceable in accordance with its terms. The Warrants and the
Warrant Agreement conform to the respective descriptions thereof in the
Registration Statement and Prospectus.
The Shares and the Warrants contained in the Unit Purchase Option have
been duly authorized and, when duly issued and delivered, such Warrants will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the Unit
Purchase Option. The Shares included in the Unit Purchase Option (and the shares
of Common Stock issuable upon exercise of such Warrants) when issued and sold,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights and no personal liability will attach to the ownership
thereof.
(f) This Agreement, the Unit Purchase Option, the M/A
Agreement, the Consulting Agreement and the Escrow Agreement have been duly and
validly authorized, executed and delivered by the Company. The Company has full
power and lawful authority to authorize, issue and sell the Units to be sold by
it hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is required
in connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Units or the Unit Purchase Option, except
such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Company is not
in violation, breach or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
any of the property or assets of the Company is subject, nor will such action
result in any violation of the provisions of the articles of incorporation or
the by-laws of the Company, as amended, or any statute or any order, rule or
regulation applicable to the Company of any court or of any regulatory authority
or other governmental body having jurisdiction over the Company.
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(h) Subject to the qualifications stated in the Prospectus,
the Company has good and marketable title to all properties and assets described
in the Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not materially significant or
important in relation to its business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, the Company is not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company as lessor, sublessor, lessee or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the right of the Company
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company owns or leases all such properties described in the Prospectus as
are necessary to its operations as now conducted and, except as otherwise stated
in the Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) Coopers & Xxxxxxx LLP, independent auditors, who have
given their reports on certain financial statements filed and to be filed with
the Commission as a part of the Registration Statement, which are incorporated
in the Prospectus, are with respect to the Company, independent public
accountants as required by the Act and the Rules and Regulations.
(j) The financial statements, and Schedules together with
related notes, set forth in the Prospectus (or if the Prospectus is not in
existence, the most recent Preliminary Prospectus) or the Registration Statement
present fairly the financial position and results of operations and changes in
cash flow position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which they
apply. Said statements and Schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent during the periods involved. The information set forth under
the captions "Dilution", "Capitalization", and "Selected Financial Data" in the
Prospectus fairly present, on the basis stated in the Prospectus, the
information included therein.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus), the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the ordinary
course of business, which is material to the business of the Company, and there
has not been any change in the capital stock of, or any incurrence of short-term
or long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or any
development involving, so far as the Company can now reasonably foresee a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company and the
Company has not become a party
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to, and neither the business nor the property of the Company has become the
subject of, any material litigation whether or not in the ordinary course of
business.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of the
Company exist or are imminent which might be expected to adversely affect the
conduct of the business, property or operations or the financial condition or
results of operations of the Company.
(m) Except as disclosed in the Prospectus, the Company has
filed all necessary federal, state and foreign income and franchise tax returns
and has paid all taxes shown as due thereon; and there is no tax deficiency
which has been or to the knowledge of the Company might be asserted against the
Company.
(n) The Company has sufficient licenses, permits and other
governmental authorizations currently required for the conduct of its business
or the ownership of its properties as described in the Prospectus and is in all
material respects complying therewith and owns or possesses adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade-names, trademark registrations, service xxxx registrations, copyrights and
licenses necessary for the conduct of such business and had not received any
notice of conflict with the asserted rights of others in respect thereof. To the
best knowledge of the Company, none of the activities or business of the Company
are in violation of, or cause the Company to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any agency
or body of the United States or of any state, county or locality, the violation
of which would have a material adverse impact upon the condition (financial or
otherwise), business, property, prospective results of operations, or net worth
of the Company.
(o) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Units to the Underwriter hereunder
will have been fully paid or provided for by the Company and all laws imposing
such taxes will have been fully complied with.
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(q) All contracts and other documents of the Company which
are, under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Units hereby.
(s) The Company has no subsidiaries.
(t) The Company has not entered into any agreement pursuant to
which any person is entitled either directly or indirectly to compensation from
the Company for services as a finder in connection with the proposed public
offering.
(u) Except as previously disclosed in writing by the Company
to the Underwriter, no officer, director or stockholder of the Company has any
affiliation or association with any member of the National Association of
Securities Dealers Inc. ("NASD").
(v) The Company is not, and upon receipt of the proceeds from
the sale of the Units will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
(w) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection with the
offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by the
Act, if any.
(x) The conditions for use of Form SB-2, as set forth in the
General Instructions thereto, have been satisfied.
(y) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S-B2 involving
the Company, the Subsidiaries and any person described in such Item that are
required to be disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and that have not been so
disclosed.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company agrees to issue and sell to the Underwriter, and the
Underwriter agrees to buy from the Company
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at $5.00 per Unit, at the place and time hereinafter specified of 1,200,000
Units (the "First Units").
Delivery of the First Units against payment therefor shall take place
at the offices of X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx Xxxx,
X.X. (or at such other place as may be designated by agreement between you and
the Company) at 10:00 a.m., New York time, on _________, 1997, or at such later
time and date as you may designate, such time and date of payment and delivery
for the First Units being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter (or, at
its option, to the Representative, individually) to purchase all or any part of
an aggregate of an additional 180,000 Units at the same price per Unit as the
Underwriter shall pay for the First Units being sold pursuant to the provisions
of subsection (a) of this Section 2 (such additional Units being referred to
herein as the "Option Units"). This option may be exercised within 45 days after
the effective date of the Registration Statement upon notice by the Underwriter
to the Company advising as to the amount of Option Units as to which the option
is being exercised, the names and denominations in which the certificates for
such Option Units are to be registered and the time and date when such
certificates are to be delivered. Such time and date shall be determined by the
Underwriter but shall not be earlier than four nor later than ten full business
days after the exercise of said option, nor in any event prior to the First
Closing Date, and such time and date is referred to herein as the "Option
Closing Date." Delivery of the Option Units against payment therefor shall take
place at the offices of X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx
Xxxx, X.X. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriter of First Units referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Units on the Option
Closing Date.
(c) The Company will make the certificates for the securities
comprising the Units to be purchased by the Underwriter hereunder available to
you for checking at least two full business days prior to the First Closing Date
or the Option Closing Date (which are collectively referred to herein as the
"Closing Dates"). The certificates shall be in such names and denominations as
you may request, at least two full business days prior to the Closing Dates.
Time shall be of the essence and delivery at the time and place specified in
this Agreement is a further condition to the obligations of each Underwriter.
Definitive certificates in negotiable form for the Units to be
purchased by the Underwriter hereunder will be delivered by the Company to you
against payment of the purchase price by you, by certified or bank cashier's
checks or, at the Underwriter's option, by wire transfer in New York Clearing
House funds, payable to the order of the Company.
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In addition, in the event the Underwriter exercises the option
to purchase from the Company all or any portion of the Option Units pursuant to
the provisions of subsection (b) above, payment for such Units shall be made to
or upon the order of the Company by certified or bank cashier's checks payable
in New York Clearing House funds at the offices of X.X. Xxxxx Investment Banking
Corp., at the time and date of delivery of such Units as required by the
provisions of subsection (b) above, against receipt of the certificates for such
Units by the Underwriter registered in such names and in such denominations as
the Representative may request.
It is understood that the Underwriter proposes to offer the
Units to be purchased hereunder to the public upon the terms and conditions set
forth in the Registration Statement, after the Registration Statement becomes
effective.
3. Covenants of the Company. The Company covenants and agrees
with the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If required,
the Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act. Upon notification from the Commission that the Registration Statement has
become effective, the Company will so advise you and will not at any time,
whether before or after the effective date, file the Prospectus, Term Sheet or
any amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously have been advised and furnished with a copy or to
which you or your counsel shall have objected in writing or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to the
later of (A) the completion by the Underwriter of the distribution of the Units
contemplated hereby (but in no event more than nine months after the date on
which the Registration Statement shall have become or been declared effective)
and (B) 25 days after the date on which the Registration Statement shall have
become or been declared effective, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus which, in your opinion, may be necessary or
advisable in connection with the distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any comments of
the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or any
amended Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any state
or regulatory body of any stop order or other order or threat thereof suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Units for offering in any jurisdiction, or of the
institution of any proceedings for any of such purposes, and will use its
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best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and dealers to use the Prospectus in connection with the sale of
the Units for such period as in the opinion of counsel to the Underwriter the
use thereof is required to comply with the applicable provisions of the Act and
the Rules and Regulations. In case of the happening, at any time within such
period as a Prospectus is required under the Act to be delivered in connection
with sales by an underwriter or dealer of any event of which the Company has
knowledge and which materially affects the Company or the securities of the
Company, or which in the opinion of counsel for the Company or counsel for the
Underwriter should be set forth in an amendment of the Registration Statement or
a supplement to the Prospectus in order to make the statements therein not then
misleading, in light of the circumstances existing at the time the Prospectus is
required to be delivered to a purchaser of the Units or in case it shall be
necessary to amend or supplement the Prospectus to comply with law or with the
Rules and Regulations, the Company will notify you promptly and forthwith
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter, except that in case the
Underwriter is required, in connection with the sale of the Units to deliver a
Prospectus nine months or more after the effective date of the Registration
Statement, the Company will upon request of and at the expense of the
Underwriter, amend or supplement the Registration Statement and Prospectus and
furnish the Underwriter with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 and the rules and
regulations thereunder in connection with the offering and issuance of the
Units.
(b) The Company will use its best efforts to qualify to
register the Units for sale under the securities or "blue sky" laws of such
jurisdictions as the Underwriter may designate and will make such applications
and furnish such information as may be required for that purpose and to comply
with such laws, provided the Company shall not be required to qualify as a
foreign corporation or a dealer in securities or to execute a general consent of
service of process in any jurisdiction in any action other than one arising out
of the offering or sale of the Units. The Company will, from time to time,
prepare and file such statements and reports as are or may be required to
continue such qualification in effect for so long a period as the Underwriter
may reasonably request.
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(c) If the sale of the Units provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in Section
8, including the accountable out-of-pocket expenses of the Underwriter.
(d) The Company will use its best efforts to (i) cause a
registration statement under the Securities Exchange Act of 1934 to be declared
effective concurrently with the completion of this offering and will notify the
Underwriter in writing immediately upon the effectiveness of such registration
statement, and (ii) if requested by the Underwriter, to obtain a listing on the
Pacific Stock Exchange and to obtain and keep current a listing in the Standard
& Poors or Xxxxx'x Industrial OTC Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the
Company, at its expense, will furnish to its stockholders an annual report
(including financial statements audited by independent public accountants), in
reasonable detail and at its expense, will furnish to you during the period
ending five (5) years from the date hereof, (i) as soon as practicable after the
end of each fiscal year, a balance sheet of the Company and any of its
subsidiaries as at the end of such fiscal year, together with statements of
income, surplus and cash flow of the Company and any subsidiaries for such
fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iv) as soon as they
are available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission or any securities exchange or
automated quotation system on which any class of securities of the Company is
listed; and (v) such other information as you may from time to time reasonably
request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above will
be on a consolidated basis to the extent the accounts of the Company and its
subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to the Underwriter at or before
the First Closing Date two signed copies of the Registration Statement including
all financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the order of the Underwriter, from
time to time until the effective date of the Registration Statement, as many
copies of any Preliminary Prospectus filed with the Commission prior to the
effective date of the Registration Statement as the Underwriter may reasonably
request. The Company will deliver to the
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Underwriter on the effective date of the Registration Statement and thereafter
for so long as a Prospectus is required to be delivered under the Act, from time
to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented, as the Underwriter may from time to time reasonably
request. The Company, not later than (i) 5:00 p.m., New York City time, on the
date of determination of the public offering price, if such determination
occurred at or prior to 12:00 noon, New York City time, on such date or (ii)
6:00 p.m., New York City time, on the business day following the date of
determination of the public offering price, if such determination occurred after
12:00 noon, New York City time, on such date, will deliver to the Underwriter,
without charge, as many copies of the Prospectus and any amendment or supplement
thereto as the Underwriter may reasonably request for purposes of confirming
orders that are expected to settle on the First Closing Date.
(h) The Company will make generally available to its security
holders and to the registered holders of its Warrants and deliver to you as soon
as it is practicable to do so but in no event later than 90 days after the end
of twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of
the Units for the purposes set forth under "Use of Proceeds" in the Prospectus,
and will file such reports with the Commission with respect to the sale of the
Units and the application of the proceeds therefrom as may be required pursuant
to Rule 463 under the Act.
(j) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action, which
in the reasonable opinion of Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to
the Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units, and will use its best efforts to cause the same to
become effective as promptly as possible.
(k) The Company will reserve and keep available that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Unit Purchase Option outstanding from time to time.
(l) For a period of 13 months from the First Closing Date, no
present stockholders of the Company (except for stockholders who at the date
hereof hold an aggregate of not more than 2% of the Company's common Stock), and
no officer or director of the Company, will directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of, acquire any option
to dispose of, or otherwise dispose of any shares of Common Stock without the
prior written consent of the Underwriter. In order to enforce this covenant, the
Company shall obtain lock-up letters in form satisfactory to the Underwriter and
impose stop-transfer instructions with respect to the shares owned by such
officer, director or stockholder until the end of such period.
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(m) Prior to completion of this offering, the Company will
make all filings required, including registration under the Securities Exchange
Act of 1934, to obtain the listing of the Units, Common Stock, and Warrants on
the Nasdaq Small Cap Market (or a listing on such other market or exchange as
the Underwriter consent to), and will effect and maintain such listing for at
least five years from the date of this Agreement.
(n) The Company and each of the Principal Stockholders
represents that it or he has not taken and agree that it or he will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Units, Shares or the Warrants or to facilitate
the sale or resale of the Securities.
(o) On the Closing Date and simultaneously with the delivery
of the Units, the Company shall execute and deliver to you the Unit Purchase
Option. The Unit Purchase Option will be substantially in the form of the
Representative's Unit Purchase Option filed as an Exhibit to the Registration
Statement.
(p) During the 18 month period commencing on the date of this
Agreement, the Company will not, without the prior written consent of the
Underwriter, grant options to purchase shares of Common Stock at an exercise
price less than the greater of (i) the initial public offering price of the
Units (without allocating any value to the Warrants); (ii) the fair market value
of the Common Stock on the date of grant or issue any shares of Common Stock to
its employees, officers, directors or consultants, at less than the greater of
such prices. During the three year period from the First Closing Date, the
Company will not, without the prior written consent of the Underwriter, offer or
sell any of its securities pursuant to Regulation S under the Act; (iii) grant
registration rights to any person which are exercisable sooner than 13 months
from the First Closing Date; or (iv) issue any securities which have per share
voting rights greater than the voting rights of the Shares (or take any
corporate action which would have this effect).
(q) Xxxxxxx X. Xxxxxxx shall be President and Xxxxx Xxxxxxxxx
shall be the Chief Financial Officer of the Company on the Closing Dates. The
Company has obtained key person life insurance on the lives of each of Messrs.
Xxxxxxx X. Xxxxxxx, Xxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx and Xxxxxxx Xxxxxxx in an
amount of not less than $2 million and will use its best efforts to maintain
such insurance during the period commencing with the First Closing and ending on
the three year anniversary of such date or the term of employment of such
individuals, whichever is later. In the event such term of employment is less
than three years, the Company will obtain a comparable policy on the life of the
such individual's successor for the balance of the three year period. For a
period of thirteen months from the First Closing Date, the compensation of the
executive officers of the Company shall not be increased from the compensation
levels disclosed in the Prospectus.
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(r) On the Closing Date and simultaneously with the delivery
of the Units the Company shall execute and deliver to you an agreement with you
regarding mergers, acquisitions, joint ventures and certain other forms of
transactions, in the form previously delivered to the Company by you (the "M/A
Agreement").
(s) So long as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement to become effective in compliance with the Act and without any lapse
of time between the effectiveness of any such post-effective amendments and
cause a copy of each Prospectus, as then amended, to be delivered to each holder
of record of a Warrant and to furnish to the Underwriter and dealer as many
copies of each such Prospectus as the Underwriter or dealer may reasonably
request. The Company shall not call for redemption any of the Warrants unless a
registration statement covering the securities underlying the Warrants has been
declared effective by the Commission and remains current at least until the date
fixed for redemption. In addition, for so long as any Warrant is outstanding,
the Company will promptly notify the Underwriter of any material change in the
business, financial condition or prospects of the Company.
(t) Upon the exercise of any Warrant or Warrants after
___________, 199 , the Company will pay X.X. Xxxxx Investment Banking Corp. a
fee of 5% of the aggregate exercise price of the Warrants, a portion of which
may be reallowed to the dealer who solicited in writing the exercise (which may
also be the Underwriter) if (i) the market price of the Company's Common Stock
is greater than the exercise price of the Warrants on the date of exercise; (ii)
the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc., (iii) the Warrant is not held in a
discretionary account; (iv) the disclosure of compensation arrangements has been
made in documents provided to customers, both as part of the original offering
and at the time of exercise, and (v) the solicitation of the Warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of 1934,
as amended. The Company agrees not to solicit the exercise of any Warrants other
than through X.X. Xxxxx Investment Banking Corp. and will not authorize any
other dealer to engage in such solicitation without the prior written consent of
X.X. Xxxxx Investment Banking Corp., unless X.X. Xxxxx Investment Banking Corp.
refuses or is unable to solicit such exercise.
(u) For a period of five (5) years from the Effective Date the
Company (i) at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's financial
statements for each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
10-Q quarterly report and the mailing of quarterly financial information to
stockholders and (ii) shall not change its accounting firm without the prior
written consent of the Chairman or the President of the Underwriter.
(v) As promptly as practicable after the Closing Date, the
Company will prepare, at its own expense, hard cover "bound volumes" relating to
the offering, and will distribute at least four of such volumes to the
individuals designated by the Representative or counsel to the Underwriter.
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(w) For a period of five years from the First Closing Date (i)
the Underwriter shall have the right, but not the obligation, to designate one
director of the Board of Directors of the Company and (ii) the Company shall
engage a public relations firm acceptable to the Underwriter.
(x) The Company shall, for a period of six years after date of
this Agreement, submit which reports to the Secretary of the Treasury and to
stockholders, as the Secretary may require, pursuant to Section 1202 of the
Internal Revenue Code, as amended, or regulations promulgated thereunder, in
order for the Company to qualify as a "small business" so that stockholders may
realize special tax treatment with respect to their investment in the Company.
(y) With respect to the Selling Securityholders, the Company
will send all post-effective amendments or prospectus supplements disclosing
actual price and selling terms to the NASD concurrently with the filing thereof
with the Commission. The Company will notify the Underwriter and the NASD if the
Company becomes aware that any 5% or greater stockholder of the Company becomes
an affiliated or associated person of an NASD member participating in the
distribution of this offering.
(z) On the First Closing Date, the right of first refusal
granted to the Underwriter pursuant to the Agency Agreement between the Company
and the Underwriter dated November 13, 1996 shall terminate.
4. Conditions of the Underwriter's Obligation. The obligations of
the Underwriter to purchase and pay for the Units which they have respectively
agreed to purchase hereunder, are subject to the accuracy (as of the date
hereof, and as of the Closing Dates) of and compliance with the representations
and warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New
York time, on the date on which the amendment to the registration
statement originally filed with respect to the Units or to the
Registration Statement, as the case may be, containing information
regarding the initial public offering price of the Units has been filed
with the Commission, or such later time and date as shall have been
agreed to by the Underwriter; if required, the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or supplement
thereto shall have been filed with the Commission in the manner and
within the time period required by Rule 434 and 424(b) under the Act;
on or prior to the Closing Dates no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that or a similar purpose shall have been instituted
or shall be pending or, to your knowledge or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the
part of the Commission for additional information shall have been
complied with to the
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reasonable satisfaction of Bachner, Tally, Xxxxxxx & Xxxxxx LLP,
counsel to the Underwriter;
(b) At the First Closing Date, you shall have received the
opinion, together with copies of such opinion for each of the other
several Underwriter, dated as of the First Closing Date, of Squire,
Xxxxxxx & Xxxxxxx L.L.P., counsel for the Company, in form and
substance satisfactory to counsel for the Underwriter, to the effect
that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the State of Nevada, with full corporate power and authority
to own its properties and conduct its business as described in
the Registration Statement and Prospectus and is duly
qualified or licensed to do business as a foreign corporation
and is in good standing in Arizona and in each other
jurisdiction in which the ownership or leasing of its
properties or conduct of its business requires such
qualification;
(ii) to the best knowledge of such counsel, (a) the Company
has obtained, or is in the process of obtaining, all licenses,
permits and other governmental authorizations necessary to the
conduct of its business as described in the Prospectus, (b)
such licenses, permits and other governmental authorizations
obtained are in full force and effect, and (c) the Company is
in all material respects complying therewith;
(iii) the authorized capitalization of the Company as of
December 31, 1996 is as set forth under "Capitalization" in
the Prospectus; all shares of the Company's outstanding stock
requiring authorization for issuance by the Company's board of
directors have been duly authorized, validly issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; the outstanding shares of Common
Stock of the Company have not been issued in violation of the
preemptive rights of any shareholder and the shareholders of
the Company do not have any preemptive rights or other rights
to subscribe for or to purchase, nor are there any
restrictions upon the voting or transfer of any of the Stock,
except with respect to the shares that are subject to the
irrevocable Proxy Agreement and the Voting Trust described in
the Prospectus; the Common Stock, the Warrants, the Unit
Purchase Option and the Warrant Agreement conform to the
respective descriptions thereof contained in the Prospectus;
the Shares have been, and the shares of Common Stock to be
issued upon exercise of the Warrants and the Unit Purchase
Option, upon issuance in accordance with the terms of such
Warrants, the Warrant Agreement and Unit Purchase Option have
been duly authorized and, when issued and delivered, will be
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duly and validly issued, fully paid, non-assessable, free of
preemptive rights and no personal liability will attach to the
ownership thereof; all prior sales by the Company of the
Company's securities have been made in compliance with or
under an exemption from registration under the Act and
applicable state securities laws and no shareholders of the
Company have any rescission rights with respect to Company
securities; a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the Warrants and
Unit Purchase Option and to the best of such counsel's
knowledge, neither the filing of the Registration Statement
nor the offering or sale of the Units as contemplated by this
Agreement gives rise to any registration rights or other
rights, other than those which have been waived or satisfied
for or relating to the registration of any shares of Common
Stock;
(iv) this Agreement, the Unit Purchase Option, the Warrant
Agreement and the M/A Agreement have been duly and validly
authorized, executed and delivered by the Company and,
assuming due execution by each other party hereto or thereto,
each constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its
respective terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting 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;
(v) the certificates evidencing the shares of Common Stock
are in valid and proper legal form; the Warrants will be
exercisable for shares of Common Stock of the Company in
accordance with the terms of the Warrants and at the prices
therein provided for; at all times during the term of the
Warrants the shares of Common Stock of the Company issuable
upon exercise of the Warrants have been duly authorized and
reserved for issuance upon such exercise and such shares, when
issued upon such exercise in accordance with the terms of the
Warrants and at the price provided for, will be duly and
validly issued, fully paid and non-assessable;
(vi) such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which
could materially adversely affect the business, property,
financial condition or operations of the Company; or which
question the validity of the Securities, this Agreement, the
Warrant Agreement, the Unit Purchase Option or the M/A
Agreement, or of any action taken or to be taken by the
Company pursuant to this Agreement, the Warrant Agreement, the
Xxxx
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Xxxxxxxx Option or the M/A Agreement, and no such proceedings
are known to such counsel to be contemplated against the
Company; there are no governmental proceedings or regulations
required to be described or referred to in the Registration
Statement which are not so described or referred to;
(vii) the Company is not in violation of or default under,
nor will the execution and delivery of this Agreement, the
Unit Purchase Option, the Warrant Agreement or the M/A
Agreement and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions
herein or therein contemplated, result in a breach or
violation of, or constitute a default under the certificate or
articles of incorporation or by-laws, in the performance or
observance of any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture,
mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which the Company is a party or by
which it or any of its properties may be bound or in violation
of any material order, rule, regulation, writ, injunction, or
decree of any government, governmental instrumentality or
court, domestic or foreign;
(viii) the Registration Statement has become effective under
the Act, and to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for that purpose
have been instituted or are pending before, or threatened by,
the Commission; the Registration Statement and the Prospectus
(except for the financial statements and other financial data
contained therein, or omitted therefrom, as to which such
counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act
and the Rules and Regulations;
(ix) such counsel has participated in the preparation of
the Registration Statement and the Prospectus and nothing has
come to the attention of such counsel to cause such counsel to
have reason to believe that the Registration Statement or any
amendment thereto at the time it became effective or as of the
Closing Dates contained any untrue statement of a material
fact required to be stated therein or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading or that the
Prospectus or any supplement thereto contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make statements therein, in light of the
circumstances under which they were made, not misleading
(except, in the case of both the Registration Statement and
any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements,
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notes thereto and other financial information and schedules
contained therein, as to which such counsel need express no
opinion);
(x) all descriptions in the Registration Statement and
the Prospectus, and any amendment or supplement thereto, of
contracts and other documents are accurate and fairly present
the information required to be shown, and such counsel is
familiar with all contracts and other documents referred to in
the Registration Statement and the Prospectus and any such
amendment or supplement or filed as exhibits to the
Registration Statement, and such counsel does not know of any
contracts or documents of a character required to be
summarized or described therein or to be filed as exhibits
thereto which are not so summarized, described or filed;
(xi) no authorization, approval, consent, or license of
any governmental or regulatory authority or agency is
necessary in connection with the authorization, issuance,
transfer, sale or delivery of the Units by the Company, in
connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking
of any action contemplated herein, or the issuance of the Unit
Purchase Option or the Securities underlying the Unit Purchase
Option, other than registrations or qualifications of the
Units under applicable state or foreign securities or Blue Sky
laws and registration under the Act;
(xii) the statements in the Registration Statement under
the captions "Business", "Use of Proceeds", "Management", and
"Description of Securities" have been reviewed by such counsel
and insofar as they refer to descriptions of agreements,
statements of law, descriptions of statutes, licenses, rules
or regulations or legal conclusions, are correct in all
material respects;
(xiii) the Units, the Common Stock and the Warrants have
been duly authorized for quotation on the Nasdaq Small Cap
Market and
(xiv) to such counsel's knowledge, there are no business
relationships or related-party transactions of the nature
described in Item 404 of Regulation S-B2 involving the
Company, any Subsidiary and any person described in such Item
that are required to be disclosed in the Prospectus and which
have not been so disclosed.
(c) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the Underwriter, and you shall have received from such counsel a
signed opinion, dated as of the
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First Closing Date, with respect to the validity of the issuance of the Units,
the form of the Registration Statement and Prospectus (other than the financial
statements and other financial data contained therein), the execution of this
Agreement and other related matters as you may reasonably require. The Company
shall have furnished to counsel for the Underwriter such documents as they may
reasonably request for the purpose of enabling them to render such opinion.
(d) You shall have received a letter prior to the effective
date of the Registration Statement and again on and as of the First Closing Date
from Coopers & Xxxxxxx LLP, independent public accountants for the Company,
substantially in the form approved by you, and including estimates of the
Company's revenues and results of operations for the period ending at the end of
the month immediately preceding the effective date and results of the comparable
period during the prior fiscal year.
(e) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and correct
with the same effect as if made on and as of the Closing Dates and the Company
shall have performed all of its obligations hereunder and satisfied all the
conditions on its part to be satisfied at or prior to such Closing Date; (ii)
the Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all material
respects conform to the requirements thereof, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
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
not misleading; (iii) there shall have been, since the respective dates as of
which information is given, no material adverse change, or any development
involving a prospective material adverse change, in the business, properties,
condition (financial or otherwise), results of operations, capital stock,
long-term or short-term debt or general affairs of the Company from that set
forth in the Registration Statement and the Prospectus, except changes which the
Registration Statement and Prospectus indicate might occur after the effective
date of the Registration Statement, and the Company shall not have incurred any
material liabilities or entered into any agreement not in the ordinary course of
business other than as referred to in the Registration Statement and Prospectus;
and (iv) except as set forth in the Prospectus, no action, suit or proceeding at
law or in equity shall be pending or threatened against the Company which would
be required to be set forth in the Registration Statement, and no proceedings
shall be pending or threatened against the Company before or by any commission,
board or administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, property, condition (financial or otherwise), results of
operations or general affairs of the Company, and (v) you shall have received,
at the First Closing Date, a certificate signed by each of the Chairman of the
Board or the President and the principal financial or accounting officer of the
Company, dated as of the First Closing Date, evidencing compliance with the
provisions of this subsection (e).
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(f) Upon exercise of the option provided for in Section 2(b)
hereof, the obligations of the Underwriter to purchase and pay for the Option
Units referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at
the Option Closing Date, and no stop order suspending the
effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been instituted or
shall be pending, or, to your knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any
reasonable request on the part of the Commission for
additional information shall have been complied with to the
satisfaction of Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel
to the Underwriter.
(ii) At the Option Closing Date there shall have been
delivered to you the signed opinion of Squire, Xxxxxxx &
Xxxxxxx L.L.P., counsel for the Company, dated as of the
Option Closing Date, in form and substance satisfactory to
Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel to the
Underwriter, which opinion shall be substantially the same in
scope and substance as the opinion furnished to you at the
First Closing Date pursuant to Section 4(b) hereof, except
that such opinion, where appropriate, shall cover the Option
Units.
(iii) At the Option Closing Date there shall have been
delivered to you a certificate of the Chairman of the Board or
the President and the principal financial or accounting
officer of the Company, dated the Option Closing Date, in form
and substance satisfactory to Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the Underwriter, substantially the same in
scope and substance as the certificate furnished to you at the
First Closing Date pursuant to Section 4(e) hereof.
(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory
to you from Coopers & Xxxxxxx LLP, dated the Option Closing
Date and addressed to the Underwriter confirming the
information in their letter referred to in Section 4(d) hereof
and stating that nothing has come to their attention during
the period from the ending date of their review referred to in
said letter to a date not more than five business days prior
to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing
Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the
Option Units shall be satisfactory in form and substance to
you, and you and Bachner, Tally,
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Xxxxxxx & Xxxxxx LLP, counsel to the Underwriter, shall have
been furnished with all such documents, certificates, and
opinions as you may request in connection with this
transaction in order to evidence the accuracy and completeness
of any of the representations, warranties or statements of the
Company or its compliance with any of the covenants or
conditions contained herein.
(g) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Units, Common Stock or the Warrants and no proceedings for the
taking of such action shall have been instituted or shall be pending, or, to the
knowledge of the Underwriter or the Company, shall be contemplated by the
Commission or the NASD. The Company represents that at the date hereof it has no
knowledge that any such action is in fact contemplated by the Commission or the
NASD. The Company shall have advised the Underwriter of any NASD affiliation of
any of its officers, directors, stockholders or their affiliates.
(h) If any of the conditions herein provided for in this
Section shall not have been fulfilled as of the date indicated, this Agreement
and all obligations of the Underwriter under this Agreement may be cancelled at,
or at any time prior to, each Closing Date by the Underwriter. Any such
cancellation shall be without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company. The obligation
of the Company to sell and deliver the Units is subject to the condition that at
the Closing Dates, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or any proceedings
therefor initiated or threatened by the Commission.
If the condition to the obligations of the Company provided for in this
Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Units on exercise of the
option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all attorneys'
fees), to which the Underwriter or such controlling person may become subject,
under the Act or otherwise, and will reimburse, as incurred, the Underwriter and
such controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages or liabilities, insofar
as such losses, claims, damages or liabilities (or actions in respect
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thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Units under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
or supplement thereto, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto. This indemnity will be in addition to any liability which
the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (i) in reliance upon and in conformity with written
information furnished to the Company by you specifically for use in the
preparation thereof and (ii) relates to the transactions effected by the
Underwriter in connection with the offer and sale of the Units contemplated
hereby. This indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the
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indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party otherwise than under this Section. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions herein stated, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is the Underwriter or a person who controls the
Underwriter within the meaning of the Act, the fees and expenses of such counsel
shall be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the named parties to any such action (including any impleaded parties)
include both the Underwriter or such controlling person and the indemnifying
party and in the judgment of the Underwriter, it is advisable for the
Underwriter or controlling persons to be represented by separate counsel (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the Underwriter or such controlling person, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the Underwriter and such controlling persons,
which firm shall be designated in writing by you). No settlement of any action
against an indemnified party shall be made without the consent of the
indemnifying party, which shall not be unreasonably withheld in light of all
factors of importance to such indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under the Act
in any case in which (i) the Underwriter makes claim for indemnification
pursuant to Section 6 hereof 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 Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the Underwriter,
then the Company and each person who controls the Company, in the aggregate, and
the Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) in either case (after
contribution from others) in
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such proportions that the Underwriter is responsible in the aggregate for that
portion of such losses, claims, damages or liabilities represented by the
percentage that the underwriting discount per Unit appearing on the cover page
of the Prospectus bears to the public offering price appearing thereon, and the
Company shall be responsible for the remaining portion, provided, however, that
(a) if such allocation is not permitted by applicable law then the relative
fault of the Company and the Underwriter and controlling persons, in the
aggregate, in connection with the statements or omissions which resulted in such
damages and other relevant equitable considerations shall also be considered.
The relative fault shall be determined by reference to, among other things,
whether in the case of an untrue statement of a material fact or the omission to
state a material fact, such statement or omission relates to information
supplied by the Company, or the Underwriter and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if the respective obligations of the Company and
the Underwriter to contribute pursuant to this Section 7 were to be determined
by pro rata or per capita allocation of the aggregate damages (even if the
Underwriter in the aggregate were treated as one entity for such purpose) or by
any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7 and (b) that
the contribution of the Underwriter shall not be in excess of its proportionate
share of such losses, claims, damages or liabilities for which it is
responsible. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company, its officers, directors and
controlling persons to the full extent permitted by law. The foregoing
contribution agreement shall in no way affect the contribution liabilities of
any persons having liability under Section 11 of the Act other than the Company
and the Underwriter. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to the settlement;
provided, however, that such consent shall not be unreasonably withheld in light
of all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the
sale of the Units to the Underwriter is consummated, the Company will pay all
costs and expenses incident to the performance of this Agreement by the Company
including, but not limited to, the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented, or the Term Sheet, the fee of the NASD in connection with the
filing required by the NASD relating to the offering of the Units contemplated
hereby; all expenses, including reasonable fees (not to exceed $25,000) and
disbursements of counsel to the Underwriter, in connection with the
qualification of the
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Units under the state securities or blue sky laws which the Underwriter shall
designate; the cost of printing and furnishing to the Underwriter copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, Selling Agreement, Underwriter's Questionnaire, Underwriter's Power
of Attorney and the Blue Sky Memorandum, any fees relating to the listing of the
Units, Common Stock and Warrants on the Nasdaq Small Cap Market or any other
securities exchange, the cost of printing the certificates representing the
securities comprising the Units, the fees of the transfer agent and warrant
agent the cost of publication of at least three "tombstones" of the offering (at
least one of which shall be in national business newspaper and one of which
shall be in a major New York newspaper) and the cost of preparing at least four
hard cover "bound volumes" relating to the offering, in accordance with the
Underwriter's request. The Company shall pay any and all taxes (including any
transfer, franchise, capital stock or other tax imposed by any jurisdiction) on
sales to the Underwriter hereunder. The Company will also pay all costs and
expenses incident to the furnishing of any amended Prospectus or of any
supplement to be attached to the Prospectus as called for in Section 3(a) of
this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company shall at
the First Closing Date pay to the Underwriter, a non-accountable expense
allowance of $180,000 of which $40,000 has been paid. In the event the
overallotment option is exercised, the Company shall pay to X.X. Xxxxx
Investment Banking Corp. at the Option Closing Date an additional amount equal
to 3% of the gross proceeds received upon exercise of the overallotment option.
In the event the transactions contemplated hereby are not consummated by reason
of any action by the Underwriter (except if such prevention is based upon a
breach by the Company of any covenant, representation or warranty contained
herein or because any other condition to the Underwriter's obligations hereunder
required to be fulfilled by the Company is not fulfilled) the Company shall be
liable for the accountable out-of-pocket expenses of the Underwriter, including
legal fees up to a maximum of $25,000. In the event the transactions
contemplated hereby are not consummated by reason of any action of the Company
or because of a breach by the Company of any covenant, representation or
warranty herein, the Company shall be liable for the accountable out-of-pocket
expenses of the Underwriter, including legal fees, up to a maximum of $150,000.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriter or from any other person for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless the Underwriter against any losses,
claims, damages or liabilities, joint or several (which shall, for all purposes
of this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Underwriter or such other
Underwriter or person may become subject insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
the claim of any person (other than an employee of the party claiming indemnity)
or entity that he or it is entitled to a finder's fee in connection with the
proposed offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
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9. Effective Date.
The Agreement shall become effective upon its execution except that you
may, at your option, delay its effectiveness until 11:00 A.M., New York time on
the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the Registration
Statement as you in your discretion shall first commence the initial public
offering by the Underwriter of any of the Units. The time of the initial public
offering shall mean the time of release by you of the first newspaper
advertisement with respect to the Units, or the time when the Units are first
generally offered by you to dealers by letter or telegram, whichever shall first
occur. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14, 15
and 16 shall remain in effect notwithstanding such termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8, 12, 13,
14 and 15 hereof, may be terminated at any time prior to the First Closing Date,
and the option referred to in Section 2(b) hereof, if exercised, may be
cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Units agreed to be purchased hereunder by
reason of (i) the Company having sustained a material loss, whether or not
insured, by reason of fire, earthquake, flood, accident or other calamity, or
from any labor dispute or court or government action, order or decree; (ii)
trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market having been
suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could materially adversely affect the Company; (vii)
except as contemplated by the Prospectus, the Company is merged or consolidated
into or acquired by another company or group or there exists a binding legal
commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the passage by the Congress of the United States or by
any state legislative body or federal or state agency or other authority of any
act, rule or regulation, measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Underwriter to have a material impact on the business, financial condition
or financial statements of the Company or the market for the securities offered
pursuant to the Prospectus; (ix) any adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement, or (x) any material adverse change having occurred,
since the
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respective dates of which information is given in the Registration Statement and
Prospectus, in the earnings, business prospects or general condition of the
Company, financial or otherwise, whether or not arising in the ordinary course
of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 11 or in
Section 10, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
11. Unit Purchase Option.
At or before the First Closing Date, the Company will sell to
X.X. Xxxxx Investment Banking Corp., or its designees for a consideration of
$.0001 and upon the terms and conditions set forth in the form of Unit Purchase
Option annexed as an exhibit to the Registration Statement, a Unit Purchase
Option to purchase an aggregate of 120,000 Units. In the event of conflict in
the terms of this Agreement and the Unit Purchase Option, the language of the
Unit Purchase Option shall control.
12. Representations, Warranties and Agreements to Survive
Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its Principal Stockholders,
where appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriter, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.
13. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered and confirmed to
them at X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, with a copy sent to Bachner, Tally, Xxxxxxx & Xxxxxx LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or if sent to the Company, will be mailed,
delivered and confirmed to it at 0000 Xxxx Xxxxx, Xxxxx X, Xxxxx, Xxxxxxx 00000.
14. Parties in Interest.
The Agreement herein set forth is made solely for the benefit
of the Underwriter, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or the Underwriter, and
directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not
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include any purchaser, as such purchaser, from the Underwriter of the Units. All
of the obligations of the Underwriter hereunder are several and not joint.
15. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be entirely performed within New York.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
PIRANHA INTERACTIVE PUBLISHING, INC.
By: ____________________________________
Xxxxxxx X. Xxxxxxx
President
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
X.X. XXXXX INVESTMENT BANKING CORP.
By: ____________________________________
Authorized Officer
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