EXHIBIT 1.04
400,000 Units
KIDS STUFF, INC.
Each Unit consisting of 1 share of
Redeemable Convertible Series 1 Preferred Stock
$.001 Par Value Per Share and
2 Series 1 Preferred Stock Purchase Warrants
UNDERWRITING AGREEMENT
New York, New York
October , 1998
Xxxxxxxxx Financial Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Kids Stuff, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Xxxxxxxxx Financial Group, Inc. (the "Underwriter"), with respect
to the sale by the Company and the purchase by the Underwriter, of 400,000 Units
(the "Units"), each consisting of 1 share of the Company's Redeemable
Convertible Series 1 Preferred Stock, $.001, par value per share ("Preferred
Stock") and 2 Series 1 Preferred Stock Purchase Warrants ("Preferred Warrants"),
and with respect to the grant by the Company to the Underwriter of the option
described in Section 2(b) hereof to purchase all or any part of 60,000
additional Units for the purpose of covering over-allotments, if any. The
aforesaid 400,000 Units (the "Firm Units") and all or any part of the Units
subject to the option described in Section 2(b) hereof (the "Option Units") are
hereinafter collectively referred to as the "Units." The Company also proposes
to issue and sell to the Underwriter, options (the "Underwriter's Options")
pursuant to the Underwriter's warrant agreement (the "Underwriter's Option
Agreement) for the purchase of an aggregate of 40,000 additional Units. The
Units issuable upon exercise of the Underwriters Options are hereinafter
sometimes referred to as the "Option Units." The Units, Underwriters Options and
Option Units are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Underwriter as of the date
hereof, and as of the Closing Date and the Option Closing Date, if any, as
follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333-61463) including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Units under the Securities Act of 1933, as amended (the "Act"), which
registration statement and any amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act and the rules and
regulations of the Commission under the Act. The Company will promptly file a
further amendment to said registration statement in the form heretofore
delivered to the Underwriter and will not, before the registration statement
becomes effective, file any other amendment thereto unless the Underwriter shall
have consented thereto after having been furnished with a copy thereof. Except
as the context may otherwise require, such registration statement, as amended,
on file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof and all information deemed to be
a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement" and the form of
prospectus in the form first filed with the Commission pursuant to Rule 424(b)
of the Regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Rules and Regulations" mean the rules and regulations adopted by the Commission
under either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority
has issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or Prospectus or any part thereof and no
proceedings for a stop order have been instituted or are pending or, to the best
knowledge of the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and Prospectus at the time of filing thereof conformed in
all material respects with the requirements of the Act and the Rules and
Regulations, neither the Registration Statement nor Prospectus, at the time of
filing thereof, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective and at
all times subsequent thereto up to the Closing Date and each Option Closing Date
(as defined in Subsection 2(c) hereof), if any, and during such longer period as
the Prospectus may be required to be delivered in connection with sales by the
Underwriter or a dealer, the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
compliance with the Act and the Rules and Regulations, and will in all material
respects conform to the requirements of the Act and the Rules and Regulations;
neither the Registration Statement, nor any amendment thereto, at the time the
Registration Statement or such amendment is declared effective under the Act,
will contain any untrue statement of a material fact or omit to state any
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material fact required to be stated therein or necessary to make the statements
therein, not misleading, and the Prospectus at the time the Registration
Statement becomes effective, at the Closing Date and at any Option Closing Date,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information supplied
to the Company in writing by or on behalf of the Underwriter expressly for use
in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
(d) The Company is validly existing as a corporation in good
standing under the laws of its state of incorporation. The Company is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of properties or the character of
its operations require such qualification or licensing. The Company has all
requisite power and authority (corporate and other), and has obtained any and
all necessary applications, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and conduct
its business as described in the Prospectus; the Company has been doing business
in compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs, position, prospects,
value, operation, properties, business or results of operation of the Company.
The disclosures in the Registration Statement concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the Company's
businesses as currently conducted and as contemplated are correct in all
respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization", and will
have the adjusted capitalization set forth therein on the Closing Date based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for the
Company to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the Prospectus. The
Units, the Underwriters Options, and the Option Units and all other securities
issued or issuable by the Company conform or, when issued and paid for will
conform in all respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
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preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The Units to be issued and sold by
the Company hereunder, the Underwriters Options to be issued and sold by the
Company and the Option Units issuable upon exercise of the Underwriters Options
and payment therefor, are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof and thereon, will be
validly issued, fully paid and non-assessable and will conform to the
descriptions thereof contained in the Prospectus; the holders thereof will not
be subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the Units, the
Underwriters Options, and the Option Units has been duly and validly taken; and
the certificates representing the Units, the Underwriters Options, and the
Option Units will be in due and proper form. Upon the issuance and delivery
pursuant to the terms hereof of the Units to be sold by the Company hereunder,
the Underwriter will acquire good and marketable title to such Units free and
clear of any lien, charge, claim, encumbrance, pledge, security interest, defect
or other restriction or equity of any kind whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles and the
Rules and Regulations, consistently applied throughout the periods involved.
There has been no material adverse change or development involving a prospective
change in the condition, financial or otherwise, or in the earnings, business
affairs, position, prospects, value, operation, properties, business, or results
of operation of the Company, whether or not arising in the ordinary course of
business, since the dates of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company conforms
in all respects to the descriptions thereof contained in the Registration
Statement and in the Prospectus.
(g) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and taxes payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986 (the "Code"), (ii) have furnished all information returns required
to furnish pursuant to the Code, and have established adequate reserves for such
taxes which are not due and payable, and (iii) do not have any tax deficiency or
claims outstanding, proposed or assessed against them.
(h) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriter in connection with (i) the issuance
by the Company of the Units, (ii) the purchase by the Underwriter of the Units
or (iii) the consummation by the Company of any of its obligations under this
Agreement.
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(i) The Company maintains insurance of the type and in the
amounts which it reasonably believes to be adequate for its business, which
insurance is in full force and effect.
(j) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
businesses of the Company which (i) questions the validity of the capital stock
of the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to or in connection with this Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all respects), or (iii) might materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operations of
the Company.
(k) The Company has full legal right, power and authority to
enter into this Agreement, the Underwriters Option Agreement and the Consulting
Agreement (as defined in Section 6(p) hereof) and to consummate the transactions
provided for in such agreements; and this Agreement, the Underwriters Option
Agreement and the Consulting Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this Agreement, the
Underwriters Option Agreement and the Consulting Agreement, constitutes a legal,
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law), and none of the Company's execution or delivery of this Agreement, the
Underwriters Option Agreement and the Consulting Agreement, its performance
hereunder and thereunder, its consummation of the transactions contemplated
herein and therein, or the conduct of its business as described in the
Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of, (i) the
articles of incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or instrument
to which the Company is a party or by which the Company is bound or to which any
of its properties or assets (tangible or intangible) is or may be subject, or
(iii) any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or properties.
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(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Units pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with the Underwriter's purchase and distribution of the Units
to be sold by the Company hereunder.
(m) All executed agreements or copies of executed agreements
filed as exhibits to the Registration Statement to which the Company is a party
or by which the Company may be bound or to which any of the Company's assets,
properties or business may be subject have been duly and validly authorized,
executed and delivered by the Company, and constitute the legal, valid and
binding agreements of the Company, enforceable against the Company in accordance
with their respective terms. The descriptions in the Registration Statement of
contracts and other documents are accurate and fairly present the information
required to be shown with respect thereto by Form SB-2 and there are no
contracts or other documents which are required by the Act to be described in
the Registration Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits which have been
filed are complete and correct copies of the documents of which they purport to
be copies.
(n) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any transaction other than in
the ordinary course of business (iii) declared or paid any dividend or made any
other distribution on or in respect of its capital stock; or (iv) any changes in
capital stock, debt (long or short term) or liabilities, material changes in or
affecting the general affairs, management, financial operations, stockholders
equity or results of operations of the Company.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the property or assets (tangible or intangible)
of the Company is subject or affected.
(p) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance in all
material respects with all federal, state, local, and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours.
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(q) Since its inception, the Company has not incurred any
material liability arising under or as a result of the application of the
provisions of the Act.
(r) The Company does not now maintain, sponsor or contribute
to, and never has maintained, sponsored or contributed to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan " or a "multiemployer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37) respectively. of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does not maintain
or contribute, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA.
(s) The Company (nor the manner in which the Company conducts
its business or proposes to conduct its business) is not in violation of any
domestic or foreign laws ordinances or governmental rules or regulations to
which it is subject.
(t) No holders of any securities of the Company or of any
options, warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company has
the right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company within
eighteen (18) months of the date hereof or to require the Company to file a
registration statement under the Act during such eighteen (18) month period,
except as have been disclosed in the Prospectus.
(u) Neither the Company nor any of its employees, directors,
stockholders or affiliates (within the meaning of the Rules and Regulations)
have taken or will take, directly or indirectly, any action designed to or which
has constituted or which might reasonably be expected to cause or result in,
under the Exchange Act, or otherwise, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Units or
otherwise.
(v) Except as described in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held by
the Company are in dispute so far as known by the Company or are in any conflict
with the right of any other person or entity. To the best of the Company's
knowledge, the Company (i) owns or has the right to use, free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever, all patents, trademarks,
service marks, trade names and copyrights, technology and licenses and rights
with respect to the foregoing, used in the conduct of its business as now
conducted or proposed to be conducted without infringing upon or otherwise
acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing, and (ii) except as
set forth in the Prospectus, is not obligated or under any liability whatsoever
to make any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service xxxx trade
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name, copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or otherwise.
(w) The Company owns and has the unrestricted right to use all
trade secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), inventions,
designs, processes, works of authorship, computer programs and technical data
and information (collectively herein "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company, free and clear of and
without violating any right, lien, or claim of others, including without
limitation, former employers of its employees; provided, however, that the
possibility exists that other persons or entities, completely independently of
the Company or its employees or agents, could have developed trade secrets or
items of technical information similar or identical to those of the Company.
(x) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all the intellectual property.
(y) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus to be owned or leased by it free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
(z) Xxxxxx + Xxxxxx LLP, whose reports are filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(aa) On or before the effective date of the Registration
Statement, the Company shall cause to be duly executed legally binding and
enforceable agreements ("Lock-up") pursuant to which Xxxxxx Xxxx and persons
holding 100,000 shares of "Rule 504" stock have agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate or otherwise encumber any of its shares of Common
Stock (either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein prior to June 26, 1999 without the
prior written consent of the Underwriter. The Company will cause the Transfer
Agent, as defined below, to xxxx an appropriate legend on the face of stock
certificates representing all of such shares of Common Stock or other securities
convertible into Common Stock.
(bb) Except as disclosed in the Prospectus, there are no
claims, payments, issuances, arrangements or understandings for services in the
nature of a finder's or origination fee with respect to the sale of the Units
hereunder or any other arrangements, agreements, understandings, payments or
issuance with respect to the Company or any of its officers, directors,
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employees or affiliates that may affect the Underwriter's compensation, as
determined by the National Association of Securities Dealers Inc. ("NASD").
(cc) The Company will apply to list all of its publically held
securities on the Nasdaq SmallCap Stock Market ("NASDAQ") at such time as they
qualify for same.
(dd) Neither the Company nor any of its officers, employees,
agents or any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (a) might subject the
Company or any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign), (b) if not given
in the past, might have had a materially adverse effect on the assets, business
or operations of the Company, or (c) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls are sufficient to cause the Company
to comply with the Foreign Corrupt Practices Act of 1977, as amended.
(ee) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any such person or entity or the Company, has or has had, either directly or
indirectly, a beneficiary interest in any contract or agreement to which the
Company is a party or by which any of them may be bound or affected. Except as
set forth in the Prospectus under "Certain Transactions," there are no existing
material agreements, arrangements, understandings or transactions, or proposed
material agreements, arrangements, understandings or transactions, between or
among the Company and any officer, director, or principal stockholder of the
Company, or any affiliate or associate of any such person or entity.
(ff) Any certificate signed by any officer of the Company and
delivered to the Underwriter or to the Underwriter's counsel shall be deemed a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
(gg) The Company has entered into an employment agreement with
Xxxxxx Xxxxxx and Xxxxxxx Xxxxxx. The Company has obtained a key-man life
insurance policy in the amount of $1,000,000 on the lifes of Xxxxxx Xxxxxx and
Xxxxxxx Xxxxxx, which policies are owned by the Company and names the Company as
the sole beneficiary thereunder.
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2. Purchase, Sale and Delivery of the Units and Agreement to
Issue Underwriters Options.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriter, and the Underwriter
agrees to purchase from the Company at the price per Unit set forth below,
400,000 Firm Units.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriter to purchase up to an additional 60,000 Units at the price per share
set forth below. The option granted hereby will expire 45 days after the date of
this Agreement, and may be exercised in whole or in part from time to time only
for the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Firm Units upon notice by the Underwriter
to the Company setting forth the number of Option Units as to which the
Underwriter are then exercising the option and the time and date of payment and
delivery for such Option Units. Any such time and date of delivery (an "Option
Closing Date") shall be determined by the Underwriter, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to Closing Date, as hereinafter defined, unless otherwise agreed to
between the Representative and the Company. Nothing herein contained shall
obligate the Underwriter to make any over-allotments. No Option Units shall be
delivered unless the Firm Units shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Units shall be made at the offices of the Underwriter
at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as shall be
agreed upon by the Underwriter and the Company. Such delivery and payment shall
be made at 10:00 a.m. (New York City time) on _____________, 1998 or at such
other time and date as shall be agreed upon by the Underwriter and the Company
but not less than three (3) nor more than thirty (30) business days after the
effective date of the Registration Statement (such time and date of payment and
delivery being hereafter called "Closing Date"). In addition, in the event that
any or all of the Option Units are purchased by the Underwriter, payment of the
purchase price for, and delivery of certificates for such Option Units shall be
made at the above mentioned office of the Underwriter or at such other place as
shall be agreed upon by the Underwriter and the Company on each Option Closing
Date as specified in the notice from the Underwriter to the Company. Delivery of
the certificates for the Firm Units and the Option Units, if any, shall be made
to the Underwriter for the respective accounts of the Underwriter against
payment by the Underwriter of the purchase price for the Firm Units and the
Option Units, if any, to the order of the Company by New York Clearing House
funds, certificates for the Firm Units and the Option Units, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and shall
be in such denominations and registered in such names as the Representative may
request in writing at least two (2) business days prior to Closing Date or the
relevant Option Closing Date, as the case may be. The certificates for the Firm
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Units and the Option Units, if any, shall be made available to the Underwriter
at such office or such other place as the Underwriter may designate for
inspection, checking and packaging no later than 9:30 a.m. on the last business
day prior to Closing Date or the relevant Option Closing Date, as the case may
be.
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The purchase price per Unit to be paid by the Underwriter, to
the Company for the Units purchased hereunder will be the same for each Unit and
will be $_____ per share. The Company shall not be obligated to sell any Units
hereunder unless all Firm Units to be sold by the Company are purchased
hereunder. The Company agrees to issue and sell 400,000 Firm Units to the
Underwriter.
(d) On Closing Date, the Company shall issue and sell to the
Underwriters Options at a purchase price of $0.001 per warrant, which warrants
shall entitle the holders thereof to purchase an aggregate of 40,000 Units. The
Underwriters Options shall be exercisable for a period of four (4) years
commencing one (1) year from the effective date of the Registration Statement at
an initial exercise price equal to one hundred forty percent (140%) of the
initial public offering price of the Units. The Underwriters Option Agreement
and form of Warrant Certificate shall be substantially in the form filed as an
exhibit to the Registration Statement. Payment for the Underwriters Options
shall be made on Closing Date.
3. Public Offering of the Units. As soon after the Registration
Statement becomes effective, as the Underwriter deems advisable, the Underwriter
shall make a public offering of the Units (other than to residents of or in any
jurisdiction in which qualification of the Units is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Underwriter may from time to time increase or decrease the public offering
price after distribution of the Units has been completed to such extent as the
Underwriter, in its sole discretion deems advisable.
4. Covenants of the Company. The Company covenants and agrees with the
Underwriter as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus before termination of the
offering of the Units by the Underwriter of which the Underwriter shall not
previously have been advised and furnished with a copy, or to which the
Underwriter shall have reasonably objected or which is not in compliance with
the Act, or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriter and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of any proceeding for that purpose, (iii) of the issuance by any
12
state securities commission of any proceedings for the suspension of the
qualification of the Units for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (iv) of the
receipt of any comments from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every effort to obtain promptly
the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriter pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the earlier
of (i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Underwriter notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriter in connection with the offering of the Units which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Underwriter with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such prospectus to which the Underwriter shall object.
(e) The Company shall endeavor in good faith, in cooperation
with the Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Units for offering and sale under the securities laws
of such jurisdictions as the Underwriter may reasonably designate, and shall
make such applications, file such documents and furnish such information as may
be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriter agrees that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or reports at such
times as are or may reasonably be required by the laws of such jurisdiction to
continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act, as now and hereafter amended
and by the Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Units in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the Units is
13
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or Underwriter's
Counsel, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the Act, the Company will
notify the Underwriter promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the Act,
each such amendment or supplement to be reasonably satisfactory to Underwriter's
Counsel, and the Company will furnish to the Underwriter a reasonable number of
copies of such amendment or supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriter, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the effective date of
the Registration Statement.
(h) During a period of five years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants), and
will deliver to the Underwriter:
(i) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(iii) every press release and every material news
item or article of interest to the financial community in respect of the Company
or its affairs which was released or prepared by the Company ; and
(iv) any additional information of a public nature
concerning the Company (and its present or future subsidiaries) or its
respective businesses which the Underwriter may reasonably request.
(i) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent).
14
(j) The Company will furnish to the Underwriter or on the
Underwriter's order, without charge, at such place as the Underwriter may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriter may reasonably
request.
(k) Except for the offering contemplated by this Agreement for
a period of 12 months (13 months with respect to issuances to any of the
Company's Officers, Directors, principal shareholder, affiliate or associate)
from the effective date of the Registration Statement none of the Company, its
officers or directors, or holders of the 5% of the Company's securities,
including options, warrants and other like rights, prior to the effective date,
or any person or entity deemed to be an affiliate of the Company pursuant to the
Rules and Regulations, will, directly or indirectly, issue, offer to sell, sell,
grant an option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber or dispose of any shares of Common Stock or securities
convertible into or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) or dispose of any beneficial interest
therein without the prior written consent of the Underwriter. On or before the
effective date of the Registration Statement, the Company shall cause to be duly
executed legally binding and enforceable agreements pursuant to which each of
persons enumerated in the preceding sentence who are subject to the Lock-up, has
agreed to be bound by the Lock-up. During the 24 month period commencing with
the effective date of the Registration Statement, the Company shall issue no
shares of capital stock (other than upon exercise of options or warrants
referred to in the Registration Statement or in connection with any acquisition
from, or business combination with, an unaffiliated entity) or securities
convertible into or exchangeable for shares of stock of any class, except in
conformity and compliance with the terms of this Agreement, grant any options or
warrants.
(l) Neither the Company nor any officers or
directors, nor affiliates of any of them (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or which
might in the future reasonably be expected to cause or result in, stabilization
or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the
sale of the Units in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. No portion of the net proceeds will be used
directly or indirectly to acquire any securities issued by the Company.
(n) The Company shall timely file all such reports,
forms or other documents as may be required (including but not limited to any
Form as may be required pursuant to Rule 463 under the Act) from time to time,
under the Act, the Exchange Act, and the Rules and Regulations, and all such
15
reports, forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Underwriter as
early as practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited consolidated interim financial
statements of the Company (which in no event shall be as of a date more than
thirty (30) days prior to the date of the Registration Statement) which have
been read by the Company's independent public accountants, as stated in their
letters to be furnished pursuant to Section 6(l) hereof.
(p) The Company shall use its best efforts to cause
the Units to be quoted on the NASDAQ as soon as they so qualify.
(q) For a period of four (4) years from the Closing
Date, the Company shall furnish to the Underwriter upon the Underwriter's
requests at the Company's sole expense, (i) daily consolidated transfer sheets;
(ii) a list of holders of the Company's securities; and (iii) a list of the
securities positions of participants in the Depository Trust Company.
(r) Intentionally omitted.
(s) For a period equal to the lesser of (i) seven (7)
years from the date hereof, and (ii) the sale to the public of the Option Units,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Forms S-1 or, if applicable, S-2 and S-3 (or other
appropriate form) for the registration under the Act of the Preferred Units.
(t) Intentionally Omitted.
(u) On or before the effective date of the
Registration Statement, retain or make arrangements to retain a financial public
relations firm reasonably satisfactory to the Underwriter which shall be
continuously engaged from such engagement date to a date twelve months from
Closing Date.
(v) As soon as practicable, but in no event after the
effective date of the Registration Statement, (i) file a Form 8-A with the
Commission providing for the registration under the Exchange Act of the Units
and the securities underlying the Units and (ii) take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions and/or Xxxxx'x OTC Manual and to continue such inclusion for a
period of not less than five (5) years.
(w) Following the Effective Date of the Registration
Statement, the Company shall, at its sole cost and expense, prepare and file
such blue sky trading applications with such jurisdictions as the Underwriter
16
may reasonably request after consultation with the Company.
(x) The Company shall not amend or alter any term of
any written employment agreement between the Company and any executive officer,
during the term thereof, in a manner more favorable to such employee, without
the express written consent of the Underwriter.
(y) Until the completion of the distribution of the
Units, the Company shall not without the prior written consent of the
Underwriter and Underwriter's Counsel, issue, directly or indirectly, any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations.
5. Payment of Expenses.
(a) The Company hereby agrees to pay all expenses and fees
(other than fees of counsel to the Underwriter, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing, filing, delivery,
electronic filing and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing and delivery of this Agreement and
the Selected Dealer Agreement and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriter in
quantities as hereinabove stated, (iii) the printing, engraving, issuance and
delivery of the Units including any transfer or other taxes payable thereon,
(iv) the qualification of the Units under state or foreign securities or "Blue
Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum," and disbursements
and fees of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and tombstone advertisements, (vi) costs and expenses in connection
with due diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vii) fees and expenses of the
transfer agent, (viii) the fees payable to the NASD, and (ix) the fees and
expenses incurred in connection with the listing of the Units on the NASDAQ and
any other exchange. All fees and expenses payable to the Underwriter or counsel
to the Underwriter shall be payable at the Closing or Option Closing Date, as
applicable.
17
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Underwriter for all of its
out-of-pocket expenses including the fees and disbursements of counsel for the
Underwriter.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriter a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm Units,
$_____________ of which has been paid to date to the Underwriter. The Company
will pay the remainder on the Closing Date by certified or bank cashier's check
or, at the election of the Underwriter, by deduction from the proceeds of the
offering contemplated herein. In the event the Underwriter elects to exercise
the over-allotment option described in Section 2(b) hereof, the Company further
agrees to pay to the Underwriter on the Option Closing Date (by certified or
bank cashier's check or, at the Underwriter's election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Option Units.
6. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of each of its or his covenants and obligations hereunder and to
the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by the Underwriter, and at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriter's Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Units and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Underwriter of such timely filing, or
a post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Rules and Regulations.
18
(b) The Underwriter shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriter's opinion, is material or omits to
state a fact which, in the Underwriter's opinion, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, is material, or omits to state a
fact which, in the Underwriter's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriter shall
have received from Underwriter's Counsel, such opinion or opinions with respect
to the organization of the Company the validity of the Units, the Registration
Statement, the Prospectus and other related matters as the Underwriter
reasonably may request and such counsel shall have received such papers and
information as they request to enable them to pass upon such matters.
(d) At the Closing Date the Underwriter shall have received
the favorable opinion of Xxxxxx Xxxxx, counsel to the Company, dated Closing
Date, addressed to the Underwriter and in form and substance satisfactory to
Underwriter's Counsel, to the effect that:
(i) The Company (A) is and has been duly organized
and validly existing as a corporations in good standing under the laws of its
state of incorporation, (B) is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to so qualify would not have a material
adverse effect on the business of the Company, and (C) has all requisite power
and authority (corporate and other), and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its businesses as
described in the Prospectus; to the best of such counsel's knowledge, the
Company is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal and state laws, rules and regulations; and to the best
of such counsel's knowledge, the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit.
The disclosures in the Registration Statement
concerning federal, state, and local laws, rules and regulations on the
Company's businesses as currently conducted and as contemplated are correct in
all respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(ii) Except as described in the Prospectus, the
Company does not own an interest in any corporation, partnership, joint venture,
trust or other business entity;
19
(iii) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, under
"Capitalization". The Units, the Underwriters Options, and the Option Units
conform in all material respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof are not
subject to personal liability by reason of being such holders, and none of such
securities were issued in violation of the preemptive rights of any holder of
any security of the Company. The Units to be sold by the Company hereunder, the
Underwriters Options to be sold by the Company under the Underwriters Option
Agreement and the Option Units are not subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof, will be validly
issued, fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders and the certificates representing the Units and
the Underwriters Options are in due and proper form. Upon the issuance and
delivery pursuant to this Agreement of the Units to be sold by the Company, the
Underwriter will acquire good and marketable title to such Units free and clear
of any pledge, lien, charge, claim, encumbrance, pledge, security interest or
other restriction or equity of any kind whatsoever.
(iv) the Registration Statement is effective under
the Act, and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and to the best of such counsel's knowledge, no
proceedings for that purpose have been instituted or are pending or threatened
or contemplated under the Act;
(v) each of the Preliminary Prospectus, the
Registration Statement and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and statistical
data included therein, as to which no opinion need be rendered) comply as to
form in all respects with the requirements of the Act and the Rules and
Regulations.
(vi) (A) there are no contracts or other documents
required to be described in the Registration Statement and the Prospectus and
filed as exhibits to the Registration Statement other than those described in
the Registration Statement and the Prospectus and filed as exhibits thereto, and
the exhibits which have been filed are correct copies of the documents of which
they purport to be copies; (B) the descriptions in the Registration Statement
and the Prospectus and any supplement or amendment thereto of contracts and
other documents to which the Company is a party or by which they are bound, are
accurate and fairly represent the information required to be shown by Form SB-2;
(vii) The Company has full legal right, power and
authority to enter into each of this Agreement, the Underwriters Option
Agreement, the Consulting Agreement, and to consummate the transactions provided
for therein; and each of this Agreement, the Underwriters Option Agreement and
20
the Consulting Agreement have been duly authorized, executed and delivered by
the Company. This Agreement, the Underwriters Option Agreement, and the
Consulting Agreement, assuming due authorization, execution and delivery by each
other party thereto and further assuming that it is a valid and binding
agreement of the Underwriter, so as the case may be, constitutes a legal, valid
and binding agreement of the Company enforceable as against the Company in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors rights and
the application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable law)
and none of the Company's execution or delivery of this Agreement, the
Underwriters Option Agreement, and the Consulting Agreement, its performance
hereunder or thereunder, its consummation of the transactions contemplated
herein or therein, or the conduct of its business as described in the
Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of, (A) the
articles of incorporation or by-laws of the Company, (B) to the best knowledge
of such counsel, any indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which is or may be bound or to
which properties or assets (tangible or intangible) or subject, or any
indebtedness, or (C) to the best knowledge of such counsel, any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), foreign, having
jurisdiction over the Company or any of its activities or properties.
(viii) no consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or other body,
(other than such as may be required under Blue Sky laws, as to which no opinion
need be rendered) is required in connection with the issuance of the Units
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement and the Consulting Agreement, and the transactions contemplated
hereby or thereby;
(ix) the Company is not in breach of, or in default
under, any term or provision of any indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets (tangible or intangible) of the
Company is subject or affected; and the Company is not in violation of any term
or provision of its Certificate of Incorporation or By-Laws or in violation of
any franchise, license, permit, judgment, decree, order, statute, rule or
regulation;
21
(x) the statements in the Prospectus under "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL AND SELLING SECURITYHOLDERS,"
"CERTAIN TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "Units ELIGIBLE FOR
FUTURE SALE" have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or regulations or
legal conclusions, are correct in all material respects;
(xi) except as and to the extent set forth in the
Prospectus, the Company is not under any obligation to pay to any third-party
royalties or fees of any kind whatsoever with respect to any technology or
intellectual properties developed, employed or used by the Company;
(xii) assuming due execution by the parties thereto
other than the Company, the Lock-up Agreements hereof are legal, valid and
binding obligations of parties thereto, enforceable against the party and any
subsequent holder of the securities subject thereto in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law);
(xiii) the Company does not (A) maintain, sponsor or
contribute to any ERISA Plans, (B) maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA, and
(C) has never completely or partially withdrawn from a "multiemployer plan;"
(xiv) except as described in the Prospectus, no
person, corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration statement
or, if filed, to include any security in such registration statement for
eighteen months from the date hereof;
(xv) except as described in the Prospectus, there are
no claims, payments, issuances, arrangements or understandings for services in
the nature of a finder's or origination fee with respect to the sale of the
Units hereunder or financial consulting arrangement or any other arrangements,
agreements understandings, payments or issuances except as described in the
Prospectus;
(xvi) Counsel has participated in the preparation of
the Registration Statement and Prospectus and in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants of the Company and your representatives at which the contents of the
Registration Statement and the Prospectus and related matters were discussed.
Counsel advises you that, on the basis of the foregoing (relying as to
materiality to a large extent on officers and other representatives of the
Company and your representatives), no facts have come to our attention which
22
lead us to believe that (A) the Registration Statement and the Prospectus
included therein and any supplement or amendment thereto, at the time the
Registration Statement was declared effective by the Commission (except for the
financial statements (including the notes thereto and the auditor's report
thereon) and schedules (including the auditor's report thereon) and other
financial or statistical data included or incorporated by reference therein, as
to which we express no opinion) contained any untrue statement of material fact
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, and (B) the Prospectus, as amended or supplemented (except
for the financial statements (including the notes thereto and the auditor's
report thereon) and schedules (including the auditor's report thereon) and other
financial or statistical data included or incorporated by reference therein, as
to which counsel expresses no opinion) contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States,
except patent and trademark laws, the corporate laws of Delaware, and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriter's
Counsel) of other counsel reasonably acceptable to Underwriter's Counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent they
deem proper, on certificates and written statements of responsible officers of
the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Underwriter's Counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in its opinion, the Underwriter and they are justified in relying thereon.
(e) Intentionally omitted.
(f) At each Option Closing Date, if any, the Underwriter shall
have received the favorable opinion of Xxxxxx Xxxxx, P.C. counsel to the
Company, each dated the Option Closing Date, addressed to the Underwriter and in
form and substance satisfactory to Underwriter's Counsel confirming as of Option
Closing Date the statements made by such firms, in their opinion, delivered on
the Closing Date.
(g) On or prior to each of the Closing Date and the Option
Closing Date, Underwriter's Counsel shall have been furnished such documents
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (b)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained.
23
(h) On or prior to each of the Closing Date and the Option
Closing Date, Underwriter's Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company herein contained.
(i) Prior to each of Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects or the business activities of the Company, whether or not
in the ordinary course of business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company, from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness;
(iv) no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
to its knowledge threatened against the Company, or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vi) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(j) At each of the Closing Date and each Option Closing Date,
if any, the Underwriter shall have received a certificate of the Company signed
by the principal executive officer and by the chief financial or chief
accounting officer of the Company, dated the Closing Date or Option Closing
Date, as the case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or the Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
24
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto, contain all statements
and information required to be included therein, and the Registration Statement,
and any amendment thereto include any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and the Prospectus and any supplement
thereto does not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company has not incurred up to and including the Closing Date or the Option
Closing Date, as the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or contingent; the
Company has not paid or declared any dividends or other distributions on its
capital stock; the Company has not entered into any transactions not in the
ordinary course of business; and there has not been any change in the capital
stock or long-term debt or any increase in the short-term borrowings (other than
any increase in the short-term borrowings in the ordinary course of business) of
the Company; the Company has not sustained any material loss or damage to its
property or assets, whether or not insured; there is no litigation which is
pending or threatened against the Company which is required to be set forth in
an amended or supplemented Prospectus which has not been set forth; and there
has occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
subsection (j) are to such documents as amended and supplemented at the date of
such certificate.
(k) By the Closing Date, the Underwriter will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(l) At the time this Agreement is executed, the Underwriter
shall have received letters, dated such date, addressed to the Underwriter in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriter from Xxxxxx + Xxxxxx:
(i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriter may rely upon the opinion of Xxxxxx +
Xxxxxx, with respect to the financial statements and-supporting schedules
included in the Registration Statement;
25
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
financial statements and supporting schedules of the Company included in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and Regulations
or are not fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement, or
(B) at a specified date not more than five (5) days prior to the effective date
of the Registration Statement, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts shown
in the June 30, 1998 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if there
was any change or decrease, setting forth the amount of such change or decrease,
and (C) during the period from June 30, 1998 to a specified date not more than
five (5) days prior to the effective date of the Registration Statement, there
was any decrease in net revenues, net earnings or increase in net earnings per
common share of the Company, in each case as compared with the corresponding
period beginning June 30, 1997 other than as set forth in or contemplated by the
Registration Statement, or, if there was any such decrease, setting forth the
amount of such decrease;
(iv) setting forth, at a date not later than five (5)
days prior to the date of the Registration Statement, the amount of liabilities
of the Company;
(v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and
(vi) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriter may reasonably request.
(m) At Closing Date, the Underwriter shall have received a
letter from Xxxxxx + Xxxxxx dated as of the Closing Date, to the effect that
they reaffirm that statements made in the letters furnished pursuant to
26
Subsection (l) of this Section, except that the specified date referred to shall
be a date not more than five days prior to Closing Date and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further effect
that they have carried out procedures as specified in clause (v) of subsection
(i) of this Section with respect to certain amounts, percentages and financial
information as specified by the Underwriter and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (v).
(n) On each of the Closing Date and Option Closing Date, if
any, there shall have been duly tendered to the Underwriter for the several
Underwriter's accounts the appropriate number of Units.
(o) No order suspending the sale of the Units in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of Section
4 hereof shall have been issued on either the Closing Date or the Option Closing
Date, if any, and no proceedings for that purpose shall have been instituted or
to its knowledge or that of the Company shall be contemplated.
(p) On or before the Closing Date, the Company shall have (i)
executed and delivered to the Underwriter the consulting agreement,
substantially in the form filed as an exhibit to the Registration Statement (the
"Consulting Agreement").
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter, and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), whatsoever
(including but not limited to any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which such Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained (i) in any Preliminary Prospectus, (except that the indemnification
contained in this paragraph with respect to any preliminary prospectus shall not
inure to the benefit of the Underwriter or to the benefit of any person
controlling the Underwriter) on account of any loss, claim, damage, liability or
expense arising from the sale of the Units by the Underwriter to any person if a
copy of the Prospectus, as amended or supplemented, shall not have been
delivered or sent to such person within the time required by the Act, and the
27
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such Preliminary Prospectus was corrected in the
Prospectus, as amended and supplemented, and such correction would have
eliminated the loss, claim, damage, liability or expense), the Registration
Statement or the Prospectus (as from time to time amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which is included securities of the Company issued
or issuable upon exercise of the Underwriters Options; or (iii) in any
application or other document or written communication (in this Section 8
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Units under the securities laws thereof or filed with the Commission, any state
securities commission or agency, NASDAQ or any other securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the Prospectus, in the light of the circumstances under which they were
made), unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) The Underwriter agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act to the same extent
as the foregoing indemnity from the Company to the Underwriter but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriter in connection with this Offering;
provided, further, that the liability of each Underwriter to the Company shall
be limited to the product of the Underwriter's discount or commission and the
number of Units sold by such Underwriter hereunder. The Company acknowledges
that the statements with respect to the public offering of the Units set forth
under the heading "Underwriting and Plan of Distribution" and the stabilization
legend in the Prospectus and the statement as to the anticipated date of
delivery of the certificates representing the Units have been furnished by the
Underwriter expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
Prospectus.
28
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with one counsel
reasonably satisfactory to such indemnified party. Notwithstanding the foregoing
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnifying party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of one additional counsel shall be borne by
the indemnifying parties. In no event shall the indemnifying parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Units or (B) if the allocation provided by clause (A) above is not permitted
29
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriter is the indemnified party the relative
benefits received by the Company on the one hand, and the Underwriter, on the
other, shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Units (before deducting expenses) bear to the total
underwriting discounts received by the Underwriter hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subdivision (d), the Underwriter shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Units purchased by the Underwriter hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations. warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Underwriter, the
30
Company, or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Units to the Underwriter.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m., New
York City time, on the next full business day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as the
Underwriter, in its discretion, shall release the Units for the sale to the
public, provided, however that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Units to be purchased hereunder shall be deemed to have been so released upon
the earlier of dispatch by the Underwriter of telegrams to securities dealers
releasing such Units for offering or the release by the Underwriter for
publication of the first newspaper advertisement which is subsequently published
relating to the Units.
10. Termination.
(a) Subject to subsection (d) of this Section 10, the
Underwriter shall have the right to terminate this Agreement, (i) if any
calamitous domestic or international event or act or occurrence has materially
disrupted, or in the Underwriter's opinion, will in the immediate future
materially disrupt general securities markets in the United States; or (ii) if
trading on the New York Stock Exchange, the American Stock Exchange, or in the
over-the-counter market shall have been suspended or minimum or maximum prices
for trading shall have been fixed, or maximum ranges for prices for securities
shall have been required on the over-the-counter market by the NASD or by order
of the Commission or any other government authority having jurisdiction; or
(iii) if the United States shall have become involved in a war or major
hostilities; or (iv) if a banking moratorium has been declared by a New York
State or federal authority; or (v) if a moratorium in foreign exchange trading
has been declared; or (vi) if the Company shall have sustained a loss material
or substantial by fire, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which whether or not such loss shall have
been insured, will, in the Underwriter's opinion, make it inadvisable to proceed
with the delivery of the Units; or (vii) if there shall have been such material
adverse change in the conditions or prospects of the Company, or such material
adverse general market conditions as in the Underwriter's judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the Units.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
31
11. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Units which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Units to be purchased on an Option Closing Date, the
Underwriter may at its option, by notice from the Underwriter to the Company,
terminate the Underwriter's obligations to purchase Units from the Company on
such date) without any liability on the part of any non-defaulting party other
than pursuant to Section 5 and Section 7 hereof. No action taken pursuant to
this Section shall relieve the Company from liability, if any, in respect of
such default.
12. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriter shall be directed to the
Underwriter at Xxxxxxxxx Financial Group, Inc., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Syndicate Department, with a copy to Xxxxxxx & Xxxxxxx,
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Notices to the Company shall be
directed to the Company at 0000 Xxxxxx Xxxxxxx Xxxxxx, X.X., Xxxxx 000, Xxxxxx,
Xxxx, Attention: Xxxxxxx X. Xxxxxx, President, with a copy to Xxxxxx Xxxxx, Esq.
000 Xxxxx Xxxx Xxxx, Xxxxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxx, Esq.
13. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and their respective heirs and
legal representatives and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or by virtue of
this Agreement or any provisions herein contained. No purchaser of Units from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
14. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
32
If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
KIDS STUFF, INC.
By:___________________________
Xxxxxxx Xxxxxx
President
Confirmed and accepted as of the date first above written.
XXXXXXXXX FINANCIAL GROUP, INC.
By:_____________________________
Name: __________________________ Title: _______________________
33
