1
EXHIBIT 1.1
1,900,000 Units
(each Unit consisting of (i) one share of Class A Common Stock and
(ii) one redeemable Class A Warrant to purchase
one share of Class A Common Stock)
ON'VILLAGE COMMUNICATIONS, INC.
UNDERWRITING AGREEMENT
September __, 1997
X.X. Xxxxx Investment Banking Corp.
As Representative of the Several Underwriters
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
On'Village Communications, Inc., a California corporation (the
"Company"), proposes to issue and sell to the underwriters named in Schedule A
(the "Underwriters") pursuant to this Agreement (the "Agreement"), an aggregate
of 1,900,000 Units, each unit being hereinafter referred to as a "Unit" and
consisting of (i) one share of Class A Common Stock ("Shares") and (ii) one
redeemable Class A Warrant ("Warrants") to purchase one share of Class A Common
Stock at a price of $6.50 from the Separation Date (as defined in the Warrant
Agreement) to _______ __, 2002. The Warrants are subject to redemption, in
certain instances commencing one year from the date of this Agreement. In
addition, the Company proposes to grant to the Underwriters (or at its option,
the Representative individually), the option referred to in Section 2(b) to
purchase all or any part of an aggregate of 285,000 additional Units. Unless
the context otherwise indicates, the term "Units" shall include the 285,000
additional Units referred to above.
The aggregate of 1,900,000 Units to be sold by the Company, together
with all or any part of the 285,000 Units which the Underwriters have the
option to purchase, and the Shares and the Warrants comprising such Units, are
herein called the "Units." The Class A Common Stock of the Company to be
outstanding after giving effect to the sale of the Shares is herein called the
"Class A Common Stock." The Shares and Warrants included in the Units
(including the Units which the Underwriters have the option to purchase) are
herein collectively called the "Securities."
You have advised the Company that you and the other Underwriters
desire to purchase, severally, the Units, and that you have been authorized by
the Underwriters to execute this agreement on their behalf. The Company
confirms the agreements made by it with respect to the purchase of the Units by
the several Underwriters on whose behalf you are signing this Agreement as
follows:
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1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) A registration statement (File No. 333-22811) on Form
SB-2 relating to the public offering of the Units, including a form of
prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission under the Act and one or more amendments to such registration
statement may have been so filed. After the execution of this Agreement, the
Company will file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the Commission to
be effective under the Act, either (A) if the Company relies on Rule 434 under
the Act, a Term Sheet (as hereinafter defined) relating to the Units that shall
identify the Preliminary Prospectus (as hereinafter defined) that it
supplements containing such information as is required or permitted by Rules
434, 430A and 424(b) under the Act or (B) if the Company does not rely on Rule
434 under the Act a prospectus in the form most recently included in an
amendment to such registration statement (or, if no such amendment shall have
been filed, in such registration statement), with such changes or insertions as
are required by Rule 430A under the Act or permitted by Rule 424(b) under the
Act and in the case of either clause (i)(A) or (i)(B) of this sentence, as have
been provided to and approved by the Representative prior to the execution of
this Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the Act,
an amendment to such registration statement, including a form of prospectus, a
copy of which amendment shall be furnished to and approved by the
Representative prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement" means
such registration statement, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means (A) if the Company relies on Rule 434 under the Act, the
Term Sheet relating to the Shares and Warrants that is first filed pursuant to
Rule 424(b)(7) under the Act, together with the Preliminary Prospectus
identified therein that such Term Sheet supplements; (B) if the Company does
not rely on Rule 434 under the Act, the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act or (C) if the Company does not
rely on Rule 434 under the Act and if no prospectus is required to be filed
pursuant to said Rule 424(b), such term means the prospectus included in the
Registration Statement; except that if such registration statement or
prospectus is amended or such prospectus is supplemented, after the effective
date of such registration statement and prior to the Option Closing Date (as
hereinafter defined), the terms "Registration Statement" and "Prospectus"
shall include such registration statement and prospectus as so amended, and the
term "Prospectus"
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shall include the prospectus as so supplemented, or both, as the case may be;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference to the "date" of a Prospectus that
includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to and on
the Closing Date (as hereinafter defined) or the Option Closing Date (as
hereafter defined), as the case may be, (i) the Registration Statement and
Prospectus will conform in all material respects to the requirements of the Act
and the Rules and Regulations; and (ii) the Registration Statement will 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 statements therein not
misleading and the Prospectus will not include any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations, warranties or agreements as to
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriters specifically for
use in the preparation thereof. It is understood that the statements set forth
in the Prospectus on page 2 with respect to stabilization, under the heading
"Underwriting," and on page 25 with respect to the relationship between the
Representative and the investors in the Bridge Financings, under the heading
"Capitalization - Bridge Financing," "Risk Factors - Possible Adverse Effect on
Liquidity of the Company's Securities Due to Investigation by the Securities
and Exchange Commission of the Representative and X.X. Xxxxx & Co. and Recent
Settlement by Xxxxx & Co. with NASD" and "Risk Factors - Possible Restrictions
on Market Making Activities in the Company's Securities," and on page 44 with
respect to the Representative's intentions to request a nominee to the Board of
Directors, under the heading "Management - Board Committees and Designated
Directors" and the identity of counsel to the Underwriters under the heading
"Legal Matters" constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in the Registration Statement
and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, with full power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus and
is duly qualified to do business as a foreign corporation and is in good
standing in all other jurisdictions in which the nature of its business or the
character or location of its properties requires such qualification, except
where failure to so qualify will not materially affect the Company's business,
properties or financial condition.
(d) The authorized, issued and outstanding capital stock
of the Company as of June 30, 1997 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and are
fully paid and non-assessable; except as set forth in the
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Prospectus, no options, warrants, or other rights to purchase, agreements or
other obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been granted
or entered into by the Company; and the capital stock conforms to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Units and the Shares are duly authorized, and
when issued and delivered pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights of
any security holder of the Company. Neither the filing of the Registration
Statement nor the offering or sale of the Units as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Class A Common
Stock, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and delivered
pursuant to this Agreement, will have been duly executed, issued and delivered
and will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Class A Common
Stock issuable upon exercise of the Warrants have been reserved for issuance
upon the exercise of the Warrants and when issued in accordance with the terms
of the Warrants and Warrant Agreement, will be duly and validly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights and
no personal liability will attach to the ownership thereof. The Warrant
Agreement has been duly authorized and, when executed and delivered pursuant to
this Agreement, will have been duly executed and delivered and will constitute
the valid and legally binding obligation of the Company enforceable in
accordance with its terms. The Warrants and the Warrant Agreement conform to
the respective descriptions thereof in the Registration Statement and
Prospectus.
The Shares and the Warrants contained in the Unit Purchase Option have
been duly authorized and, when duly issued and delivered, such Warrants will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the Unit
Purchase Option. The Shares included in the Unit Purchase Option (and the
shares of Class A Common Stock issuable upon exercise of such Warrants) when
issued and sold, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
(f) This Agreement, the Unit Purchase Option, the M/A
Agreement (as defined herein) and the Escrow Agreement (as defined herein)
have been duly and validly authorized, executed and delivered by the Company.
The Company has full power and lawful authority to authorize, issue and sell
the Units to be sold by it hereunder on the terms and conditions set forth
herein, and no consent, approval, authorization or other order of any
governmental authority is required in connection with such authorization,
execution and delivery
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or with the authorization, issue and sale of the Units or the Unit Purchase
Option, except such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus and except as
would not have a material adverse effect on the Company's business, properties
or financial condition (a "Material Adverse Effect"), the Company is not in
violation, breach or default of or under, and consummation of the transactions
herein contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or
assets of the Company pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company is
a party or by which the Company may be bound or to which any of the property or
assets of the Company is subject, nor will such action result in any violation
of the provisions of the articles of incorporation or the by-laws of the
Company, as amended, or any statute or any order, rule or regulation applicable
to the Company of any court or of any regulatory authority or other
governmental body having jurisdiction over the Company.
(h) Subject to the qualifications stated in the
Prospectus, the Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to its business; all of the material
leases and subleases under which the Company is the lessor or sublessor of
properties or assets or under which the Company holds properties or assets as
lessee or sublessee as described in the Prospectus are in full force and
effect, and, except as described in the Prospectus, the Company is not in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no claim has been asserted by anyone
adverse to rights of the Company as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company owns or leases all
such properties described in the Prospectus as are necessary to its operations
as now conducted and, except as otherwise stated in the Prospectus, as proposed
to be conducted as set forth in the Prospectus.
(i) BDO Xxxxxxx LLP, who have given their reports on
certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are incorporated in the Prospectus,
are with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
(j) The financial statements, together with related
notes, set forth in the Prospectus (or if the Prospectus is not in existence,
the most recent Preliminary Prospectus) or the Registration Statement present
fairly the financial position and results of operations and changes in cash
flow position of the Company on the basis stated in the Registration Statement,
at the respective dates and for the respective periods to which they apply.
Said statements and related notes have been prepared in accordance with
generally accepted accounting principles
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applied on a basis which is consistent during the periods involved. The
information set forth under the captions "Dilution", "Capitalization", and
"Selected Financial Data" in the Prospectus fairly present, on the basis stated
in the Prospectus, the information included therein. The pro forma financial
information filed as part of the Registration Statement or included in the
Prospectus (or preliminary prospectus) has been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, and includes all adjustments necessary to present fairly the pro
forma financial condition and results of operations at the respective dates and
for the respective periods indicated and all assumptions used in preparing such
pro forma financial statements are reasonable.
(k) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), the
Company has not incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of short-term or long-term debt by, the Company or any issuance of
options, warrants or other rights to purchase the capital stock of the Company
or any adverse change or any development involving, so far as the Company can
now reasonably foresee a prospective adverse change in the condition (financial
or other), net worth, results of operations, business, key personnel or
properties of it which would be material to the business or financial condition
of the Company and the Company has not become a party to, and neither the
business nor the property of the Company has become the subject of, any
material litigation whether or not in the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not
now pending or, to the knowledge of the Company, threatened, any action, suit
or proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of
the Company exist or are imminent which might be expected to adversely affect
the conduct of the business, property or operations or the financial condition
or results of operations of the Company.
(m) Except as disclosed in the Prospectus, the Company
has filed all necessary federal, state and foreign income and franchise tax
returns and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been or to the knowledge of the Company might be asserted
against the Company.
(n) Except as disclosed in the Prospectus, the Company
has sufficient licenses, permits and other governmental authorizations
currently required for the conduct of its business or the ownership of its
properties as described in the Prospectus and is in all material respects
complying therewith and owns or possesses adequate rights to use all material
patents, patent applications, trademarks, service marks, trade-names, trademark
registrations, service
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xxxx registrations, copyrights and licenses necessary for the conduct of such
business and had not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of
the activities or business of the Company are in violation of, or cause the
Company to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or body of the United States or
of any state, county or locality, the violation of which would have a Material
Adverse Effect.
(o) The Company has not, directly or indirectly, at any
time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined) all
transfer or other taxes (including franchise, capital stock or other tax, other
than income taxes, imposed by any jurisdiction) if any, which are required to
be paid in connection with the sale and transfer of the Units to the several
Underwriters hereunder will have been fully paid or provided for by the Company
and all laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents of the Company
which are, under the Rules and Regulations, required to be filed as exhibits to
the Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Class A Common
Stock to facilitate the sale or resale of the Units hereby.
(s) The Company has no subsidiaries and does not own any
equity interest in any other corporation, joint venture, partnership or other
business entity.
(t) The Company has not entered into any agreement
pursuant to which any person is entitled either directly or indirectly to
compensation from the Company for services as a finder in connection with the
proposed public offering.
(u) Except as previously disclosed in writing by the
Company to the Representative, no officer, director or stockholder of the
Company has any affiliation or association with any member of the National
Association of Securities Dealers Inc. ("NASD").
(v) The Company is not, and upon receipt of the proceeds
from the sale of the Units will not be, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
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(w) The Company has not distributed and will not
distribute prior to the First Closing Date (as hereinafter defined) any
offering material in connection with the offering and sale of the Units other
than the Preliminary Prospectus, Prospectus, the Registration Statement or the
other materials permitted by the Act, if any.
(x) The conditions for use of Form SB-2, as set forth in
the General Instructions thereto, have been satisfied.
(y) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S- B involving
the Company and any person described in such Item that are required to be
disclosed in the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) and that have not been so disclosed.
(z) The Company has complied with all provisions of
Section 517.075 Florida Statutes relating to doing business with the government
of Cuba or with any person or affiliate located in Cuba.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties, and
agreements herein contained, the Company agrees to issue and sell to the
Underwriters, and each such Underwriter agrees, severally and not jointly, to
buy from the Company at $4.50 per Unit, at the place and time hereinafter
specified, the number of Units set forth opposite the names of the Underwriters
in Schedule A attached hereto (the "First Units") plus any additional Units
which such Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof. The First Units shall consist of 1,900,000
Units to be purchased from the Company.
Delivery of the First Units against payment therefor shall
take place at the offices of X.X. Xxxxx Investment Banking Corp., 00 Xxxx
Xxxxxx, Xxx Xxxx, X.X. (or at such other place as may be designated by
agreement between you and the Company) at 10:00 a.m., New York time, on _______
__ , 1997, or at such later time and date as you may designate, such time and
date of payment and delivery for the First Units being herein called the "First
Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the several
Underwriters (or, at the Representative's option, to the Representative,
individually) to purchase all or any part of an aggregate of an additional
285,000 Units at the same price per Unit as the Underwriters shall pay for the
First Units being sold pursuant to the provisions of subsection (a) of this
Section 2 (such additional Units being referred to herein as the "Option
Units"). This option may be exercised within 30 days after the effective date
of the Registration Statement upon notice by the Representative in writing to
the Company advising as to the amount of Option Units as to which the option is
being exercised,
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the names and denominations in which the certificates for such Option Units are
to be registered and the time and date when such certificates are to be
delivered. Such time and date shall be determined by the Representative but
shall not be earlier than four nor later than ten full business days after the
exercise of said option, nor in any event prior to the First Closing Date, and
such time and date is referred to herein as the "Option Closing Date." Delivery
of the Option Units against payment therefor shall take place at the offices of
X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, X.X. The number
of Option Units to be purchased by each Underwriter, if any, shall bear the
same percentage to the total number of Option Units being purchased by the
several Underwriters pursuant to this subsection (b) as the number of Units
such Underwriter is purchasing bears to the total number of the First Units
being purchased pursuant to subsection (a) of this Section 2, as adjusted, in
each case by the Representative in such manner as the Representative may deem
appropriate. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriters of First Units referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Class A Common Stock, whether in the form of cash, shares
of Class A Common Stock or any other consideration, prior to the Option Closing
Date, such dividend or distribution shall also be paid on the shares of Class A
Common stock underlying the Option Units on the Option Closing Date.
(c) The Company will make the certificates for the
securities comprising the Units to be purchased by the Underwriters hereunder
available to you for checking at least two full business days prior to the
First Closing Date or the Option Closing Date (which are collectively referred
to herein as the "Closing Dates"). The certificates shall be in such names and
denominations as you may request, at least two full business days prior to the
Closing Dates. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of each
Underwriter.
Definitive certificates in negotiable form for the Units to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the accounts of the several Underwriters against payment of the respective
purchase price by the several Underwriters, by certified or bank cashier's
checks or, at the Representative's option, by wire transfer in New York
Clearing House funds, payable to the order of the Company.
In addition, in the event the Underwriters (or the
Representative, individually) exercise the option to purchase from the Company
all or any portion of the Option Units pursuant to the provisions of subsection
(b) above, payment for such Units shall be made to or upon the order of the
Company by certified or bank cashier's checks payable in New York Clearing
House funds at the offices of X.X. Xxxxx Investment Banking Corp., at the time
and date of delivery of such Units as required by the provisions of subsection
(b) above, against receipt of the certificates for such Units by the
Representative for the respective accounts of the several Underwriters
registered in such names and in such denominations as the Representative may
request.
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It is understood that you, individually and not as Representative of
the several Underwriters, may (but shall not be obligated to) make any and all
payments required pursuant to this Section 2 on behalf of any Underwriters
whose check or checks shall not have been received by the Representative at the
time of delivery of the Units to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder. It is also
understood that you individually rather than all of the Underwriters may (but
shall not be obligated to) purchase the Option Units referred to in subsection
(b) of this Section 2, but only to cover overallotments.
It is understood that the several Underwriters propose to
offer the Units to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective.
3. Covenants of the Company. The Company covenants and agrees
with the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise you and
will not at any time, whether before or after the effective date, file the
Prospectus, Term Sheet or any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been
advised and furnished with a copy or to which you or your counsel shall have
objected in writing or which is not in compliance with the Act and the Rules
and Regulations. At any time prior to the later of (A) the completion by all
of the Underwriters of the distribution of the Units contemplated hereby (but
in no event more than nine months after the date on which the Registration
Statement shall have become or been declared effective) and (B) 25 days after
the date on which the Registration Statement shall have become or been declared
effective, the Company will prepare and file with the Commission, promptly upon
your request, any amendments or supplements to the Registration Statement or
Prospectus which, in your opinion, may be necessary or advisable in connection
with the distribution of the Units.
As soon as the Company is advised thereof, the Company will
advise you, and confirm the advice in writing, of the receipt of any comments
of the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission for amendment of
the Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance by the Commission
or any state or regulatory body of any stop order or other order or threat
thereof suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Units for offering in any jurisdiction,
or of the institution of any proceedings for any of such purposes, and will use
its
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best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to
the use of such copies for the purposes permitted by the Act. The Company
authorizes the Underwriters and dealers to use the Prospectus in connection
with the sale of the Units for such period as in the opinion of counsel to the
several Underwriters the use thereof is required to comply with the applicable
provisions of the Act and the Rules and Regulations. In case of the happening,
at any time within such period as a Prospectus is required under the Act to be
delivered in connection with sales by an underwriter or dealer of any event of
which the Company has knowledge and which materially affects the Company or the
securities of the Company, or which in the opinion of counsel for the Company
or counsel for the Underwriters should be set forth in an amendment of the
Registration Statement or a supplement to the Prospectus in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required to be delivered to a purchaser of the
Units or in case it shall be necessary to amend or supplement the Prospectus to
comply with law or with the Rules and Regulations, the Company will notify you
promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which
they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters, except that in case any Underwriter is required, in connection
with the sale of the Units to deliver a Prospectus nine months or more after
the effective date of the Registration Statement, the Company will upon request
of and at the expense of such Underwriter, amend or supplement the Registration
Statement and Prospectus and furnish such Underwriter with reasonable
quantities of prospectuses complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 and the rules and
regulations thereunder in connection with the offering and issuance of the
Units.
(b) The Company will use its best efforts to qualify to
register the Units for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent of service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Units. The Company will,
from time to time, prepare and file such statements and reports as are or may
be required to continue such qualification in effect for so long a period as
the Representative may reasonably request.
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(c) If the sale of the Units provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in
Section 8, including the actual accountable out-of-pocket expenses of the
Representative up to a maximum of $285,000.
(d) The Company will use its best efforts to (i) cause a
registration statement under the Securities Exchange Act of 1934 to be declared
effective concurrently with the completion of this offering and will notify the
Representative in writing immediately upon the effectiveness of such
registration statement, and (ii) if requested by the Representative, to obtain
a listing on the Pacific Stock Exchange and to obtain and keep current a
listing in the Standard & Poors or Xxxxx'x Industrial OTC Manual.
(e) For so long as the Company is a reporting company
under either Section 12(g) or 15(d) of the Securities Exchange Act of 1934, the
Company, at its expense, will furnish to its stockholders an annual report
(including financial statements audited by independent public accountants), in
reasonable detail and at its expense, will furnish to you during the period
ending five (5) years from the date hereof, (i) as soon as practicable after
the end of each fiscal year, a balance sheet of the Company and any of its
subsidiaries as at the end of such fiscal year, together with statements of
income, surplus and cash flow of the Company and any subsidiaries for such
fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, unaudited consolidated summary financial information of the
Company for such quarter in reasonable detail; (iii) as soon as they are
available, a copy of all reports (financial or other) mailed to security
holders; (iv) as soon as they are available, a copy of all non-confidential
reports and financial statements furnished to or filed with the Commission or
any securities exchange or automated quotation system on which any class of
securities of the Company is listed; and (v) such other information as you may
from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to the Representative at or
before the First Closing Date (if and to the extent not previously delivered)
two signed copies of the Registration Statement including all financial
statements and exhibits filed therewith, and of all amendments thereto, and
will deliver to the several Underwriters such number of conformed copies of the
Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the several Underwriters may
reasonably request. The Company will deliver to or upon the order of the
several Underwriters, from time to time until the effective date of the
Registration Statement, as many copies of any Preliminary Prospectus filed with
the Commission prior to the effective date of the Registration Statement as the
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Underwriters may reasonably request. The Company will deliver to the
Underwriters on the effective date of the Registration Statement and thereafter
for so long as a Prospectus is required to be delivered under the Act, from
time to time, as many copies of the Prospectus, in final form, or as thereafter
amended or supplemented, as the Underwriters may from time to time reasonably
request. The Company, not later than (i) 5:00 p.m., New York City time, on the
date of determination of the public offering price, if such determination
occurred at or prior to 12:00 noon, New York City time, on such date or (ii)
6:00 p.m., New York City time, on the business day following the date of
determination of the public offering price, if such determination occurred
after 12:00 noon, New York City time, on such date, will deliver to the
Underwriters, without charge, as many copies of the Prospectus and any
amendment or supplement thereto as the Underwriters may reasonably request for
purposes of confirming orders that are expected to settle on the First Closing
Date.
(h) The Company will make generally available to its
security holders and to the registered holders of its Warrants and deliver to
you as soon as it is practicable to do so but in no event later than 90 days
after the end of twelve months after its current fiscal quarter, an earnings
statement (which need not be audited) covering a period of at least 12
consecutive months beginning after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale
of the Units for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) The Company will, promptly upon the Representative's
request, prepare and file with the Commission any amendments or supplements to
the Registration Statement, Preliminary Prospectus or Prospectus and take any
other action, which in the reasonable opinion of Bachner, Tally, Xxxxxxx &
Xxxxxx LLP, counsel to the several Underwriters, may be reasonably necessary or
advisable in connection with the distribution of the Units, and will use its
best efforts to cause the same to become effective as promptly as possible.
(k) The Company will reserve and keep available that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Unit Purchase Option outstanding from time to time.
(l) For a period of thirteen months from the First
Closing Date, no current officer, current director or stockholder of the
Company (the "Principal Stockholders") will directly or indirectly, publicly
offer, sell (including any short sale), grant any option for the sale of,
acquire any option to dispose of, or otherwise dispose of any shares of Common
Stock or other securities of the Company, without the prior written consent of
the Representative. In order to enforce this covenant, the Company shall
impose stop-transfer instructions with respect to the shares owned by the
Principal Stockholders until the end of such period.
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(m) Prior to completion of this offering, the Company
will make all filings required, including registration under the Securities
Exchange Act of 1934, to obtain the listing of the Units, Class A Common Stock,
and Warrants on the Nasdaq SmallCap Market (or a listing on such other market
or exchange as the Representative consents to), and will use its best efforts
to effect and maintain such listing for at least five years from the date of
this Agreement.
(n) The Company and each of the Principal Stockholders
represents that it or he has not taken and agree that it or he will not take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Units, Shares or the Warrants or to facilitate
the sale or resale of the Securities.
(o) On the Closing Date and simultaneously with the
delivery of the Units, the Company shall execute and deliver to the
Representative, the Unit Purchase Option. The Unit Purchase Option will be
substantially in the form of the Representative's Unit Purchase Option filed as
an Exhibit to the Registration Statement.
(p) During the 18 month period commencing on the date of
this Agreement, the Company will not, without the prior written consent of the
Representative, grant options to employees to purchase shares of Class A Common
Stock at an exercise price less than the greater of (i) the initial public
offering price of the Units (without allocating any value to the Warrants) or
(ii) the fair market value of the Class A Common Stock on the date of grant.
During the six month period commencing on the date of this Agreement, the
Company will not, without the prior written consent of the Representative,
grant options to any current executive officer of the Company except for the
grant to Xxxxxxx X. Xxxxx of options to purchase _______ shares of Class A
Common Stock. During the three year period commencing on the date of this
Agreement, the Company will not, without the prior written consent of the
Representative, offer or sell any of its securities pursuant to Regulation S
under the Act.
(q) Except as contemplated by Section 3(z), the Company
will not, without the prior written consent of the Representative, grant
registration rights to any person which are exercisable sooner than 13 months
from the First Closing Date.
(r) Xxxx X. Xxxxxx shall be the Chief Executive Officer,
Xxxxxx X. Xxxxxx shall be the President and Chief Operating Officer and Xxxx X.
Xxxxxx and Xxxxx X. Xxxxxx will each be a Senior Vice President of the Company
on the Closing Dates. The Company has obtained key person life insurance on
the lives of each of Xxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxx and Xxxxx
X. Xxxxxx, respectively, in an amount of not less than $2 million and will use
its best efforts to maintain such insurance during the three year period
commencing on the First Closing Date or the term of their employment, whichever
period is longer. In the event Xxxx X. Xxxxxx'x employment is terminated prior
to the three year period commencing on the First Closing Date, the Company will
obtain a comparable policy on the life of his successor for the balance of the
three year period. For a period of thirteen months from
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the First Closing Date, the compensation of the executive officers of the
Company shall not be increased from the compensation levels disclosed in the
Prospectus.
(s) On the Closing Date and simultaneously with the
delivery of the Units the Company shall deliver to you, individually and not as
representative of the Underwriters, an agreement with you regarding mergers,
acquisitions, joint ventures and certain other forms of transactions, in the
form previously delivered to the Company by you (the "M/A Agreement").
(t) So long as any Warrants are outstanding, the Company
shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be
delivered to each holder of record of a Warrant and to furnish to the several
Underwriters and dealers as many copies of each such Prospectus as such
Underwriter or dealer may reasonably request. The Company shall not call for
redemption any of the Warrants unless a registration statement covering the
securities underlying the Warrants has been declared effective by the
Commission and remains current at least until the date fixed for redemption.
In addition, for so long as any Warrant is outstanding, the Company will
promptly notify the Representative of any material change in the business,
financial condition or prospects of the Company.
(u) Upon the exercise of any Warrant or Warrants after
_______ __, 1998, the Company will pay X.X. Xxxxx Investment Banking Corp., a
fee of 5% of the aggregate exercise price of the Warrants, of which 1% may be
reallowed to the dealer who solicited in writing the exercise (which may also
be the Representative) if (i) the market price of the Company's Class A Common
Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrant was solicited by a member of the
National Association of Securities Dealers, Inc., (iii) the Warrantholder
designates in writing that the exercise of the Warrant was solicited by a
member of the National Association of Securities Dealers, Inc. and designates
in writing the broker-dealer to receive compensation for such exercise; (iv)
the Warrant is not held in a discretionary account; (v) the disclosure of
compensation arrangements has been made in documents provided to customers,
both as part of the original offering and at the time of exercise, and (vi) the
solicitation of the Warrant was not in violation of Regulation M promulgated
under the Securities Exchange Act of 1934, as amended. The Company agrees not
to solicit the exercise of any Warrants other than through X.X. Xxxxx
Investment Banking Corp. and will not authorize any other dealer to engage in
such solicitation without the prior written consent of X.X. Xxxxx Investment
Banking Corp.
(v) For a period of five (5) years from the Effective
Date the Company (i) at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) the
Company's financial statements for each of the first three (3) fiscal quarters
prior to the announcement of quarterly financial information, the filing of the
Company's 10-Q quarterly report and the mailing of quarterly financial
information to stockholders and (ii) shall not change its accounting firm
without the prior written consent of the
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Chairman or the President of the Representative which consent shall not be
withheld in connection with a change to any "Big 6" accounting firm.
(w) As promptly as practicable after the Closing Date,
the Company will prepare, at its own expense, hard cover "bound volumes"
relating to the offering, and will distribute at least four of such volumes to
the individuals designated by the Representative or counsel to the
Representative.
(x) For a period of five years from the First Closing
Date (i) the Representative shall have the right, but not the obligation, to
designate one director of the Board of Directors of the Company and (ii) the
Company shall engage a public relations firm reasonably acceptable to the
Representative.
(y) The Company shall, for a period of six years after
date of this Agreement, submit reports to the Secretary of the Treasury and to
stockholders, as the Secretary may require, pursuant to Section 1202 of the
Internal Revenue Code, as amended, or regulations promulgated thereunder, in
order for the Company to qualify as a "small business" so that stockholders may
realize special tax treatment with respect to their investment in the Company.
(z) The Company shall, within nine months after the First
Closing Date, file a registration statement pursuant to the Act, covering the
Warrants and the shares of Class A Common Stock issuable upon exercise of the
Warrants (the "Bridge Securities"), held by the holders ("Bridge Lenders") of
the Warrants issued in connection with the Company's private placement
completed in January 1997 and use its best efforts to cause such registration
statement to become effective upon the expiration of the lock-up agreement
between each Bridge Lender and the Company relating to the Bridge Securities.
4. Conditions of Underwriters' Obligation. The obligations of
the several Underwriters to purchase and pay for the Units which they have
respectively agreed to purchase hereunder, are subject to the accuracy (as of
the date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later than
10:00 A.M., New York time, on the date on which the amendment to the
registration statement originally filed with respect to the Units or
to the Registration Statement, as the case may be, containing
information regarding the initial public offering price of the Units
has been filed with the Commission, or such later time and date as
shall have been agreed to by the Representative; if required, the
Prospectus or any Term Sheet that constitutes a part thereof and any
amendment or supplement thereto shall have been filed with the
Commission in the manner and within the time period required by Rule
434 and 424(b) under the Act; on or prior to the Closing Dates no stop
order suspending the effectiveness of the Registration Statement shall
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have been issued and no proceedings for that or a similar purpose
shall have been instituted or shall be pending or, to the knowledge of
the Company, shall be contemplated by the Commission; any request on
the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Bachner, Tally,
Xxxxxxx & Xxxxxx LLP, counsel to the Underwriters;
(b) At the First Closing Date, you shall have received
the opinion, dated as of the First Closing Date, of Xxxx & Xxxxx
Professional Corporation, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of California, and has all requisite
corporate power and authority to own its properties and
conduct its business as described in the Registration
Statement and Prospectus. The Company is duly qualified or
licensed to do business as a foreign corporation and is in
good standing as a foreign corporation in the State of Utah;
(ii) to the best knowledge of such counsel, (a)
the Company has obtained, or is in the process of obtaining,
all material licenses, permits and other governmental
authorizations necessary to the conduct of its business as
described in the Prospectus, (b) such licenses, permits and
other governmental authorizations as have been obtained are in
full force and effect, and (c) the Company is in all material
respects complying therewith;
(iii) the authorized capitalization of the Company
as of June 30, 1997 is as set forth under "Capitalization" in
the Prospectus; all shares of the Company's outstanding stock
requiring authorization for issuance by the Company's board of
directors have been duly authorized, validly issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; to the best of such counsel's
knowledge, the outstanding shares of Class A Common Stock of
the Company have not been issued in violation of the
preemptive rights of any shareholder and the shareholders of
the Company do not have any preemptive rights or other rights
to subscribe for or to purchase, nor, except as described in
the Prospectus, are there any restrictions upon the voting or
transfer of any of the Shares; the Class A Common Stock, the
Warrants, the Unit Purchase Option and the Warrant Agreement
conform to the respective descriptions thereof contained in
the Prospectus; the Shares have been, and the shares of Class
A Common Stock to be issued upon exercise of the Warrants and
the Unit Purchase Option, upon
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issuance in accordance with the terms of such Warrants, the
Warrant Agreement and Unit Purchase Option have been duly
authorized and, when issued and delivered in accordance with
the terms of such documents, will be duly and validly issued,
fully paid and non-assessable, free of preemptive rights and
no personal liability will attach to the ownership thereof;
all prior sales by the Company of the Company's securities
have been made in compliance with or under an exemption from
registration under the Act and applicable state securities
laws and no shareholders of the Company have any rescission
rights with respect to Company securities; a sufficient number
of shares of Class A Common Stock has been reserved for
issuance upon exercise of the Warrants and Unit Purchase
Option and to the best of such counsel's knowledge, neither
the filing of the Registration Statement nor the offering or
sale of the Units as contemplated by this Agreement gives rise
to any registration rights or other rights, other than those
which have been waived or satisfied for or relating to the
registration of any shares of Class A Common Stock;
(iv) this Agreement, the Unit Purchase Option, the
Warrant Agreement, the M/A Agreement and the Escrow Agreement
have been duly and validly authorized, executed and delivered
by the Company and, if the laws of the State of California
were to govern the enforcement of such documents (as to which
such counsel need express no opinion), each constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting
enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited
by applicable law);
(v) the certificates evidencing the shares of
Class A Common Stock are in valid and proper legal form; the
Warrants will be exercisable for shares of Class A Common
Stock of the Company in accordance with the terms of the
Warrants and at the prices therein provided for; the shares of
Class A Common Stock of the Company issuable upon exercise of
the Warrants have been duly authorized and reserved for
issuance at all times during the term of the Warrants upon
such exercise and such shares, when issued upon such exercise
in accordance with the terms of the Warrants and at the price
provided for, will be duly and validly issued, fully paid and
non-assessable;
(vi) such counsel knows of no pending or
threatened legal or governmental proceedings to which the
Company is a party which could
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materially adversely affect the business, property, financial
condition or operations of the Company; or which question the
validity of the Securities, this Agreement, the Warrant
Agreement, the Unit Purchase Option, the M/A Agreement or the
Escrow Agreement or of any action taken or to be taken by the
Company pursuant to this Agreement, the Warrant Agreement, the
Unit Purchase Option, the M/A Agreement or the Escrow
Agreement and no such proceedings are known to such counsel
to be contemplated against the Company; to the best of such
counsel's knowledge, there are no governmental proceedings or
regulations required to be described or referred to in the
Registration Statement which are not so described or referred
to;
(vii) to the best of such counsel's knowledge, the
Company is not in violation of or default under, nor will the
execution and delivery of this Agreement, the Unit Purchase
Option, the Warrant Agreement, the M/A Agreement or the Escrow
Agreement and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions
herein or therein contemplated, result in a breach or
violation of, or constitute a default under the certificate or
articles of incorporation or by-laws, in the performance or
observance of any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture,
mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which the Company is a party or by
which it or any of its properties may be bound or in violation
of any material order, rule, regulation, writ, injunction, or
decree of any government, governmental instrumentality or
court, domestic or foreign;
(viii) based on oral advice of the SEC the
Registration Statement has become effective under the Act, and
to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is
in effect, and no proceedings for that purpose have been
instituted or are pending before, or threatened by, the
Commission; the Registration Statement and the Prospectus
(except for the financial statements and other financial data
and statistical data contained therein, or omitted therefrom,
as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable requirements
of the Act and the Rules and Regulations;
(ix) such counsel has participated in the
preparation of the Registration Statement and the Prospectus
and although such counsel has not independently verified and
need not pass upon, and need not assume responsibility for,
the accuracy, completeness or fairness of the statements
contained in the Registration Statement on the basis of the
foregoing but
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without independent check or verification, no fact has come to
the attention of such counsel to cause such counsel to have
reason to believe that the Registration Statement or any
amendment thereto at the time it became effective or as of the
Closing Dates contained any untrue statement of a material
fact required to be stated therein or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading or that the
Prospectus or any supplement thereto contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make statements therein, in light of the
circumstances under which they were made, not misleading
(except, in the case of both the Registration Statement and
any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto and other
financial or statistical information and schedules contained
therein, as to which such counsel need express no opinion);
(x) all descriptions in the Registration
Statement and the Prospectus, and any amendment or supplement
thereto, of contracts and other documents are accurate in all
material respects and fairly present the information required
to be shown, and such counsel is familiar with all contracts
and other documents referred to in the Registration Statement
and the Prospectus and any such amendment or supplement or
filed as exhibits to the Registration Statement, and such
counsel does not know of any contracts or documents of a
character required to be summarized or described therein or to
be filed as exhibits thereto which are not so summarized,
described or filed;
(xi) no authorization, approval, consent, or
license of any governmental or regulatory authority or agency
is necessary in connection with the authorization, issuance,
transfer, sale or delivery of the Units by the Company, in
connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking
of any action contemplated herein, or the issuance of the Unit
Purchase Option or the Securities underlying the Unit Purchase
Option, other than registrations or qualifications of the
Units under applicable state or foreign securities or Blue Sky
laws and registration under the Act;
(xii) the statements in the Registration Statement
under the captions "Business", "Use of Proceeds",
"Management", and "Description of Securities" have been
reviewed by such counsel and insofar as they refer to
descriptions of agreements, statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions,
are correct in all material respects except that such counsel
need express no opinion with respect to the statements set
forth in the caption "Business -- Government Regulation" "Risk
Factors - Government Regulation and
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Legal Uncertainties" or any other statement regarding
trademark or copyright law;
(xiii) the Units, the Class A Common Stock and the
Warrants have been duly authorized for quotation on the Nasdaq
SmallCap Market; and
(xiv) to such counsel's knowledge, there are no
business relationships or related-party transactions of the
nature described in Item 404 of Regulation S-B involving the
Company, and any person described in such Item that are
required to be disclosed in the Prospectus and which have not
been so disclosed.
(c) At the First Closing Date, you shall have received
the opinion, addressed to the Underwriters, dated as of the First
Closing Date, of Xxxx, Raywid & Xxxxxxxxx LLP, regulatory counsel to
the Company, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The information in the Prospectus under the
captions entitled "Risk Factors -- Government Regulation and
Legal Uncertainties" and "Business of the Company" insofar as
it pertains to legal and regulatory matters, has been reviewed
and analyzed by us and in our opinion accurately and
adequately describes in all material respects the nature and
extent to which the Company's operations and proposed business
may be subject to government regulations and guidelines in the
United States.
(ii) The business as presently conducted by the
Company and as proposed to be conducted as stated in the
Prospectus does not, to our knowledge, violate any rules,
regulations or policies of the Federal Trade Commission, the
Department of Justice or the Federal Communications
Commission.
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as you or counsel for the Underwriters shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law other than the law of the United
States or of the State of California upon opinions of counsel satisfactory to
you, in which case the opinion shall state that they have no reason to believe
that you and they are not entitled to so rely.
(d) All corporate proceedings and other legal matters
relating to this Agreement, the Registration Statement, the Prospectus and
other related matters shall be satisfactory to or approved by Bachner, Tally,
Xxxxxxx & Xxxxxx LLP, counsel to the
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Underwriters, and you shall have received from such counsel a signed opinion,
dated as of the First Closing Date, together with copies thereof for each of
the other Underwriters, with respect to the validity of the issuance of the
Units, the form of the Registration Statement and Prospectus (other than the
financial statements and other financial data contained therein), the execution
of this Agreement and other related matters as you may reasonably require. The
Company shall have furnished to counsel for the several Underwriters such
documents as they may reasonably request for the purpose of enabling them to
render such opinion.
(e) You shall have received a letter prior to the
effective date of the Registration Statement and again on and as of the First
Closing Date from BDO Xxxxxxx LLP, independent public accountants for the
Company, substantially in the form approved by you, and including estimates of
the Company's revenues and results of operations for the period ending at the
end of the month immediately preceding the effective date and results of the
comparable period during the prior fiscal year.
(f) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and correct
with the same effect as if made on and as of the Closing Dates and the Company
shall have performed all of its obligations hereunder and satisfied all the
conditions on its part to be satisfied at or prior to such Closing Date; (ii)
the Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein (with respect to the Prospectus, in light of the
circumstances in which they were made) not misleading; (iii) there shall have
been, since the respective dates as of which information is given, no material
adverse change, or any development involving a prospective material adverse
change, in the business, properties, condition (financial or otherwise),
results of operations, capital stock, long-term or short-term debt or general
affairs of the Company from that set forth in the Registration Statement and
the Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement,
and the Company shall not have incurred any material liabilities or entered
into any agreement not in the ordinary course of business other than as
referred to in the Registration Statement and Prospectus; and (iv) except as
set forth in the Prospectus, no action, suit or proceeding at law or in equity
shall be pending or threatened against the Company which would be required to
be set forth in the Registration Statement, and no proceedings shall be pending
or threatened against the Company before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company, and (v) you shall have received, at the First Closing
Date, a certificate signed by each of the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated as of the First Closing Date, evidencing compliance with the provisions
of this subsection (f).
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(g) Upon exercise of the option provided for in Section
2(b) hereof, the obligations of the several Underwriters (or, at its option,
the Representative, individually) to purchase and pay for the Option Units
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, and no stop order
suspending the effectiveness thereof shall have been issued
and no proceedings for that purpose shall have been instituted
or shall be pending, or, to your knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any
reasonable request on the part of the Commission for
additional information shall have been complied with to the
satisfaction of Bachner, Tally, Xxxxxxx & Xxxxxx LLP, counsel
to the Underwriters.
(ii) At the Option Closing Date there shall have
been delivered to you the signed opinions of Xxxx & Xxxxx
Professional Corporation and Xxxx, Raywid & Xxxxxxxxx LLP,
counsels for the Company, dated as of the Option Closing Date,
in form and substance satisfactory to Bachner, Tally, Xxxxxxx
& Xxxxxx LLP, counsel to the several Underwriters, together
with copies of such opinion for each of the other several
Underwriters, which opinions shall be substantially the same
in scope and substance as the opinions furnished to you at the
First Closing Date pursuant to Section 4(b) and (c) hereof,
except that such opinion, where appropriate, shall cover the
Option Units.
(iii) At the Option Closing Date there shall have
been delivered to you a certificate of the Chairman of the
Board or the President and the principal financial or
accounting officer of the Company, dated the Option Closing
Date, in form and substance satisfactory to Bachner, Tally,
Xxxxxxx & Xxxxxx LLP, counsel to the several Underwriters,
substantially the same in scope and substance as the
certificate furnished to you at the First Closing Date
pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date there shall have
been delivered to you a letter in form and substance
satisfactory to you from BDO Xxxxxxx LLP, dated the Option
Closing Date and addressed to the Underwriters confirming the
information in their letter referred to in Section 4(e) hereof
and stating that nothing has come to their attention during
the period from the ending date of their review referred to in
said letter to a date not more than five business days prior
to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing
Date.
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(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and issuance
of the Option Units shall be satisfactory in form and
substance to you, and you and Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, counsel to the several Underwriters, shall have been
furnished with all such documents, certificates, and opinions
as you may request in connection with this transaction in
order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company or
its compliance with any of the covenants or conditions
contained herein.
(h) No action shall have been taken by the Commission or
the NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Units, Class A Common Stock or the Warrants and no proceedings
for the taking of such action shall have been instituted or shall be pending,
or, to the knowledge of the Representative or the Company, shall be
contemplated by the Commission or the NASD. The Company represents that at the
date hereof it has no knowledge that any such action is in fact contemplated by
the Commission or the NASD. The Company shall have advised the Underwriters of
any NASD affiliation of any of its officers, directors, stockholders or their
affiliates.
(i) If any of the conditions herein provided for in this
Section shall not have been fulfilled as of the date indicated, this Agreement
and all obligations of the several Underwriters under this Agreement may be
cancelled at, or at any time prior to, each Closing Date by the Representative.
Any such cancellation shall be without liability of the Underwriters to the
Company.
5. Conditions of the Obligations of the Company. The obligation
of the Company to sell and deliver the Units is subject to the condition that
at the Closing Dates, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or any proceedings
therefor initiated or threatened by the Commission.
If the condition to the obligations of the Company provided for in
this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Units on
exercise of the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
attorneys' fees), to which such Underwriter or such controlling person may
become subject, under the Act or otherwise, and will reimburse, as incurred,
such Underwriters
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and such controlling persons for any legal or other expenses reasonably
incurred in connection with investigating, defending against or appearing as a
third party witness in connection with any losses, claims, damages or
liabilities, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Units under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein (in the case of the Preliminary Prospectus or
Prospectus, in light of the circumstances under which they were made) not
misleading; provided, however, that the Company will not be liable in any such
case to the extent, but only to the extent, that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Underwriters specifically for use in the preparation of the Registration
Statement or any such amendment or supplement thereof or any such Blue Sky
Application or any such preliminary Prospectus or the Prospectus or any such
amendment or supplement thereto. This indemnity will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter severally, but not jointly, will
indemnify and hold harmless the Company, each of its directors, each nominee
(if any) for director named in the Prospectus, each of its officers who have
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which the Company or any such director, nominee, officer or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto (i) in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you specifically for use in the preparation thereof and
(ii) relates to the transactions effected by the Underwriters in connection
with the offer and sale of the Units contemplated hereby. This indemnity
agreement will be in addition to any liability which the Underwriters may
otherwise have.
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(c) Promptly after receipt by an indemnified party under
this Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify in writing the indemnifying party
of the commencement thereof; but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section. In case any such action
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, subject
to the provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the employment
of such counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any impleaded
parties) include both such Underwriter or such controlling person and the
indemnifying party and in the judgment of the Underwriter, it is advisable for
the Underwriter or controlling persons to be represented by separate counsel
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such Underwriter or such controlling
person, it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for the Underwriter and controlling
persons, which firm shall be designated in writing by you). No settlement of
any action against an indemnified party shall be made without the consent of
the indemnifying party, which shall not be unreasonably withheld in light of
all factors of importance to such indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under the Act
in any case in which (i) any Underwriter makes claim for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the express provisions of Section 6 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and any such Underwriter shall contribute to the
-26-
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aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees) in either such case (after contribution from others) in such
proportions that all such Underwriters are responsible in the aggregate for
that portion of such losses, claims, damages or liabilities represented by the
percentage that the underwriting discount per Unit appearing on the cover page
of the Prospectus bears to the public offering price appearing thereon, and the
Company shall be responsible for the remaining portion, provided, however, that
if such allocation is not permitted by applicable law then the relative fault
of the Company and the Underwriters and controlling persons, in the aggregate,
in connection with the statements or omissions which resulted in such damages
and other relevant equitable considerations shall also be considered. The
relative fault shall be determined by reference to, among other things, whether
in the case of an untrue statement of a material fact or the omission to state
a material fact, such statement or omission relates to information supplied by
the Company, or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Underwriters agree that it would
not be just and equitable if the respective obligations of the Company and the
Underwriters to contribute pursuant to this Section 7 were to be determined by
pro rata or per capita allocation of the aggregate damages (even if the
Underwriters in the aggregate were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who is not guilty
of such fraudulent misrepresentation. As used in this paragraph, the word
"Company" includes any officer, director, or person who controls the Company
within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then any
Underwriter and each person who controls such Underwriter shall be entitled to
contribution from the Company, its officers, directors and controlling persons
to the full extent permitted by law. The foregoing contribution agreement
shall in no way affect the contribution liabilities of any persons having
liability under Section 11 of the Act other than the Company and the
Underwriters. No contribution shall be requested with regard to the settlement
of any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or
the sale of the Units to the Underwriters is consummated, the Company will pay
all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to
the preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), Preliminary Prospectus and the Prospectus, as
amended or supplemented, or the Term Sheet, the fee of the NASD in connection
with the filing required by the NASD relating to the offering of the Units
contemplated hereby; all expenses, including reasonable fees and disbursements
of
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counsel to the Underwriters, in connection with the qualification of the Units
under the state securities or blue sky laws which the Representative shall
designate; the cost of printing and furnishing to the several Underwriters
copies of the Registration Statement, each Preliminary Prospectus, the
Prospectus, this Agreement, the Agreement among Underwriters, Selling
Agreement, Underwriters' Questionnaire, Underwriters' Power of Attorney and the
Blue Sky Memorandum, any fees relating to the listing of the Units, Class A
Common Stock and Warrants on the Nasdaq Small Cap Market or any other
securities exchange, the cost of printing the certificates representing the
securities comprising the Units, the fees of the transfer agent and warrant
agent, the cost of publication of at least three "tombstones" of the offering
(at least one of which shall be in national business newspaper and one of which
shall be in a major New York newspaper) and the cost of preparing at least four
hard cover "bound volumes" relating to the offering, in accordance with the
Representative's request. The Company shall pay any and all taxes (including
any transfer, franchise, capital stock or other tax imposed by any
jurisdiction) on sales to the Underwriters hereunder. The Company will also
pay all costs and expenses incident to the furnishing of any amended Prospectus
or of any supplement to be attached to the Prospectus as called for in Section
3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the Company
shall at the First Closing Date pay to the Representative, in its individual
rather than representative capacity, a non-accountable expense allowance of
$285,000 of which $20,000 has been paid. In the event the overallotment option
is exercised, the Company shall pay to X.X. Xxxxx Investment Banking Corp. the
Option Closing Date an additional amount equal to 3% of the gross proceeds
received upon exercise of the overallotment option. In the event the
transactions contemplated hereby are not consummated by reason of any action by
the Underwriters (except if such prevention is based upon a breach by the
Company of any covenant, representation or warranty contained herein or because
any other condition to the Underwriters' obligations hereunder required to be
fulfilled by the Company is not fulfilled) the Company shall be liable for the
actual out-of-pocket accountable expenses of the Representative, including
legal fees up to a maximum of $40,000. In the event the transactions
contemplated hereby are not consummated by reason of any action of the Company
or because of a breach by the Company of any covenant, representation or
warranty herein, the Company shall be liable for the actual out-of-pocket
accountable expenses of you, including legal fees, up to a maximum of $285,000.
In the event the offering is not consummated for any reason, any portion of the
non-accountable expense allowance previously paid to you which is not accounted
for shall be returned to the Company.
(c) No person is entitled either directly or indirectly
to compensation from the Company, from any Underwriter or from any other person
for services as a finder in connection with the proposed offering, and the
Company agrees to indemnify and hold harmless the Underwriters, against any
losses, claims, damages or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), to which the Underwriters
or persons may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
claim of any person (other than an employee of the party claiming indemnity)
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or entity that he or it is entitled to a finder's fee in connection with the
proposed offering by reason of such person's or entity's influence or prior
contact with the indemnifying party.
9. Substitution of Underwriters.
If any Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase the First Units hereunder, or shall fail
to take up and pay for the number of First Units set forth opposite their
respective names in Schedule A hereto upon tender of such First Units in
accordance with the terms hereof, then:
(a) If the aggregate number of First Units which such
Underwriter or Underwriters agreed but failed to purchase does not exceed 10%
of the total number of First Units, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to purchase
the First Units which such defaulting Underwriter or Underwriters agreed but
failed to purchase.
(b) If any Underwriter or Underwriters so default and the
agreed number of First Units with respect to which such default or defaults
occurs is more than 10% of the total number of First Units, the remaining
Underwriters shall have the right to take up and pay for (in such proportion as
may be agreed upon among them) the First Units which the defaulting Underwriter
or Underwriters agreed but failed to purchase. If such remaining Underwriters
do not, at the First Closing Date, take up and pay for the First Units which
the defaulting Underwriter or Underwriters agreed but failed to purchase, the
time for delivery of the First Units shall be extended to the next business day
to allow the several Underwriters the privilege of substituting within
twenty-four hours (including nonbusiness hours) another underwriter or
underwriters satisfactory to the Company. If no such underwriter or
underwriters shall have been substituted as aforesaid, within such twenty-four
hour period, the time of delivery of the First Units may, at the option of the
Company, be again extended to the next following business day, if necessary, to
allow the Company the privilege of finding within twenty-four hours (including
nonbusiness hours) another underwriter or underwriters to purchase the First
Units which the defaulting Underwriter or Underwriters agreed but failed to
purchase. If it shall be arranged for the remaining Underwriters or
substituted Underwriters to take up the First Units of the defaulting
Underwriter or Underwriters as provided in this Section, (i) the Company or the
Representative shall have the right to postpone the time of delivery for a
period of not more than seven business days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of First Units to be purchased by the remaining Underwriters or
substituted Underwriters shall be taken at the basis of the underwriting
obligation for all purposes of this Agreement.
If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the First Units agreed
to be purchased by the
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defaulting Underwriters or substitute another underwriter or underwriters as
aforesaid, the Company shall not find or shall not elect to seek another
underwriter or underwriters for such First Units as aforesaid, then this
Agreement shall terminate.
If, following exercise of the option provided in Section 2(b) hereof,
any Underwriter or Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase Option Units at the Option Closing Date,
or shall fail to take up and pay for the number of Option Units, which they
become obligated to purchase at the Option Closing Date upon tender of such
Option Units in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Units of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not
take up and pay for all such Option Units, the Underwriters shall be entitled
to purchase the number of Option Units for which there is no default or, at
their election, the option shall terminate, the exercise thereof shall be of no
effect.
As used in this Agreement, the term "Underwriters" includes any person
substituted for any Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any nondefaulting
Underwriter to the Company, provided that the provisions of this Section 9
shall not in any event affect the liability of any defaulting Underwriter to
the Company arising out of such default.
10. Effective Date.
The Agreement shall become effective upon its execution except that
you may, at your option, delay its effectiveness until 11:00 A.M., New York
time on the first full business day following the effective date of the
Registration Statement, or at such earlier time after the effective date of the
Registration Statement as you in your discretion shall first commence the
initial public offering by the Underwriters of any of the Units. The time of
the initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Units, or the time when the Units
are first generally offered by you to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by you at any time before
it becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 13,
14 and 15 shall remain in effect notwithstanding such termination.
11. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8,
13, 14, 15 and 16 hereof, may be terminated at any time prior to the First
Closing Date, and the option referred to in Section 2(b) hereof, if exercised,
may be cancelled at any time prior to the Option Closing Date, by you if in
your judgment it is impracticable to offer for sale or to enforce contracts
made by the Underwriters for the resale of the Units agreed to be purchased
hereunder by reason of (i) the Company having sustained a material loss,
whether or not insured, by reason of fire, earthquake, flood, accident or other
calamity, or from any labor dispute or court or government action, order or
decree; (ii) trading in securities on the New York Stock Exchange, the American
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Stock Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market having
been suspended or limited; (iii) material governmental restrictions having been
imposed on trading in securities generally (not in force and effect on the date
hereof); (iv) a banking moratorium having been declared by federal or New York
state authorities; (v) an outbreak of international hostilities or other
national or international calamity or crisis or change in economic or political
conditions having occurred; (vi) a pending or threatened legal or governmental
proceeding or action relating generally to the Company's business, or a
notification having been received by the Company of the threat of any such
proceeding or action, which could materially adversely affect the Company;
(vii) except as contemplated by the Prospectus, the Company is merged or
consolidated into or all or substantially all of the capital stock or assets of
the Company are acquired by another company or group or there exists a binding
legal commitment for the foregoing or any other material change of ownership or
control occurs; (viii) the passage by the Congress of the United States or by
any state legislative body or federal or state agency or other authority of any
act, rule or regulation, measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Representative to have a material impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered pursuant to the Prospectus; (ix) any adverse change in the
financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement, or (x) any material adverse change
having occurred, since the respective dates of which information is given in
the Registration Statement and Prospectus, in the earnings, business prospects
or general condition of the Company, financial or otherwise, whether or not
arising in the ordinary course of business.
(b) If the Representative elects to prevent this
Agreement from becoming effective or to terminate this Agreement as provided in
this Section 11 or in Section 10, the Company shall be promptly notified by
you, by telephone or telegram, confirmed by letter.
12. Unit Purchase Option.
At or before the First Closing Date, the Company will sell to X.X.
Xxxxx Investment Banking Corp. (for its own account and not as Representative
of the several Underwriters), or its designees for a consideration of $190, and
upon the terms and conditions set forth in the form of Unit Purchase Option
annexed as an exhibit to the Registration Statement, a Unit Purchase Option to
purchase an aggregate of 190,000 Units. In the event of conflict in the terms
of this Agreement and the Unit Purchase Option, the language of the Unit
Purchase Option shall control.
13. Representations, Warranties and Agreements to Survive
Delivery.
The respective indemnities, agreements, representations, warranties
and other statements of the Company or its Principal Stockholders, where
appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect,
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regardless of any investigation made by or on behalf of the Underwriters, the
Company or any of its officers or directors or any controlling person and will
survive delivery of and payment of the Units and the termination of this
Agreement.
14. Notice.
Any communications specifically required hereunder to be in writing,
if sent to the Underwriters, will be mailed, delivered and confirmed to them at
X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
with a copy sent to Bachner, Tally, Xxxxxxx & Xxxxxx LLP, 000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or if sent to the Company, will be mailed, delivered
and confirmed to it at On'Village Communications, Inc., 00000 Xxxxx Xxxx, Xxxxx
000, Xxxxxxxxx, Xxxxxxxxxx 00000, with a copy to Xxxx & Xxxxx Professional
Corporation, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx
00000, Attention: Xxxxxxxx Xxxxxxx.
15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
several Underwriters, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or any of the several
Underwriters, and directors of the Company, nominees for directors (if any)
named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors, assigns
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser,
as such purchaser, from any of the Underwriters of the Units. All of the
obligations of the Underwriters hereunder are several and not joint.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the several Underwriters in
accordance with its terms.
Very truly yours,
ON'VILLAGE COMMUNICATIONS, INC.
By: _______________________________________
Xxxx X. Xxxxxx, Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
X.X. XXXXX INVESTMENT BANKING CORP.
By: ____________________________________
Authorized Officer
For itself and as Representative of the
several Underwriters
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SCHEDULE A
Underwriter Number of Units to be Purchased
----------- -------------------------------
[UNDERWRITER]
Total: ________
Units
============
