DISCAS, INC.
800,000 Shares of Common Stock
and
800,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
, 1997
Roan Capital Partners L.P.
As Representative of the several Underwriters
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Discas, Inc., a Delaware corporation (the "Company") hereby confirms
the agreement with the Underwriters named in Schedule A of this Underwriting
Agreement (the "Agreement") (the Underwriters"), for whom you are acting as
representative (the "Representative"), as follows:
1. Description of the Securities.
The Company proposes to issue and sell to the Underwriters an
aggregate of 800,000 shares of common stock, $.0001 par value per share (the
"Common Stock"), and 800,000 redeemable common stock purchase warrants of the
Company (the "Warrants," and collectively with the Common Stock, the
"Securities") in the amounts set forth on Schedule A hereto. Each Warrant shall
entitle the holder to purchase one share of Common Stock for $6.25, subject to
adjustment. The Company proposes to grant to the Underwriters (or to the
Representative, individually) an option to purchase up to 120,000 additional
shares of Common Stock and up to an additional 120,000 Warrants (the
"Additional Securities"). The offering of Securities and Additional Securities
contemplated hereby may sometimes be referred to as the "Offering."
(a) The Warrants.
The Warrants are exercisable beginning thirteen (13) months from the
effective date of the Registration Statement, as defined in Paragraph 2(a) (the
"Effective Date"), and expire five years and one month after the Effective
Date, subject to prior redemption by the Company. The shares of Common Stock
issuable upon the exercise of the Warrants are hereinafter referred to as the
"Warrant Shares."
The Warrants will be redeemable at a price of $.10 per Warrant,
commencing thirteen (13) months after the Effective Date upon at least 30 days
prior written notice provided that the average of the closing bid prices of the
Common Stock (or closing sales price if listed on an exchange or on a reporting
system that provides last sales prices) for 20 consecutive trading days ending
on the fifteenth day immediately prior to the date on which notice of
redemption is given shall exceed 150% ($9.375 per share) of the current Warrant
exercise price (subject to adjustment), subject to the right of the holder to
exercise his purchase rights thereunder until redemption.
(b) Representative's Warrants.
The Company will sell to the Representative, for $10, a warrant to
purchase one share of Common Stock and one Warrant for each ten shares of
Common Stock and ten Warrants sold in this Offering excluding the Additional
Securities (a maximum of 80,000 shares of Common Stock and 80,000 Warrants) at
a price equal to $8.25 per share of Common Stock and $.165 per Warrant (the
"Representative's Warrants," and collectively with the Securities underlying
the Representative's Warrants, the "Representative's Securities"). The Warrants
underlying the Representative's Warrants shall be exercisable at a price of
$6.25 per Warrant. The Representative's Warrants shall be non-transferable
(other than to (i) officers of the Underwriters, and (ii) members of the
selling group and their officers or partners) for a period of 12 months
following the Effective Date. Thereafter, they are transferable for a period of
four years. If the Warrants underlying the Representative's Warrants are not
exercised during their term, they shall, by their terms, automatically expire.
The Representative's Securities shall be registered for sale to the public and
shall be included in the Registration Statement filed in connection with the
Offering.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriters that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
333-26543), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities under the Securities Act
of 1933 (the "Act"). The Company will file further amendments to said
registration statement in the form to be delivered to you and will not, before
the registration statement becomes effective, file any other amendment thereto
to which you shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statement, as amended, on file
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with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, exhibits and all other
documents filed as a part thereof or incorporated therein), is hereinafter
called the "Registration Statement", and the prospectus, in the form filed with
the Commission pursuant to Rule 424(b) of the General Rules and Regulations of
the Commission under the Act (the "Regulations") or, if no such filing is made,
the definitive prospectus used in the Offering, is hereinafter called the
"Prospectus". The Company has delivered to you copies of each Preliminary
Prospectus as filed with the Commission and has consented to the use of such
copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and has not included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, subject to the provisions set forth below and except as such
untrue statement or omission has been cured in the a subsequent preliminary
prospectus or in the final prospectus.
(c) When the Registration Statement becomes effective under the
Act and at all times subsequent thereto including the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined) and for such longer
periods as in the opinion of counsel for the Underwriters, a Prospectus is
required to be delivered in connection with the sale of the Securities by the
Underwriters, the Registration Statement and Prospectus, and any amendment
thereof or supplement thereto, will contain all material statements which are
required to be stated therein in accordance with the Act and the Regulations,
and will in all material respects conform to the requirements of the Act and
the Regulations, and neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements or omissions made in
reliance upon and in conformity with written information furnished to the
Company by you, for use in connection with the preparation of the Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto. It
is understood that the statements set forth under the heading "Underwriting" in
the Prospectus with respect to (i) the amounts of the selling concession and
reallowance; (ii) the identity of counsel to the Underwriters under the heading
"Legal Matters;" (iii) the information concerning the
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NASD affiliation of the Underwriters; and (iv) the Risk Factor entitled
"Limited Experience of Underwriter" constitute for purposes of this Section the
only information furnished in writing by or on behalf of the Underwriters for
inclusion in the Registration Statement and Prospectus, as the case may be.
(d) The Company and each of its subsidiaries (each a
"Subsidiary") are, and at the Closing Date and the Option Closing Date will be,
corporations duly organized, validly existing and in good standing under the
laws of the jurisdiction of their incorporation. The Company and each of its
Subsidiaries are duly qualified or licensed and in good standing as foreign
corporations in each jurisdiction in which their ownership or leasing of any
properties or the character of their operations requires such qualification or
licensing, except those jurisdictions in which the failure to so qualify would
not have a material adverse effect. The Company and each of its Subsidiaries
have all requisite corporate powers and authority, and, except as set forth in
the Registration Statement, the Company and each of its Subsidiaries and their
employees' have all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies to own or lease their properties and conduct their
businesses as described in the Prospectus, and the Company and each of its
Subsidiaries are doing business and have been doing business during the period
described in the Registration Statement in compliance with all such material
authorizations, approvals, orders, licenses, certificates and permits and all
material federal, state and local laws, rules and regulations concerning the
businesses in which the Company or its Subsidiaries are engaged. The
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the Company's or its Subsidiaries' businesses as
currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact. The Company has all corporate power
and authority to enter into this Agreement and carry out the provisions and
conditions hereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained or will have been obtained
prior to the Closing Date.
(e) This Agreement has been duly and validly authorized and
executed by the Company. The Securities (including the Common Stock and the
Warrants), the Warrant Shares, the Representative's Warrants to be issued and
sold by the Company pursuant to this Agreement, the Securities issuable upon
exercise of the Representative's Warrants and payment therefor, and the Common
Stock and Warrant Shares underlying such Representative's Warrants, have been
duly authorized (and, in the case of the Common Stock and the Warrant Shares,
have been duly reserved for issuance) and, when issued and paid for in
accordance with this Agreement (and, in the
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case of the Warrant Shares, upon exercise of the Warrants and payment to the
Company of the exercise price therefor), the Common Stock and Warrant Shares
will be validly issued, fully paid and non-assessable; the Common Stock,
Warrants, Warrant Shares, Representative's Warrants, Additional Securities and
Representative's Warrant Shares are not and will not be subject to the
preemptive rights of any stockholder of the Company and conform and at all
times up to and including their issuance will conform in all material respects
to all statements with regard thereto contained in the Registration Statement
and Prospectus; and all corporate action required to be taken for the
authorization, issuance and sale of the Common Stock, Warrants, Warrant Shares
and Representative's Warrants has been taken, and this Agreement constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms, to issue and sell, upon exercise in accordance with the terms thereof,
the number and kind of securities called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, the Certificate of Incorporation, as amended, or Bylaws of the Company
or any of its Subsidiaries or of any evidence of material indebtedness, lease,
contract or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their material properties is bound, or under any applicable law, rule,
regulation, judgment, order or decree of any government, professional advisory
body, administrative agency or court, domestic or foreign, having jurisdiction
over the Company or any of its Subsidiaries or their properties which are
material to the Company or its business, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries; and no consent, approval,
authorization or order of any court or governmental or other regulatory agency
or body is required for the consummation by the Company or any of its
Subsidiaries of the transactions on their part herein contemplated, except such
as may be required under the Act or under state securities or blue sky laws,
except where a breach, violation or failure to obtain such consent would not
have a material adverse effect upon the business or operation of the Company or
its Subsidiaries.
(g) Subsequent to the date hereof, and prior to the Closing Date
and the Option Closing Date, the Company will not issue or acquire any equity
securities other than securities of a wholly-owned subsidiary, except that the
Company may make short-term investments as contemplated in the "Use of
Proceeds" section of the Prospectus. Except as described in the Registration
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Statement, the Company does not have, and at the Closing Date and at the Option
Closing Date will not have, outstanding any options to purchase or rights or
warrants to subscribe for, or any securities or obligations convertible into,
or any contracts or commitments to issue or sell shares of its Preferred Stock,
Common Stock or any such options, warrants, convertible securities or
obligations.
(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for
the respective periods to which they apply; and such financial statements have
been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved.
(i) Except as set forth in the Registration Statement, the
Company and each Subsidiary are not, and at the Closing Date and at the Option
Closing Date will not be, in violation or breach of, or default in, the due
performance and observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, note, loan or credit agreement, or any other agreement
or instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company or any of its Subsidiaries are a
party or by which the Company or any of its Subsidiaries may be bound or to
which any of the property or assets of the Company or any of its Subsidiaries
are subject, which violations, breaches, default or defaults, singularly or in
the aggregate, would have a material adverse effect on the Company or any of
its Subsidiaries. The Company and each of its Subsidiaries have not and will
not have taken any action in material violation of the provisions of the
Certificate of Incorporation, as amended, or the Bylaws of the Company or its
Subsidiaries or any statute or any order, rule or regulation of any court or
regulatory authority or governmental body having jurisdiction over or
application to the Company or its Subsidiaries, their businesses or properties.
(j) The Company and each of its Subsidiaries have, and at the
Closing Date and at the Option Closing Date will have, good and marketable
title to all properties and assets described in the Prospectus as owned by
them, free and clear of all liens, charges, encumbrances, claims, security
interests, restrictions and defects of any material nature whatsoever, except
such as are described or referred to in the Prospectus and liens for taxes not
yet due and payable. All of the material leases and subleases under which the
Company or any of its Subsidiaries are the lessor or sublessor of properties or
assets or under which the Company or any of its Subsidiaries hold properties or
assets as lessee as described in the Prospectus are, and will on the Closing
Date and the Option Closing Date be, in full force and effect, and except as
described in the Prospectus, the Company and its Subsidiaries are not and
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will not be in default in respect to any of the terms or provisions of any of
such leases or subleases (which would have a material adverse effect on the
business, business prospects or operations of
the Company or any of its Subsidiaries taken as a whole), and no claim has been
asserted by anyone adverse to rights of the Company or any of its Subsidiaries
as lessor, sublessor, lessee or sublessee under any of the leases or subleases
mentioned above, or affecting or questioning the right of the Company or any of
its Subsidiaries to continue 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 and each of its Subsidiaries owns or leases all
such properties as are necessary to its operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted set forth in
the Prospectus (which would have a material adverse effect on the business,
business prospects or operations of the Company or any of its Subsidiaries
taken as a whole).
(k) The authorized, issued and outstanding capital stock of the
Company as of , 1997 and as of the date of the Prospectus is as
set forth in the Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued and are fully paid and non-assessable; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the Common Stock, the Warrants
and all such options and warrants conform in all material respects, to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(l) Except as described in the Prospectus, the Company does not
own or control any capital stock or securities of, or have any proprietary
interest in, or otherwise participate in any other corporation, partnership,
joint venture, firm, association or business organization; provided, however,
that this provision shall not be applicable to the investment, if any, of the
net proceeds from the sale of the Securities sold by the Company in
certificates of deposits, savings deposits, short-term obligations of the
United States Government, money market instruments or other short-term
investments.
(m) To the knowledge of the Company, Jump, Green, Xxxxxx &
Company, 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
7
Prospectus, are with respect to the Company, independent public accountants as
required by the Act and the Rules and Regulations.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred any material liability or obligation, direct or
contingent, for borrowed money; or (ii) entered into any material transaction
other than in the ordinary course of business; or (iii) declared or paid any
dividend or made any other distribution on or in respect to its capital stock.
(o) There is no litigation or governmental proceeding pending or
to the knowledge of the Company or any Subsidiary threatened against, or
involving the properties or business of the Company or any Subsidiary which
might materially adversely affect the value, assets or the operation of the
properties or the business of the Company or any Subsidiary, except as referred
to in the Prospectus. Further, except as referred to in the Prospectus, there
are no pending actions, suits or proceedings related to environmental matters
or related to discrimination on the basis of age, sex, religion or race, nor is
the Company or any Subsidiary charged with or, to its knowledge, under
investigation with respect to any violation of any statutes or regulations of
any regulatory authority having jurisdiction over its business or operations,
and no labor disturbances by the employees of the Company or any Subsidiary
exist or, to the knowledge of the Company or any Subsidiary, have been
threatened.
(p) The Company has, and at the Closing Date and at the Option
Closing Date will have, filed all necessary federal, state and foreign income
and franchise tax returns or has requested extensions thereof (except in any
case where the failure to so file would not have a material adverse effect on
the Company), and has paid all taxes which it believes in good faith were
required to be paid by it except for any such tax that currently is being
contested in good faith or as described in the Prospectus.
(q) The Company has not at any time (i) made any contribution 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, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required
or allowed by applicable law.
(r) Except as set forth in the Registration Statement, to the
knowledge of the Company, neither the Company nor any of
8
officer, director, employee or agent of the Company has made any payment or
transfer of any funds or assets of the Company or conferred any personal
benefit by use of the Company's assets or received any funds, assets or
personal benefit in violation of any law, rule or regulation, which is required
to be stated in the Registration Statement or necessary to make the statements
therein not misleading.
(s) On the Closing Date and on the Option Closing Date, all
transfer or other taxes, if any (other than income tax) which are required to
be paid, and are due and payable, in connection with the sale and transfer of
the Securities by the Company to the Underwriters will have been fully paid or
provided for by the Company as the case may be, and all laws imposing such
taxes will have been fully complied with in all material respects.
(t) There are no contracts or other documents of the Company
which are of a character required to be described in the Registration Statement
or Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(u) The Company will apply the net proceeds from the sale of the
Securities sold by it for the purposes and in the manner set forth in the
Registration Statement and Prospectus under the heading "Use of Proceeds."
(v) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (1) transactions are
executed in accordance with management's general or specified authorizations;
(2) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
accordance with management's general or specific authorizations; and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) Except as set forth in the Prospectus, no holder of any
securities of the Company has the right to require registration of any
securities because of the filing or effectiveness of the Registration
Statement.
(x) The Company has not taken and at the Closing Date will not
have taken, 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 Common Stock or the
Warrants to facilitate the sale or resale of such securities.
9
(y) To the Company's knowledge, there are no claims for services
in the nature of a finder's origination fee with respect to the sale of the
Securities hereunder, except as set forth in the Prospectus.
(z) No right of first refusal exists with respect to any sale of
securities by the Company.
(aa) No statement, representation, warranty or covenant made by
the Company in this Agreement or made in any certificate or document required
by this Agreement to be delivered to Underwriters was, when made, or as of the
Closing Date or as of the Option Closing Date will be materially inaccurate,
untrue or incorrect.
3. Covenants of the Company.
The Company covenants and agrees that:
(a) It will deliver to the Representative, without charge, two
conformed copies of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(b) The Company has delivered to each of the Underwriters, and
each of the Selected Dealers (as hereinafter defined) without charge, as many
copies as have been requested of each Preliminary Prospectus heretofore filed
with the Commission in accordance with and pursuant to the Commission's Rule
430 under the Act and will deliver to the Underwriters and to others whose
names and addresses are furnished by the Underwriters or a Selected Dealer,
without charge, on the Effective Date of the Registration Statement, and
thereafter from time to time during such reasonable period as you may request
if, in the opinion of counsel for the Underwriters, the Prospectus is required
by law to be delivered in connection with sales by the Underwriters or a
dealer, as many copies of the Prospectus (and, in the event of any amendment of
or supplement to the Prospectus, of such amended or supplemented Prospectus) as
the Underwriters may reasonably request for the purposes contemplated by the
Act. The Company will take all necessary actions to furnish to whomever
directed by the Underwriters, when and as requested by the Underwriters, all
necessary documents, exhibits, information, applications, instruments and
papers as may be reasonably required or, in the written opinion of counsel to
the Underwriters desirable, in order to permit or facilitate the sale of the
Securities.
(c) The Company has authorized the Underwriters to use, and make
available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriters, all dealers selected by you in connection with the
distribution of the Securities (the
10
"Selected Dealers") to be purchased by the Underwriters and all dealers to whom
any of such Securities may be sold by the Underwriters or by any Selected
Dealer, to use the Prospectus, as from time to time amended or supplemented, in
connection with the sale of the Securities in accordance with the applicable
provisions of the Act, the applicable Regulations and applicable state law,
until completion of the distribution of the Securities and for such longer
period as you may request if the Prospectus is required under the Act, the
applicable Regulations or applicable state law to be delivered in connection
with sales of the Securities by the Underwriters or the Selected Dealers.
(d) The Company will use its best efforts to cause the
Registration Statement to become effective and will notify the Representative
immediately, and confirm the notice in writing: (i) when the Registration
Statement or any post-effective amendment thereto becomes effective; (ii) of
the issuance by the Commission of any stop order or of the initiation, or to
the best of the Company's knowledge, the threatening, of any proceedings for
that purpose; (iii) the suspension of the qualification of the Securities and
the Representative's Warrants, or underlying securities, for offering or sale
in any jurisdiction or of the initiating, or to the best of the Company's
knowledge the threatening, of any proceeding for that purpose; and (iv) of the
receipt of any comments from the Commission. If the Commission shall enter a
stop order at any time, the Company will make every reasonable effort to obtain
the lifting of such order at the earliest possible moment.
(e) During the time when a prospectus is required to be delivered
under the Act, the Company will comply with all requirements imposed upon it by
the Act and the Securities Exchange Act of 1934 (the "Exchange Act"), as now
and hereafter amended and by the Regulations, as from time to time in force, as
necessary to permit the continuance of sales of or dealings in the Securities
in accordance with the provisions hereof and the Prospectus. If at any time
when a prospectus relating to the Securities is required to be delivered under
the Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or counsel for the Underwriters, the Prospectus as then
amended or supplemented includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify you promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act and will furnish to you copies thereof.
11
(f) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes effective, to
qualify the Securities for offering and sale under the securities laws or blue
sky laws of such jurisdictions as you may reasonably designate. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction.
(g) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than the first day of
the fifteenth full calendar month following the Effective Date of the
Registration Statement, an earnings statement of the Company, which will be in
reasonable detail but which need not be audited, covering a period of at least
twelve months beginning after the Effective Date of the Registration Statement,
which earnings statements shall satisfy the requirements of Section 11(a) of
the Act and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on the Effective
Date of the Registration Statement, the Company will make available to its
stockholders an annual report (including financial statements audited by its
independent public accountants), in reasonable detail, and, at its expense,
furnish each of the Underwriters (i) within 90 days after the end of each
fiscal year of the Company, a consolidated balance sheet of the Company and its
consolidated subsidiaries and a separate balance sheet of each subsidiary of
the Company the accounts of which are not included in such consolidated balance
sheet as of the end of such fiscal year, and consolidated statements of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries and separate statements of operations, stockholders'
equity and cash flows of each of the subsidiaries of the Company the accounts
of which are not included in such consolidated statements, for the fiscal year
then ended all in reasonable detail and all certified by independent
accountants (within the meaning of the Act and the Regulations), (ii) within 45
days after the end of each of the first three fiscal quarters of each fiscal
year, similar balance sheets as of the end of such fiscal quarter and similar
statements of operations, stockholders' equity and cash flows for the fiscal
quarter then ended, all in reasonable detail, and subject to year end
adjustment, all certified by the Company's principal financial officer or the
Company's principal accounting officer as having been prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
(iii) as soon as available, each report furnished to or filed with the
Commission or
12
any securities exchange and each report and financial statement furnished to
the Company's shareholders generally and (iv) as soon as available, such other
material as the Representative may from time to time reasonably request
regarding the financial condition and operations of the Company.
(i) For a period of eighteen months from the Closing Date, the
Company, 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 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.
(j) Prior to the Closing Date or the Option Closing Date, the
Company will not issue, directly or indirectly, without your prior written
consent and that of counsel for the Representative, any press release or other
public announcement or hold any press conference with respect to the Company or
its activities with respect to this Offering.
(k) The Company will deliver to you prior to filing, any
amendment or supplement to the Registration Statement or Prospectus proposed to
be filed after the Effective Date of the Registration Statement and will not
file any such amendment or supplement to which you shall reasonably object
after being furnished such copy.
(l) During the period of 120 days commencing on the date hereof,
the Company will not at any time take, directly or indirectly, any action
designed to, or which will constitute or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Securities
to facilitate the sale or resale of any of the Securities.
(m) The Company will apply the net proceeds from the Offering
received by it in the manner set forth under "Use of Proceeds" in the
Prospectus.
(n) Counsel for the Company, the Company's accountants, and the
officers and directors of the Company will, respectively, furnish the opinions,
the letters and the certificates referred to in subsections of Paragraph 9
hereof, and, in the event that the Company shall file any amendment to the
Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date of the Registration Statement, such
counsel, such accountants, such officers and directors, respectively, will, at
the time of such filing or at such subsequent time as you shall specify, so
long as securities being registered by such amendment or supplement are being
13
underwritten by the Underwriters, furnish to you such opinions, letters and
certificates, each dated the date of its delivery, of the same nature as the
opinions, the letters and the certificates referred to in said Paragraph 9, as
you may reasonably request, or, if any such opinion or letter or certificate
cannot be furnished by reason of the fact that such counsel or such accountants
or any such officer or director believes that the same would be inaccurate,
such counsel or such accountants or such officer or director will furnish an
accurate opinion or letter or certificate with respect to the same subject
matter.
(o) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement in all material respects.
(p) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Warrants and issuable upon exercise of the
Representative's Warrants (including the underlying securities) outstanding
from time to time.
(q) Following the Effective Date and from time to time
thereafter, so long as the Warrants are outstanding, the Company will timely
prepare and file at its sole cost and expense one or more post-effective
amendments to the Registration Statement or a new registration statement as
required by law as will permit Warrant holders to be furnished with a current
prospectus in the event Warrants are exercised, and to use its best efforts and
due diligence to have same be declared effective. The Company will deliver a
draft of each such post-effective amendment or new registration statement to
the Representative at least ten days prior to the filing of such post-effective
amendment or registration statement.
(r) Following the Effective Date and from time to time thereafter
so long as any of the Warrants remain outstanding, the Company will timely
deliver and supply to its warrant agent sufficient copies of the Company's
current Prospectus, as will enable such Warrant Agent to deliver a copy of such
Prospectus to any Warrant or other holder where such Prospectus delivery is by
law required to be made.
(s) So long as any of the Warrants remain outstanding, the
Company shall continue to employ the services of a firm of independent
certified public accountants reasonably acceptable to the Representative in
connection with the preparation of the financial statements to be included in
any registration statement to be filed by the Company hereunder, or any
amendment or supplement thereto (it being understood that Jump, Green, Xxxxxx &
14
Company is acceptable to the Representative). During the same period, the
Company shall employ the services of a law firm(s) suitably experienced in
corporate and securities laws in connection with all legal work of the Company,
including the preparation of a registration statement to be filed by the
Company hereunder, or any amendment or supplement thereto.
(t) So long as any of the Warrants remain outstanding, the
Company shall continue to appoint a Warrant Agent for the Warrants, who shall
be reasonably acceptable to the Representative.
(u) The Company agrees that it will, upon the Closing Date, for a
period of no less than three (3) years, engage a designee of the Representative
as an advisor (the "Advisor") to its Board of Directors where such Advisor
shall attend meetings of the Board, receive all notices and other
correspondence and communications sent by the Company to members of its Board
of Directors and shall be entitled to receive compensation therefor equal to
the entitlement of all non-employee directors. Such Advisor shall also be
entitled to receive reimbursement for all reasonable costs incurred in
attending such meetings including, but not limited to, food, lodging, and
transportation. The Company further agrees that during said three (3) year
period, it shall schedule no less than four (4) formal and "in person" meetings
of its Board of Directors in each such year and fifteen (15) days advance
notice of such meetings shall be given to the Advisor. Further, during such
three (3) year period, the Company shall give notice to the Representative with
respect to any proposed acquisitions, mergers, reorganizations or other similar
transactions. In lieu of the Representative's right to designate an Advisor,
the Representative shall have the right during such three-year period, in its
sole discretion, to designate one person for election as a Director of the
Company and the Company will utilize its best efforts to obtain the election of
such person who shall be entitled to receive the same compensation, expense
reimbursements and other benefits set forth above.
The Company agrees to indemnify and hold the Underwriters and
such Advisor or Director harmless against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its of officers and directors, it agrees, if possible, to include
the Representative's designee as an insured under such policy.
(v) Upon the Closing Date, the Company shall have entered into a
two year agreement with the Representative in form reasonably satisfactory to
the Representative (the "Consulting Agreement"), pursuant to which the
Representative will be retained as a management and financial consultant and
will be paid an
15
aggregate fee of $85,400 all of which shall be paid upon the Closing Date.
(w) The Company's Common Stock and Warrants shall be listed on
the Nasdaq SmallCap Market ("Nasdaq"), and on the Boston Stock Exchange
("BSE"), not later than the Effective Date. Prior to the Effective Date, the
Company will make all filings required, including registration under the
Exchange Act, to obtain the listing of the Common Stock and Warrants on Nasdaq
and the BSE, and will effect and use its best efforts to maintain such listings
(unless the Company is acquired) for at least five years from the date of this
Agreement.
(x) The Company will apply for listing in Standard and Poors
Corporation Reports or Moodys OTC Guide and shall use its best efforts to have
the Company included in such publications for at least five years from the
Closing Date.
(y) For a period of twenty-four (24) months from the Closing
Date, no officer, director or holder of any securities of the Company prior to
the Offering (other than Christie Enterprises, Inc.) will, directly or
indirectly, offer, sell (including any short sale), grant any option for the
sale of, acquire any option to dispose of, or otherwise dispose of any shares
of Common Stock into public markets, including shares of Common Stock issuable
upon exercise of options, warrants or any convertible securities of the
Company, without the prior written consent of the Representative, other than as
set forth in the Registration Statement. In order to enforce this covenant, the
Company shall impose stop-transfer instructions with respect to the securities
owned by every stockholder prior to the Offering until the end of such period
(subject to any exceptions to such limitation on transferability set forth in
the Registration Statement). Notwithstanding the foregoing, the Company's
current stockholders shall be permitted to make transfers for estate planning
purposes or in private sales, so long as the transferee agrees in writing to be
bound by the foregoing provisions. If necessary to comply with any applicable
Blue-sky Law, the shares held by such stockholders will be escrowed with
counsel for the Company or otherwise as required.
(z) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization,
acquisition of a business or similar transactions or as result of the exercise
of warrants or options disclosed in or issued or granted pursuant to plans
disclosed in the Registration Statement, the Company shall not, for a period of
twenty-four (24) months following the Closing Date, directly or indirectly,
offer, sell, issue or transfer any shares of its capital stock, or any security
exchangeable or exercisable for, or convertible into, shares of the capital
stock or register
16
any of its capital stock (under any form of registration statement, including
Form S-8), without the prior written consent of the Representative. Options
granted pursuant to plans must be exercisable at the fair market value on the
date of grant.
(aa) For so long as any of the Warrants remain outstanding, the
Company shall maintain key person life insurance payable to the Company on the
life of Xxxxxxx X. XxXxxxx, its Chief Executive, in the amount of $1,000,000,
unless his employment with the Company is earlier terminated. In such event,
the Company will obtain a comparable policy on the life of his successor for
the balance of such period.
(bb) The Company will use its best efforts to obtain, as soon
after the Closing Date as is reasonably possible, liability insurance covering
its officers and directors.
(cc) The Company agrees that any conflict of interest arising
between a member of the Company's Board of Directors and the Company in
connection with such Director's dealing with, or obligations to, the Company,
shall be resolved by a vote of the majority of the independent members of the
Board of Directors.
(dd) The Company agrees that it will employ the services of a
financial public relations firm reasonably acceptable to the Representative for
a period of at least twelve months following the Effective Date.
4. Sale, Purchase and Delivery of Securities: Closing Date.
(a) The Company agrees to sell to the Underwriters, and the
Underwriters, on the basis of the warranties, representations and agreements of
the Company herein, and subject to the terms and conditions herein, agree to
purchase the Securities from the Company at a price of $5.00 per share of
Common Stock and $.10 per Warrant, less an underwriting discount of ten percent
(10%) of the offering price for each security. The Underwriters may allow a
concession not exceeding $ per share of Common Stock and $ per Warrant to
Selected Dealers who are members of the National Association of Securities
Dealers, Inc ("NASD"), and to certain foreign dealers, and such dealers may
reallow to NASD members and to certain foreign dealers a concession not
exceeding $ per share of Common Stock and $ per Warrant.
(b) Delivery of the Securities and payment therefor shall be made
at 10:00 A.M., New York time on the Closing Date, as hereinafter defined, at
the offices of the Representative or such other location as may be agreed upon
by you and the Company. Delivery of certificates for the Common Stock and
Warrants (in definitive form and registered in such names and in such
17
denominations as you shall request by written notice to the Company delivered
at least two business days' prior to the Closing Date), shall be made to you
for the account of the Underwriters against payment of the purchase price
therefor by certified or bank check or wire transfer payable in New York
Clearing House funds to the order of the Company. The Company will make such
certificates available for inspection at least two business days prior to the
Closing Date at such place as you shall designate.
(c) The "Closing Date" shall be , 1997, or such other
date not later than the sixth business day following the effective date of the
Registration Statement as you shall determine and advise the Company by at
least three full business days' notice, confirmed in writing.
(d) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Securities by the Company to the
Underwriters shall be borne by the Company. The Company will pay and hold the
Underwriters, and any subsequent holder of the Securities, harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance or sale to
the Underwriters of the Securities or any portions thereof.
5. Sale Purchase and Delivery of Additional Securities: Option
Closing Date.
(a) The Company agrees to sell to the Underwriters, and upon the
basis of the representations, warranties and agreements of the Company herein
contained, subject to the satisfaction of all the terms and conditions of this
Agreement, the Underwriters shall have the option (the "Option") to purchase
the Additional Securities from the Company, at the same price per Security as
set forth in Paragraph 4(a) above. Additional Securities may be purchased
solely for the purpose of covering over-allotments made in connection with the
distribution and sale of the Securities.
(b) The Option to purchase all or part of the Additional
Securities covered thereby is exercisable by you at any time and from time to
time before the expiration of a period of 45 calendar days from the date of the
Effective Date of the Registration Statement (the "Option Period") by written
notice to the Company setting forth the number of Additional Securities for
which the Option is being exercised, the name or names in which the
certificates for such Additional Securities are to be registered and the
denominations of such certificates. If less than all of the Additional
Securities are purchased, than the Underwriters shall exercise their Option to
purchase an equal number of shares
18
of Common Stock and Warrants. Upon each exercise of the Option, the Company
shall sell to the Underwriters the aggregate number of Additional Securities
specified in the notice exercising such Option.
(c) Delivery of the Additional Securities with respect to which
Options shall have been exercised and payment therefor shall be made at 10:00
A.M., New York time on the Option Closing Date, as hereinafter defined, at the
offices of the Representative or at such other locations as may be agreed upon
by you and the Company. Delivery of certificates for Additional Securities
shall be made to you for the account of the Underwriters against payment of the
purchase price therefor by certified or bank check or wire transfer in New York
Clearing House Funds to the order of the Company. The Company will make
certificates for Additional Securities to be purchased at the Option Closing
Date available for inspection at least two business days prior to such Option
Closing Date at such place as you shall designate.
(d) The "Option Closing Date" shall be the date not later than
five business days after the end of the Option Period as you shall determine
and advise the Company by at least three full business days' notice, unless
some other time is agreed upon between you and the Company.
(e) The obligations of the Underwriters to purchase and pay for
Additional Securities at such Option Closing Date shall be subject to
compliance as of such date with all the conditions specified in Paragraph 2
herein and the delivery to you of opinions, certificates and letters, each
dated such Option Closing Date, substantially similar in scope to those
specified in Paragraph 9 herein.
(f) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Additional Securities by the Company to
the Underwriters shall be borne by the Company. The Company will pay and hold
the Underwriters, and any subsequent holder of Additional Securities, harmless
from any and all liabilities with respect to or resulting from any failure or
delay in paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance or sale to
the Underwriters of the Additional Securities or any portion thereof.
6. Warrant Solicitation Fee.
The Company agrees to pay Roan Capital Partners L.P. ("Roan"), in its
individual capacity and not as representative of the underwriters, a fee of
seven percent (7%) of the aggregate exercise price of the Warrants if: (i) the
market price of the
19
Common Stock is greater than the exercise price of the Warrants on the date of
exercise; (ii) the exercise of the Warrants are solicited by a member of the
NASD and the customer states in writing that the transaction was solicited and
designates in writing the broker-dealer to receive compensation for the
exercise; (iii) the Warrants are not held in a discretionary account; (iv) the
disclosure of compensation arrangements was made both at the time of the
Offering and at the time of the exercise of the Warrant; and (v) the
solicitation of the Warrant is not in violation of Regulation M promulgated
under the Exchange Act. The Company agrees not to solicit the exercise of any
Warrants other than through Roan and will not authorize any other dealer to
engage in such solicitation without the prior written consent of the
Representative which will not be unreasonably withheld. The Warrant
solicitation fee will not be paid in a non-solicited transaction. No Warrant
solicitation by the Representative will occur prior to one year from the
Effective Date.
7. Representations and Warranties of the Underwriters.
The Underwriters represent and warrant to the Company that:
(a) The Underwriters are each members in good standing of the
National Association of Securities Dealers, Inc., and have complied with all
NASD requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Underwriters' knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale
of the Securities hereunder to which the Company is, or may become, obligated
to pay.
(c) Neither the Underwriters nor their respective registered
representatives have provided purchasers of the Securities with any information
concerning the Company other than the Preliminary Prospectus and the
Prospectus.
8. Payment of Expenses.
(a) The Company will pay and bear all costs, fees, taxes and
expenses incident to and in connection with: (i) the issuance, offer, sale and
delivery of the Securities, including all expenses and fees incident to the
preparation, printing, filing and mailing (including the payment of postage
with respect to such mailing) of the Registration Statement (including all
exhibits thereto), each Preliminary Prospectus, the Prospectus, and amendments
and post-effective amendments thereof and supplements thereto, and this
Agreement and related documents, Preliminary and Final Blue Sky Memoranda,
including the cost of preparing and copying all copies thereof in quantities
deemed necessary by the Underwriters;
20
(ii) the costs of preparing and printing all "Tombstone" and other appropriate
advertisements as mutually agreed upon by the Company and the Representative;
(iii) the printing, engraving, issuance and delivery of the Common Stock,
Warrants, Warrant Shares, Additional Securities, Underwriters' Warrants and the
securities underlying the Underwriters' Warrant, including any transfer or
other taxes payable thereon in connection with the original issuance thereof;
(iv) the qualification of the Common Stock and Warrants under the state or
foreign securities or "Blue Sky" laws selected by the Underwriters and the
Company, and disbursements and reasonable fees of counsel for the Underwriters
in connection therewith (not to exceed $35,000) plus the filing fees for such
states; (v) fees and disbursements of counsel and accountants for the Company;
(vi) other expenses and disbursements reasonably incurred on behalf of the
Company (vii) the filing fees payable to the Commission and the National
Association of Securities Dealers, Inc. ("NASD"); (viii) any listing of the
Common Stock and Warrants on a securities exchange or on NASDAQ.
(b) In addition to the expenses to be paid and borne by the
Company referred to in Paragraph 8(a) above, the Company shall reimburse you at
closing for expenses incurred by you in connection with the Offering (for which
you need not make any accounting), in the amount of 3% of the price to the
public of the Securities and Additional Securities sold in the Offering. This
3% non-accountable expense allowance shall cover the fees of your legal
counsel, but shall not include any expenses for which the Company is
responsible under Paragraph 8(a) above, including the reasonable fees and
disbursements of your legal counsel with respect to Blue Sky matters. As of the
date hereof, $40,000 has been advanced by the Company to the Underwriters with
respect to such non-accountable expense allowance.
(c) In the event that the Company does not or cannot, for any
reason whatsoever other than a default by the Underwriters, proceed with the
Offering, or if any of the representations, warranties or covenants contained
in this Agreement are not materially correct or cannot be complied with by the
Company, or business prospects or obligations of the Company are adversely
affected and the Company does not commence or continue with the Offering at any
time or terminates the proposed transaction prior to the Closing Date, the
Company shall reimburse the Underwriters on an accountable basis for all
out-of-pocket expenses actually incurred in connection with the Underwriting,
this Agreement and all of the transactions hereby contemplated (including,
without limitation, your legal fees and expenses), up to an aggregate total of
$100,000 less such sums which have already been paid.
9. Conditions of Underwriters' Obligations.
21
The obligations of the Underwriters to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Date, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements hereunder
and under each certificate, opinion and document contemplated hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you and, on or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or
registration of the Securities under the securities laws of any jurisdiction
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 or any such authorities of any
jurisdiction and any request on the part of the Commission or any such
authorities for additional information shall have been complied with to the
reasonable satisfaction of the Commission or such authorities and counsel to
the Underwriters and after the date hereof no amendment or supplement shall
have been filed to the Registration Statement or Prospectus without your prior
consent.
(b) The Registration Statement or the Prospectus or any amendment
thereof or supplement thereto shall not contain an untrue statement of a fact
which is material, or omit to state a fact which is material and is required to
be stated therein or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) Between the time of the execution and delivery of this
Agreement and the Closing Date, there shall be no litigation instituted against
the Company or any of its officers or directors and between such dates there
shall be no proceeding instituted or, to the Company's knowledge, threatened
against the Company or any of its officers or directors before or by any
federal, state or county commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding would have a material adverse effect
on the Company or its business, business prospects or properties, or have a
material adverse effect on the financial condition or results of operation of
the Company.
(d) Each of the representations and warranties of the Company
contained herein and each certificate and document
22
contemplated under this Agreement to be delivered to you shall be true and
correct at the Closing Date as if made at the Closing Date, and all covenants
and agreements contained herein and in each such certificate and document to be
performed on the part of the Company, and all conditions contained herein and
in each such certificate and document to be fulfilled or complied with by the
Company at or prior to the Closing Date shall be fulfilled or complied with.
(e) At the Closing Date, you shall have received the opinion of
Xxxxxxx Xxxxxx & Green, P.C., counsel to the Company, dated as of such Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
counsel to the Underwriters, to the effect that:
(i) The Company and each of its Subsidiaries are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation with full corporate power and authority,
and all licenses, permits, certifications, registrations, approvals, consents
and franchises to own or lease and operate their properties and to conduct
their businesses as described in the Registration Statement. The Company and
each of its Subsidiaries are duly qualified to do business as foreign
corporations and are in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company and each of its Subsidiaries;
(ii) The Company has full corporate power and authority to
execute, deliver and perform the Underwriting Agreement, the Consulting
Agreement, the Warrant Agreement and the Representative's Warrants and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Underwriting Agreement, the Consulting Agreement, the
Warrant Agreement and the Representative's Warrants by the Company, the
consummation by the Company of the transactions therein contemplated and the
compliance by the Company with the terms of the Underwriting Agreement, the
Consulting Agreement, the Warrant Agreement and the Representative's Warrants
have been duly authorized by all necessary corporate action, and each of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Representative's Warrants have been duly executed and delivered by the Company.
Each of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Representative's Warrants is a valid and binding obligation
of the Company, enforceable in accordance with their respective terms, subject,
as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the discretion of courts in
23
granting equitable remedies and except that enforceability of the
indemnification provisions and the contribution provisions set forth in the
Underwriting Agreement may be limited by the federal securities laws or public
policy underlying such laws;
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Representative's Warrants by the Company, the consummation by the Company of
the transactions therein contemplated and the compliance by the Company with
the terms of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Representative's Warrants do not, and will not, with or
without the giving of notice or the lapse of time, or both, (A) result in a
violation of the Certificate of Incorporation, as the same may be amended, or
Bylaws of the Company or any of its Subsidiaries, (B) to the best of our
knowledge, result in a breach of, or conflict with, any terms or provisions of
or constitute a default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any indenture, mortgage, note, contract,
commitment or other material agreement or instrument to which the Company or
any of its Subsidiaries are a party or by which the Company or any of its
Subsidiaries or any of their properties or assets are or may be bound or
affected, except where any of the foregoing would not result in a material
adverse effect upon the Company's or any Subsidiaries business or operations;
(C) to the best of our knowledge, violate any existing applicable law, rule or
regulation or judgment, order or decree known to us of any governmental agency
or court, domestic or foreign, having jurisdiction over the Company or any of
its Subsidiaries or any of their properties or businesses; or (D) to the best
of our knowledge, have any effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company or any of its
Subsidiaries to own or lease and operate their properties and to conduct their
business or the ability of the Company or any of its Subsidiaries to make use
thereof;
(iv) To the best of our knowledge, no authorization,
approval, consent, order, registration, license or permit of any court or
governmental agency or body (other than under the Act, the Regulations and
applicable state securities or Blue Sky laws) is required for the valid
authorization, issuance, sale and delivery of the Securities, the Additional
Securities, the Common Stock, the Warrants, the Warrant Shares, or the
Representative's Warrants, and the consummation by the Company of the
transactions contemplated by the Underwriting Agreement, the Consulting
Agreement, the Warrant Agreement or the Representative's Warrants;
24
(v) The Registration Statement was declared effective under
the Act on , 1997; to the best our knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued, and no proceedings
for that purpose have been instituted or are pending, threatened or
contemplated under the Act or applicable state securities laws;
(vi) The Registration Statement and the Prospectus, as of the
Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which we express no opinion),
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company;
(vii) The description in the Registration Statement and the
Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to
the best of our knowledge, there are no material statutes or regulations, or,
to the best of our knowledge, material contracts or documents, of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement, which are not so described
or filed as required.
To the best of our knowledge, none of the material provisions
of the contracts or instruments described above violates any existing
applicable law, rule or regulation or judgment, order or decree known to us of
any United States governmental agency or court having jurisdiction over the
Company or any of its assets or businesses;
(viii) The outstanding Common Stock and Warrants have been
duly authorized and validly issued. The outstanding Common stock is fully paid
an nonassessable. To the best of our knowledge, none of the outstanding Common
Stock has been issued in violation of the preemptive rights of any stockholder
of the Company. None of the holders of the outstanding Common Stock is subject
to personal liability solely by reason of being such a holder. The authorized
Common Stock conforms to the description thereof contained in the Registration
Statement and Prospectus. To the best of our knowledge, except as set forth in
the Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under
the Act;
(ix) The issuance and sale of the Securities, the Additional
Securities, the Common Stock, the Warrants, the Warrant Shares and the
Representative's Warrants have been duly authorized
25
and when issued and paid for in accordance with the Underwriting Agreement or
the respective Warrants will be validly issued, fully paid and nonassessable,
and the holders thereof will not be subject to personal liability solely by
reason of being such holders. Neither the Securities, the Additional
Securities, nor the Common Stock are subject to preemptive rights of any
stockholder of the Company. The certificates representing the Securities are in
proper legal form;
(x) The issuance and sale of the Warrant Shares and the
Representative's Warrants have been duly authorized and, when paid for, issued
and delivered pursuant to the terms of the Warrant Agreement or the
Representative's Warrants, as the case may be, the Warrants and the
Representative's Warrants will constitute the valid and binding obligations of
the Company, enforceable in accordance with their terms, to issue and sell the
Warrants, the Warrant Shares and/or Representative's Warrants. All corporate
action required to be taken for the authorization, issuance and sale of the
securities has been duly, validly and sufficiently taken. The Common Stock and
the Warrants have been duly authorized by the Company to be offered in the form
of the Securities. The Warrants, the Warrant Shares and the Representative's
Warrants conform to the descriptions thereof contained in the Registration
Statement and Prospectus;
(xi) The Underwriters have acquired good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims, provided that the Underwriters are bona fide purchasers
as defined in ss.8-302 of the Uniform Commercial Code;
(xii) Assuming that the Underwriters exercise the
over-allotment option to purchase the Additional Securities and make payments
therefor in accordance with the terms of the Underwriting Agreement, upon
delivery of the Additional Securities to the Underwriters thereunder, the
Underwriters will acquire good title to the Additional Securities, free and
clear of any liens, encumbrances, equities, security interests and claims,
provided that the Underwriters are bona fide purchasers as defined in ss.8-302
of the Uniform Commercial Code;
(xiii) To the best of our knowledge, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, foreign or domestic, or before any
private arbitration tribunal, pending or threatened against the Company or any
of its Subsidiaries or involving their properties or businesses, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company or any of
its Subsidiaries
26
which, individually and in the aggregate, is not material, and, except as
otherwise disclosed in the Prospectus and the Registration Statement, the
Company and its Subsidiaries have complied with all federal and state laws,
statutes and regulations concerning its business;
(xiv) All sales of the Company's securities have been made in
compliance with or under an exemption from the registration requirements of the
Act, and no purchaser of such securities in any such sale has a right of action
against the Company for failure to comply with the registration or filing
requirements of any state; and
(xv) We have participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus. Although we are not passing upon and do not assume responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement, no facts came to our attention which lead us to believe
that (A) the Registration Statement (except as to the financial statements and
other financial data contained therein, as to which we express no opinion), on
the Effective Date, contained any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which we express no opinion) contains any untrue
statement or a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(f) On or prior to the Closing Date, counsel for the Underwriters
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review the matters
referred to in subparagraph (e) of this Paragraph 9, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained.
(g) Prior to the Closing Date:
(i) There shall have been no material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in
the Registration Statement and Prospectus;
(ii) There shall have been no transaction, outside the
ordinary course of business, entered into by the Company from
27
the latest date as of which the financial condition of the Company is set forth
in the Registration Statement and Prospectus which is material to the Company,
which is either (x) required to be disclosed in the Prospectus or Registration
Statement and is not so disclosed, or (y) likely to have a material adverse
effect on the Company's business or financial condition;
(iii) The Company shall not be in default under any material
provision of any instrument relating to any outstanding indebtedness, except as
described in the Prospectus;
(iv) No material amount of the assets of the Company shall
have been pledged, mortgaged or otherwise encumbered, except as set forth in
the Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company or
affecting any of its properties or businesses before or by any court or federal
or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, operations, prospects or financial condition or income of the
Company, taken as a whole, except as set forth in the Registration Statement
and Prospectus; and
(vi) No stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated or, to the Company's
knowledge, threatened by the Commission.
(vii) Each of the representations and warranties of the
Company contained in this Agreement and in each certificate and document
contemplated under this Agreement to be delivered to you was, when originally
made and is at the time such certificate is dated, true and correct.
(h) Concurrently with the execution and delivery of this
Agreement and at the Closing Date, you shall have received a certificate of the
Company signed by the Chief Executive Officer of the Company and the principal
financial officer of the Company, dated as of the Closing Date, to the effect
that the conditions set forth in subparagraph (g) above have been satisfied and
that, as of the Closing Date, the representations and warranties of the Company
set forth in Paragraph 2 herein and the statements in the Registration
Statement and Prospectus were and are true and correct in all material
respects. Any certificate signed by any officer of the Company and delivered to
you or for counsel for the Underwriters shall be deemed a representation and
warranty by the Company to the Underwriters as to the statements made therein.
28
(i) At the time this Agreement is executed, and at the Closing
Date, you shall have received a "cold comfort" letter, addressed to the
Underwriters and in form and substance satisfactory in all respects to you and
counsel for the Underwriters, from Jump, Green, Xxxxxx & Company, dated as of
the date of this Agreement and as of the Closing Date.
(j) All proceedings taken in connection with the authorization,
issuance or sale of the Common Stock, Warrants, Warrant Shares, Additional
Securities, the Representative's Warrants and the Representative's Warrant
Shares as herein contemplated shall be satisfactory in form and substance to
you and to counsel to the Underwriters, and the Underwriters shall have
received from such counsel an opinion, dated as the Closing Date with respect
to such of these proceedings as you may reasonably require.
(k) The Company shall have furnished to you such certificates,
additional to those specifically mentioned herein, as you may have reasonably
requested in a timely manner as to the accuracy and completeness, at the
Closing Date, of any statement in the Registration Statement or the Prospectus,
as to the accuracy, at the Closing Date, of the representations and warranties
of the Company herein and in each certificate and document contemplated under
this Agreement to be delivered to you, as to the performance by the Company of
its obligations hereunder and under each such certificate and document or as to
the fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(l) The obligation of the Underwriters to purchase Additional
Securities hereunder is subject to the accuracy of the representations and
warranties of the Company contained herein on and as of the Option Closing Date
and to the satisfaction on and as of the Option Closing Date of the conditions
set forth herein.
(m) On the Closing Date there shall have been duly tendered to
you for your account the appropriate number of shares of Common Stock and
Warrants constituting the Securities.
10. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless the Underwriters and each person, if any, who
controls the Underwriters ("controlling person") within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act, against any and all
losses, liabilities, claims, damages, actions and expenses or liability, joint
or several, whatsoever (including but not limited to any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or
29
threatened, or any claim whatsoever), joint or several, to which it or such
controlling persons may become subject under the Act, the Exchange Act or under
any other statute or at common law or otherwise or under the laws of foreign
countries, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
Preliminary Prospectus or the Prospectus (as from time to time amended and
supplemented); in any post-effective amendment or amendments or any new
registration statement and prospectus in which is included the Warrant Shares
of the Company issued or issuable upon exercise of the Warrants, or
Underwriters' Warrant Shares upon exercise of the Underwriters' Warrants; or in
any application or other document or written communication (in this Paragraph
10 collectively called "application") executed by the Company or based upon
written information furnished by the Company filed in any jurisdiction in order
to qualify the Common Stock, Warrants, Warrant Shares, Additional Securities,
Representative's Warrants and Representative's Warrant Shares (including the
Shares issuable upon exercise of the Warrants underlying the Representative's
Warrants) under the securities laws thereof or filed with the Commission or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission
was made in reliance upon or in conformity with written information furnished
to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in
application, as the case may be. Notwithstanding the foregoing, the Company
shall have no liability under this Paragraph 10(a) if any such untrue statement
or omission made in a Preliminary Prospectus, is cured in the Prospectus and
the Underwriters failed to deliver to the person or persons alleging the
liability upon which indemnification is being sought, at or prior to the
written confirmation of such sale, a copy of the Prospectus. This indemnity
will be in addition to any liability which the Company may otherwise have.
(b) The Underwriters agree to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters in Paragraph 10(a), but only with respect to any untrue
statement or alleged untrue statement of any material fact contained in or any
omission or alleged omission to state a material fact required to be stated in
any Preliminary Prospectus,
30
the Registration Statement or Prospectus or any amendment or supplement thereof
or necessary to make the statements therein not misleading or in any
application made solely in reliance upon, and in conformity with, written
information furnished to the Company by you specifically expressly for use in
the preparation of such Preliminary Prospectus, the Registration Statement or
Prospectus directly relating to the transactions effected by the Underwriters
in connection with this Offering. This indemnity agreement will be in addition
to any liability which the Underwriters may otherwise have. Notwithstanding the
foregoing, the Underwriters shall have no liability under this Paragraph 10(b)
if any such untrue statement or omission made in a Preliminary Prospectus is
cured in the Prospectus, and the Prospectus is delivered to the person or
persons alleging the liability upon which indemnification is being sought.
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee shall
have the right to employ its or their own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such Indemnitee
unless the employment of such counsel shall have been authorized in writing by
the Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings against the Indemnitee in
connection with the issue and sale of the Common Stock, Warrants, Warrants
Shares, Additional Securities, Representative's Securities or in connection
with the Registration Statement or Prospectus.
(d) In order to provide for just and equitable contribution under
the Act in any case in which: (i) the Underwriters make a claim for
indemnification pursuant to Paragraph 10 hereof, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the time to appeal has expired or the last right of appeal has
been denied) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 10 provides for indemnification of
such case; or (ii) contribution under the Act may be required on the part of
the Underwriters in circumstances for which indemnification is provided under
this Paragraph 10, then, and in each such case, the Company and the
Underwriters shall
31
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after any contribution from others) in such proportion so
that the Underwriters are responsible for the portion represented by dividing
the total compensation received by the Underwriters herein by the total
purchase price of all Securities sold in the public offering and the Company is
responsible for the remaining portion; provided, that in any such case, 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 was
not guilty of such fraudulent misrepresentation.
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. As used in this Paragraph
10, the term "Underwriters" includes any officer, director, or other person who
controls the Underwriters within the meaning of Section 15 of the Act, and the
word "Company" includes any of officer, director or person who controls the
Company within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriters and each person who controls the Underwriters shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter
from any party who did not consent to the settlement.
(e) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability it may have to
any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against
any party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 10 are in
addition to any other rights or remedies which either party hereto may have
with respect to the other or hereunder.
32
11. Representations Warranties Agreements to Survive Delivery.
The respective indemnity and contribution agreements by the
Underwriters and the Company contained in Paragraph 10 hereof, and the
covenants, representations and warranties of the Company and the Underwriters
set forth in this Agreement, shall remain operative and in full force and
effect regardless of (i) any investigation made by the Underwriters or on their
behalf or by or on behalf of any person who controls the Underwriters, or by
the Company or any controlling person of the Company or any director or any of
officer of the Company, (ii) acceptance of any of the Securities and payment
therefor, or (iii) any termination of this Agreement, and shall survive the
delivery of the Securities and any successor of the Underwriters or the
Company, or of any person who controls you or the Company or any other
indemnified party, as the case may be, shall be entitled to the benefit of such
respective indemnity and contribution agreements. The respective indemnity and
contribution agreements by the Underwriters and the Company contained in this
Paragraph 11 shall be in addition to any liability which the Underwriters and
the Company may otherwise have.
12. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 A.M., New York
time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Representative by
notifying the Company at any time on or before the Closing Date, if any
domestic or international event or act or occurrence has materially disrupted,
or in your opinion will in the immediate future materially disrupt, securities
markets; or if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or NASDAQ or by order of the Commission or any other
governmental authority having jurisdiction; or if a moratorium in foreign
exchange trading by major international banks or persons has been declared; or
if the Company shall have sustained a loss material or substantial to the
Company taken as a whole by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in
33
your opinion, make it inadvisable to proceed with the delivery of the
Securities; or if there shall have been a material adverse change in the
conditions of the securities market in general, as in your reasonable judgment
would make it inadvisable to proceed with the offering, sale and delivery of
the Securities; or if there shall have been a material adverse change in the
financial or securities markets, particularly in the over-the-counter market,
in the United States having occurred since the date of this Agreement.
(c) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Paragraph 12, the
Company shall be notified promptly by you by telephone or facsimile, confirmed
by letter.
(d) If this Agreement shall not become effective or if this
Agreement shall not be carried out within the time specified herein by reason
of any failure on the part of the Company to perform any undertaking, or to
materially satisfy any condition of this Agreement by it to be performed or
satisfied, the sole liability of the Company to the Underwriters, in addition
to the obligations assumed by the Company pursuant to Paragraph 8 herein, will
be to reimburse the Underwriters for the following: (i) Blue Sky counsel fees
and expenses to the extent set forth in Paragraph 8(a)(iv); (ii) Blue Sky
filing fees; and (iii) such reasonable out-of-pocket expenses of the
Underwriters (including the fees and disbursements of their counsel), to the
extent set forth in Paragraph 8(c), in connection with this Agreement and the
proposed offering of the Securities, but in no event to exceed the sum of
$100,000 less such amounts already paid.
Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Paragraph 8 and 10 hereof shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
13. Notices.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriters, shall be
mailed, delivered or telegraphed and confirmed to the Representative at Roan
Capital Partners L.P., 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxx Xxxx, with a copy thereof to Xxxxxxxxx Xxxxxxxxxxx, Esq.,
Gusrae Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and, if sent
to the Company, shall be mailed, delivered or telegraphed and confirmed to the
Company at 000-0 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000, Attention:
Xxxxxxx X. XxXxxxx, President, with a copy thereof to Xxxxxxx Xxxxxx & Green,
P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxx,
Esq.
34
14. Parties.
This Agreement shall inure solely to the benefit of and shall be
binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Paragraph 10 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or claim under or
in respect of or by virtue of this Agreement or any provision herein contained.
15. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York and shall supersede any
agreement or understanding, oral or in writing, express or implied, between the
Company and you relating to the sale of any of the Securities.
16. Jurisdiction and Venue.
The Company agrees that the courts of the State of New York shall have
jurisdiction over any litigation arising from this Agreement, and venue shall
be proper in the Southern District of New York.
17. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the understanding between
you, the Selling Stockholders and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
DISCAS, INC.
By:
-------------------------------
Xxxxxxx X. XxXxxxx, President
Accepted as of the date first
above written:
ROAN CAPITAL PARTNERS L.P.
By:
-------------------------------
35
SCHEDULE A
Number of Shares Number of
of Common Stock Warrants to
to be Purchased to be Purchased
--------------- ---------------
Underwriter
-----------
Roan Capital Partners L.P.
Total: 800,000 800,000
======= =======
