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WATERSIDE CAPITAL CORPORATION
800,000 COMMON SHARES
UNDERWRITING AGREEMENT
Richmond, Virginia
, 1998
XXXXX & XXXXXXXXXXXX, INC.
As Representative of the Several
Underwriters Named in Schedule I Hereto
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Waterside Capital Corporation, a Virginia corporation (the "Company"),
proposes to sell to Xxxxx & Xxxxxxxxxxxx, Inc. (the "Representative") and the
several other underwriters named in Schedule I hereto (collectively, with the
Representative, the "Underwriters") 800,000 shares of the Company's $1.00 par
value common stock ("Common Shares"). Such Common Shares to be sold to the
Underwriters by the Company are referred to collectively herein as the "Firm
Shares." The respective amounts of the Firm Shares to be purchased by the
several Underwriters are set forth opposite their names in Schedule I hereto.
The Firm Shares shall be offered to the public at a public offering price of
$ per Firm Share (the "Offering Price").
In addition, in order to cover over-allotments in the sale of the Firm
Shares, the Underwriters may purchase for the Underwriters' own accounts,
ratably in proportion to the amounts set forth opposite their respective names
in Schedule I hereto, up to 120,000 additional Common Shares from the Company.
Such 120,000 additional Common Shares are referred to collectively herein as the
"Optional Shares." If any Optional Shares are purchased, they shall be purchased
for offering to the public at the Offering Price and in accordance with the
terms and conditions set forth herein. The Firm Shares and the Optional Shares
are referred to collectively herein as the "Shares."
The Company, intending to be legally bound, hereby confirms its agreement
with the Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES.
Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) the Company has prepared, in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Regulations") of the Securities and Exchange
Commission (the "SEC") under the Act in effect at all applicable times,
and has filed with the SEC a registration statement on Form N-5 (File
No. 333-36709) and one or more amendments thereto for the purpose of
registering the Shares (or a portion of the Shares if a "Rule 462(b)
Registration Statement," as defined below, has been or is to be filed),
the common stock purchase warrant referred to in Section 5(u) (the
"Representative's Warrant"), and the shares of common stock underlying
the Representative's Warrant (the "Warrant Stock"). The Company
similarly may have prepared or may prepare an additional registration
statement on Form N-5 with respect to a portion of the Shares pursuant
to Rule 462(b) of the Regulations, and if so prepared or if to be so
prepared, such additional registration statement has been or will be
filed pursuant to Rule 462(b) of the Regulations. The term "Rule 462(b)
Registration Statement" means such additional registration statement, if
any, filed pursuant to Rule 462(b) of the Regulations, including,
without limitation, all exhibits thereto, the contents of the earlier
registration statement incorporated therein by reference, and any
price-related information included therein, but omitted from the earlier
registration statement in reliance on Rule 430A of the Regulations.
Copies of all such registration statements (or the form thereof in the
case of a Rule 462(b) Registration Statement that has not yet
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been filed) and any amendments thereto, and all forms of the related
prospectus contained therein, have been delivered to the Representative.
Each prospectus included in any such registration statement before it
became effective under the Act and any prospectus filed with the SEC
pursuant to Rule 424(a) of the Regulations is hereinafter called a
"Preliminary Prospectus." The various parts of the first registration
statement referenced in this Section l(a), including all exhibits
thereto and the information contained in the form of final prospectus
filed with the SEC pursuant to Rule 424(b) of the Regulations in
accordance with Section 5(b) of this Agreement and deemed by virtue of
Rule 430A(b) of the Regulations to be part of the registration statement
at the time it was declared effective, each as amended at the time the
registration statement became effective, as well as the information
contained in the Rule 462(b) Registration Statement, if any, deemed to
be a part of the registration statement, are hereinafter collectively
called the "Primary Registration Statement." The term "Registration
Statements" means both the Primary Registration Statement and the Rule
462(b) Registration Statement, if any, collectively. The term "Term
Sheet" means the term sheet, if any, containing the information required
pursuant to Rule 434(b) or (c), as applicable, of the Regulations, and
filed pursuant to Rule 424(b)(7) of the Regulations. The term
"Prospectus" means the Prospectus relating to the Shares included in the
Registration Statement at the time it became effective (including, if
the Company omitted information from the Primary Registration Statement
pursuant to Rule 430A(a) of the Regulations, the information deemed to
be a part of the Primary Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the Regulations); provided,
however, that, if with the consent of the Representative, the Company
provides a Term Sheet prior to the time any confirmation is sent or
given for purposes of Section 2(10)(a) of the Act, the term "Prospectus"
shall mean the "prospectus subject to completion" (as defined in Rule
434(g) of the Regulations) last provided to the Representative by the
Company and circulated by the Underwriters to all prospective purchasers
of the Shares, plus and including the information contained in the Term
Sheet. Notwithstanding the foregoing, if any revised Prospectus shall be
provided to the Underwriters by the Company for use in connection with
the offering of the Shares that differs from the Prospectus referred to
in the immediately preceding sentence (whether or not such revised
Prospectus is required to be filed with the SEC pursuant to Rule 424(b)
of the Regulations), the term "Prospectus" shall refer to such revised
Prospectus from and after the time it is first provided to the
Underwriters for such use. If, with the consent of the Representative,
the Company shall have provided to the Underwriters a Term Sheet prior
to the time any confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the Prospectus and the Term Sheet together will not
be materially different from the prospectus in the Registration
Statements;
(b) the Primary Registration Statement has become effective under
the Act and the SEC has not issued any stop order suspending the
effectiveness of the Registration Statements or preventing or suspending
the use of any Preliminary Prospectus, nor has the SEC instituted or
threatened to institute proceedings with respect to such an order. No
stop order suspending the sale of the Shares, the Representative's
Warrants, or the Warrant Stock in any jurisdiction designated by the
Representative as provided for in Section 5(i) hereof has been issued,
and no proceedings for that purpose have been instituted or threatened.
The Company has complied in all material respects with all requests of
the SEC, or requests of which the Company has been advised of any state
or foreign securities commission in a state designated by the
Representative as provided for in Section 5(i) hereof, for additional
information to be included in the Registration Statements, any
Preliminary Prospectus or the Prospectus. Each Preliminary Prospectus
conformed to all the requirements of the Act and the Regulations as of
its date in all material respects and did not as of its date contain any
untrue statement of material fact or omit to state 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, except the foregoing shall not apply to statements in, or
omissions from, any Preliminary Prospectus in reliance upon and in
conformity with information regarding the Underwriters supplied to the
Company in writing by or on behalf of any Underwriter through the
Representative expressly for use therein. The Primary Registration
Statement, on the date on which
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it was declared effective by the SEC (the "Effective Date") and when any
post-effective amendment thereof shall become effective, the Rule 462(b)
Registration Statement when filed with the SEC, and the Prospectus, at
the time it is filed with the SEC and on the Closing Date (as defined in
Section 3 hereof) and any Option Closing Date (as defined in Section
4(b) hereof), conformed and will conform in all material respects to all
the requirements of the Act and the Regulations, and did not and will
not, on any of such dates, include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, except that
this representation and warranty does not apply to statements in or
omissions from the Primary Registration Statement (including the
information contained in the Rule 462(b) Registration Statement after it
is filed with the SEC) or the Prospectus made in reliance upon and in
conformity with information regarding the Underwriters furnished to the
Company in writing by or on behalf of any Underwriter through the
Representative expressly for use therein;
(c) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia,
with all necessary corporate power and authority, and all required
licenses, permits, clearances, certifications, registrations, approvals,
and consents, to own or lease and operate its properties and to conduct
its business as described in the Prospectus, and to execute, deliver and
perform this Agreement. The Company is duly qualified to do business as
a foreign corporation or partnership, as applicable, and is in good
standing, in all jurisdictions in which such qualification is required,
except where the failure to so qualify would not have a material adverse
effect on the general affairs, properties, condition (financial or
otherwise), results of operations, stockholders' equity, business or
prospects of the Company taken as a whole (a "Material Adverse Effect").
No proceeding has been instituted in any jurisdiction revoking, limiting
or curtailing, or seeking to revoke, limit or curtail the Company's
corporate power and authority or qualification or ability to own or
lease and operate its properties and to conduct its business as
described in the Prospectus;
(d) The Company has no subsidiaries. The Company owns no stock or
other interest whatsoever, directly or indirectly, whether equity or
debt, in any corporation, partnership or other entity other than
disclosed in the Prospectus and Registration Statements;
(e) this Agreement and the Representative's Warrant Agreement
("Representative's Warrant Agreement") have been duly authorized,
executed and delivered by the Company and constitute its legal, valid
and binding obligation, enforceable against the Company in accordance
with their terms, except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and subject to applicability of general principles of
equity and except, as to this Agreement, as rights to indemnity and
contribution may be limited by federal and state securities laws or
principles of public policy;
(f) the execution, delivery and performance of this Agreement and
the Representative's Warrant Agreement and the transactions contemplated
therein do not and will not, with or without the giving of notice or the
lapse of time, or both, (i) conflict with any term or provision of the
Company's Articles of Incorporation or Bylaws; (ii) result in a breach
of, constitute a default under, result in the termination or
modification of, result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the assets of the
Company under, or require any payment by the Company or impose any
liability on the Company pursuant to, any contract, indenture, mortgage,
deed of trust, commitment or other agreement or instrument to which the
Company is a party or by which any of their assets are bound or
affected; (iii) assuming compliance with Blue Sky laws and regulations
applicable to the offer and sale of the Shares, the Representative's
Warrant and the Warrant Stock, violate any applicable law, rule,
regulation, judgment, order or decree of any government or governmental
agency, instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or businesses; or
(iv) result in a breach, termination or lapse of the Company's corporate
power and authority to own or lease and operate its respective assets
and properties and conduct its businesses as described in the
Prospectus;
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(g) at the date or dates indicated in the Prospectus, the Company
had the duly authorized and outstanding capitalization set forth in the
Prospectus under the caption "Capitalization" and will have, as of the
issuance of the Firm Shares on the Closing Date, the pro forma adjusted
capitalization set forth therein. The description of the Company's
capitalization in the Prospectus conforms in all material respects with
the instruments defining the same. On the Effective Date, the Closing
Date and any Option Closing Date (as defined in Section 4(b) hereto),
there will be no options or warrants for the purchase of, other
outstanding rights to purchase, agreements or obligations to issue or
agreements or other rights to convert or exchange any obligation or
security into, capital stock of the Company or securities convertible
into or exchangeable for capital stock of the Company, except as
expressly described in the Prospectus. The information in the Prospectus
insofar as it relates to all outstanding options and other rights to
acquire securities of the Company as of the Effective Date and
immediately prior to the Closing Date and any Option Closing Date is
true and correct in all material respects;
(h) the currently outstanding shares of the Company's capital stock
have been duly authorized and are validly issued, fully paid and
non-assessable, and none of such outstanding shares of the Company's
capital stock has been issued in violation of any preemptive rights of
any security holder of the Company. No preemptive rights or other rights
to subscribe for or purchase exist with respect to the sale of the
Shares by the Company. The holders of the outstanding shares of the
Company's capital stock are not subject to personal liability solely by
reason of being such holders. All previous offers and sales of the
outstanding shares of the Company's capital stock, whether described in
the Registration Statement or otherwise, were made in conformity with
applicable federal and state securities laws. The authorized capital
stock of the Company, including, without limitation, the outstanding
Common Shares, the Shares being issued, the Representative's Warrant,
the Warrant Stock and the outstanding options to purchase shares of
Common Shares conform in all material respects with the descriptions
thereof in the Prospectus, and such descriptions conform in all material
respects with the instruments defining the same.
(i) when the Shares and Warrant Stock have been duly delivered
against payment therefor as contemplated by this Agreement, the Shares
and Warrant Stock will be validly issued, fully paid and non-assessable.
The certificates representing the Shares are, and certificates
representing the Warrant Stock will be, in proper legal form under, and
conform in all respects to the requirements of, the Virginia Stock
Corporation Act, as amended (the "VSCA"). Neither the filing of the
Registration Statement nor the offering or sale of Shares, the
Representative's Warrant or the Warrant Stock as contemplated by this
Agreement gives any security holder of the Company any rights for or
relating to the registration of any Common Shares or any other capital
stock of the Company or any rights to convert or have redeemed or
otherwise receive anything of value with respect to any other security
of the Company;
(j) no consent, approval, authorization, order, registration,
license, permit of, or filing or registration with, any court,
government, governmental agency, instrumentality or other regulatory
body or official is required for the valid and legal execution, delivery
and performance by the Company of this Agreement or the Representative's
Warrant Agreement and the consummation of the transactions contemplated
hereby and described in the Prospectus, except such as may be required
for the registration of the Shares, the Representative's Warrant and the
Warrant Stock under the Act, the Regulations and for compliance with the
1940 Act, applicable state securities or Blue Sky laws or the Bylaws,
rules and other pronouncements of the National Association of Securities
Dealers, Inc. (the "NASD"):
(k) the Company is registered under the Investment Company Act of
1940 ("1940 Act") and the Company has complied in all material respects
with the applicable provisions of the 1940 Act during the period it was
subject to such requirements;
(l) the statements in the Registration Statements and Prospectus,
insofar as they are descriptions or summaries of or references to
contracts, agreements or other documents, are accurate in all
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material respects and present or summarize fairly, in all material
respects, the information required to be disclosed under the Act, the
1940 Act and/or the Regulations, and there are no contracts, agreements
or other documents, instruments or transactions of any character
required to be described or referred to in the Registration Statements
or Prospectus or to be filed as exhibits to the Registration Statements
that have not been so described, referred to or filed, as required;
(m) the consolidated financial statements of the Company (including
the notes thereto) filed as part of any Preliminary Prospectus, the
Prospectus and the Registration Statements present fairly, in all
material respects, the financial position of the Company as of the
respective dates thereof, and the results of operations and cash flows
of the Company for the periods indicated therein, all in conformity with
generally accepted accounting principles consistently applied throughout
the periods involved. The supporting notes and schedules included in the
Registration Statements fairly state in all material respects the
information required to be stated therein in relation to the financial
statements taken as a whole. The selected and summary financial and
statistical information in the Prospectus including, but not limited to,
that under the captions "Summary Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" presents fairly the information shown therein and has
been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statements. The unaudited
financial statements included in the Registration Statements comply as
to form in all material respects with the applicable accounting
requirements of Regulation S-X under the Act and the pro forma
adjustments, if any, have been properly applied to the historical
amounts in the compilation of those statements. No financial statements
or schedules or other information other than that which appears in the
Prospectus is required to be included in the Registration Statement;
(n) since the respective dates as of which information is given in
the Registration Statements and the Prospectus, except as otherwise
stated therein, there has not been (i) any material adverse change
(including, whether or not insured against, any material loss or damage
to any material assets), or development involving a prospective material
adverse change, in the general affairs, properties, assets, management,
condition (financial or otherwise), results of operations, stockholders'
equity, business or prospects of the Company; (ii) any material adverse
change, loss, reduction, termination or non-renewal of any contract to
which the Company is a party; (iii) any transaction entered into by the
Company not in the ordinary course of its business that is material to
the Company, (iv) any dividend or distribution of any kind declared,
paid or made by the Company on its capital stock, (v) any liabilities or
obligations, direct or indirect, incurred by the Company that are
material to the Company on a consolidated basis; (vi) any change in the
capitalization or stock ownership of the Company; or (vii) any change in
the indebtedness of the Company that is material to the Company on a
consolidated basis. The Company does not have any contingent liabilities
or obligations that are material to the Company that are not expressly
disclosed in the Prospectus;
(o) the Company has not distributed, and will not distribute, any
offering material in connection with the offering and sale of the Shares
other than the Registration Statements, a Preliminary Prospectus, the
Prospectus and other material, if any, permitted by the Act, the 1940
Act and the Regulations. Neither the Company nor any of its officers,
directors or affiliates has taken, nor shall the Company or such persons
take, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the
Shares;
(p) the Company has filed with the appropriate federal, state and
local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns that are required to be filed or
has duly obtained extensions of time for the filing thereof and has paid
all taxes shown on such returns or otherwise due and all material
assessments received by them to the extent that the same have become
due. The Company has not executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for assessment
or collection of any income or other tax and neither is a party to any
pending action or proceeding by any foreign or domestic governmental
agency for the assessment or collection of taxes, and no claims for
assessment or
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collection of taxes have been asserted against the Company that might
have a Material Adverse Effect;
(q) Xxxxxxx, Xxxxxxxx & Xxxxxxxxxx, P.C., which has given its
reports on certain financial statements included as part of the
Registration Statements, is a firm of independent certified public
accountants as required by the Act and the Regulations with respect to
the Company;
(r) the Company is not in violation of, or in default under, any of
the terms or provisions of (i) its Articles or Certificate of
Incorporation or Bylaws or similar governing instruments, or (ii) any
indenture, mortgage, deed of trust, contract, commitment or other
agreement or instrument to which it is a party or by which it or any of
its properties is bound or affected, (iii) any law, rule, regulation,
judgment, order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having jurisdiction over
it or any of its properties or business, or (iv) any license, permit,
certification, registration, approval, or consent referred to in Section
1(c) hereof;
(s) except as expressly disclosed in the Prospectus, there are no
claims, actions, suits, protests, proceedings, arbitrations,
investigations or inquiries pending before, or to the Company's
knowledge threatened or contemplated by, any governmental agency,
instrumentality, court or tribunal, domestic or foreign, or before any
private arbitration tribunal to which the Company is or may be made a
party or otherwise affecting the Company that could reasonably be
expected to affect the validity of any of the outstanding Common Shares,
or that, if determined adversely to the Company would, in any case or in
the aggregate, result in any Material Adverse Effect, nor is the Company
aware of any reasonable basis for any such claim, action, suit, protest,
proceeding, arbitration, investigation or inquiry. Except as expressly
disclosed in the Prospectus, there are no outstanding orders, judgments
or decrees of any court, governmental agency, instrumentality or other
tribunal enjoining the Company from, or requiring the Company to take or
refrain from taking, any action, or to which the Company or its
properties, assets or businesses are bound or subject;
(t) the Company owns, or possesses adequate rights to use, all
patents, patent applications, trademarks, trademark registrations,
applications for trademark registration, trade names, service marks,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
technology, information, systems, design methodologies and devices or
procedures developed or derived from or for the businesses of the
Company), trade secrets, confidential information, processes and
formulations and other proprietary information necessary for, used in,
or proposed to be used in, the conduct of its business as described in
the Prospectus (collectively, the "Intellectual Property"). The Company
owns any rights in or to any patents. The Company has not infringed, nor
is it infringing and, except as expressly and specifically disclosed in
the Prospectus, has it received any notice of conflict with, the
asserted rights of others with respect to the Intellectual Property
that, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect, and
the Company knows of no reasonable basis therefor. To the knowledge of
the Company, no other parties, including but not limited to directors or
officers of the Company have infringed upon or are in conflict with the
Intellectual Property. The Company is not a party to, or bound by, any
agreement pursuant to which royalties, honorariums or fees are payable
by the Company to any person by reason of the ownership or use of any
Intellectual Property that is material to the business of the Company on
a consolidated basis;
(u) the Company has good and marketable title to all property
described in the Prospectus as being owned by it, free and clear of all
liens, security interests, charges or encumbrances and the like, except
such as are expressly described or referred to in the Prospectus or such
as would not have a Material Adverse Effect. The Company has adequately
insured its property against loss or damage by fire or other casualty
and maintains, in amounts reasonably believed by it to be adequate, and
insurance against such other risks as management of the Company deems
appropriate. All real and personal property leased by the Company as
described or referred to in the Prospectus is held by the Company under
valid leases. The executive offices and the other facilities of the
Company (the
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"Premises"), and all operations presently or formerly conducted thereon
by the Company are now and, since the Company began to use such
Premises, always have been and, to the knowledge of the Company and
prior to when the Company began to use such Premises, always had been,
in compliance with all federal, state and local statutes, ordinances,
regulations, rules, standards and requirements of common law concerning
or relating to industrial hygiene and the protection of health and the
environment (collectively, "the Environmental Laws"), except to the
extent that any failure to be in such compliance would not have a
Material Adverse Effect. There are no conditions on, about, beneath or
arising from the Premises or at any other location that might give rise
to liability, the imposition of a statutory lien or require a
"Response," "Removal" or "Remedial Action," as defined herein, under any
of the Environmental Laws, and that would have a Material Adverse
Effect. Except as expressly disclosed in the Prospectus, or where such
items will not result in any Material Adverse Effect, (i) the Company
has not received notice and does not have knowledge of any claim,
demand, investigation, regulatory action, suit or other action
instituted or threatened against the Company or any portion of the
Premises relating to any of the Environmental Laws and (ii) the Company
has not received any notice of material violation, citation, complaint,
order, directive, request for information or response thereto, notice
letter, demand letter or compliance schedule to or from any governmental
or regulatory agency arising out of or in connection with "hazardous
substances" (as defined by applicable Environmental Laws) on, about,
beneath, arising from or generated at the Premises or at any other
location. As used in this subsection, the terms "Response," "Removal"
and "Remedial Action" shall have the respective meanings assigned to
such terms under Sections 101(23) - 101(25) of the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by
the Superfund Amendments and Reauthorization Act 42 U.S.C.
9601(23)-9601(25);
(v) the Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences;
(w) no unregistered securities of the Company have been sold by the
Company or on behalf of the Company by any person or persons
controlling, controlled by, or under common control with the Company
within the three years prior to the date hereof, except as expressly
disclosed in the Registration Statements and any such sales of
unregistered securities by the Company were completed in compliance with
the applicable provisions of the state and federal securities or bluesky
laws;
(x) the Company has not had and currently does not have any
employee benefit plan, profit sharing plan, employee pension benefit
plan or employee welfare benefit plan or deferred compensation
arrangements ("Plans") that are subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the
rules and regulations thereunder ("ERISA") and that are not in
compliance with ERISA in all material respects, and, to the extent
required by the Internal Revenue Code of 1986, as amended (the "Code"),
in compliance with the Code in all material respects. The Company has
not had any employee pension benefit plan that is subject to Part 3 of
Subtitle 8 of Title I of ERISA or any defined benefit plan or
multi-employer plan. The Company has not maintained retired life and
retired health insurance plans that are employee welfare benefit plans
providing for continuing benefit or coverage for any employee or any
beneficiary of any employee after such employee's termination of
employment, except as required by Section 4980B of the Code. No
fiduciary or other party in interest with respect to any of the Plans
has caused any of such Plans to engage in a prohibited transaction as
defined in Section 406 of ERISA. As used in this subsection, the terms
"defined benefit plan," "employee benefit plan," "employee pension
benefit plan,"
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"employee welfare benefit plan," "fiduciary" and "multiemployer plan"
shall have the respective meanings assigned to such terms in Section 3
of ERISA;
(y) no labor dispute exists with any employees of the Company and
to the Company's knowledge, no such labor dispute is threatened. The
Company has no knowledge of any existing or threatened labor disturbance
by the employees of any of its principal suppliers, contractors or
customers that would have a Material Adverse Effect. None of the
employees of the Company is covered by a collective bargaining agreement
and no union organizing activity exists with respect to any of such
employees;
(z) the Company has not incurred any liability for any finder's
fees or similar payments in connection with the transactions
contemplated herein other than as disclosed in the Prospectus;
(aa) the Company is familiar with the Investment Company Act, as
amended, and the rules and regulations thereunder, and has in the past
conducted, and the Company intends to conduct, its affairs in such a
manner as to ensure that it will be in compliance with the Investment
Company Act and the rules and regulations thereunder;
(bb) no statement, representation, warranty or covenant made by the
Company in this Agreement or in any certificate or document required by
this Agreement to be delivered to the Representative is, was when made,
or as of the Closing Date or any Option Closing Date will be,
inaccurate, untrue or incorrect in any material respect. No transaction
has occurred or is proposed between or among the Company and any of its
officers, directors or stockholders or any affiliate of any such
officer, director or stockholder that is required to be described in and
is not described in the Registration Statements and the Prospectus;
(cc) the Company or any officer, director, employee, agent or other
person acting on behalf of the Company has not directly or indirectly,
given or agreed to give any money, property or similar benefit or
consideration to any customer or supplier (including any employee or
agent of any customer or supplier) or official or employee of any agency
or instrumentality of any government (foreign or domestic) or political
party or candidate for office (foreign or domestic) or any other person
who was, is or in the future may be in a position to affect the general
affairs, properties, condition (financial or otherwise), results of
operations, stockholders' equity, business or prospects of the Company
or any actual or proposed business transaction of the Company that (i)
could subject the Company to any liability (including, but not limited
to, the payment of monetary damages) or penalty in any civil, criminal
or governmental action or proceeding that would have a Material Adverse
Effect, or (ii) violates any law, rule or regulation to which the
Company is subject, which violation if proven would have a Material
Adverse Effect;
(dd) each person listed on Schedule II hereto has executed an
agreement in a form reasonably satisfactory to the Representative that
such person will not, for the period specified in such agreement (the
"Lock-up Period"), offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any Common Shares, any options or
warrants to purchase any Common Shares or any securities convertible
into or exchangeable for Common Shares (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to
which such person has or hereafter acquires the power of disposition,
otherwise than as specified in such agreement or with the prior written
consent of the Representative; provided, however, that the foregoing
language shall not prohibit the purchase of Common Stock from the
Company pursuant to the exercise of stock options. The Company has
provided to counsel for the Underwriters a complete and accurate list of
all securityholders of the Company and the number and type of securities
held by each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers, directors and shareholders have agreed
to such or similar restrictions (the "Lock-Up Agreements");
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(ee) each contract or other instrument (however characterized or
described) to which the Company is a party or by which its respective
properties or businesses is bound or affected and which is material to
the conduct of the business of the Company has been duly and validly
executed by the Company and, to the knowledge of the Company, by the
other parties thereto. Each such contract or other instrument is in full
force and effect and is enforceable against the parties thereto in
accordance with its terms and the Company is not, and to the knowledge
of the Company, no other party is, in default thereunder, and no event
has occurred that, with the lapse of time or the giving of notice, or
both, would constitute a default under any such contract or other
instrument. All necessary consents under such contracts or other
instruments to the disclosure in the Prospectus with respect thereto
have been obtained;
(ff) The Company is in compliance with the applicable requirements
of the Small Business Administration rules governing small business
investment companies, including the Small Business Investment Act of
1958 (the "SBA Act"), and the applicable provisions of federal and state
laws or regulations governing the activities of a small business
investment company. The Company is not a "business development" company
as defined under the 1940 Act. No person is serving as an officer or
director of the Company except in compliance with the provisions of the
1940 Act and the rules and regulations thereunder;
(gg) The Company's application for listing the Common Shares,
including the Shares and the Warrant Stock, on NASDAQ's SmallCap Market
has been approved, subject to notice to issuance; and
(hh) Neither the Company nor any of its affiliates is presently
doing business with the government of Cuba or with any person or
affiliate located in Cuba.
Any certificate signed by any officer of the Company in such capacity
and delivered to the Representative or to counsel for the Underwriters
pursuant to this Agreement shall be deemed a representation and warranty by
the Company to the several Underwriters as to the matters covered thereby.
2. PURCHASE SALE OF FIRM' SHARES. On the basis of the
representations, warranties, covenants and agreements contained herein, and
subject to the terms and conditions set forth herein, the Company shall
sell the Firm Shares to the Underwriters, and each of the Underwriters,
severally and not jointly, shall purchase the number of Firm Shares set
forth opposite its name in Schedule I hereto. The purchase price of the
Firm Shares hereunder shall be the Offering Price less the Underwriting
Discounts and Commissions shown on the cover page of the Prospectus. Each
Underwriter shall be obligated to purchase from the Company that number of
Firm Shares as is set forth opposite the name of such Underwriter in
Schedule I hereto. The several Underwriters intend to offer the Shares to
the public as set forth in the Prospectus; provided, however, that no
Shares registered pursuant to the Rule 462(b) Registration Statement, if
any, will be offered prior to the filing of such registration statement
with the SEC. After the public offering, the several Underwriters may, in
their discretion, vary the public offering price.
3. PAYMENT AND DELIVERY.
(a) Delivery of and payment for the Firm Shares shall be made at
the offices of Xxxxx & Xxxxxxxxxxxx, Inc., 000 Xxxx Xxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxx at 10:00 a.m., Richmond, Virginia time (i) on the
third full business day following the first day that the Firm Shares are
traded, or (ii) at such other time and date not later than seven full
business days following the first day the Firm Shares are traded as the
Representative and the Company may determine (or at such time and date
to which delivery and payment shall have been postponed pursuant to
Section 11 hereof). Such date and time of delivery and payment are
referred to collectively herein as the "Closing Date." Notwithstanding
the foregoing, if the Company has not made available to the
Representative copies of the Prospectus in the quantities and within the
time provided for in Section 5(g) hereof, the
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Representative may, in its sole discretion, postpone the Closing Date
until no later than two full business days following delivery of such
copies of the Prospectus to the Representative.
(b) On the Closing Date, the Company shall deliver or cause to be
delivered certificates representing the Firm Shares to the
Representative for the account of each Underwriter against payment to or
upon the order of the Company of the purchase price (i) by certified or
official bank check or checks payable in New York Clearing House
(next-day) funds, or (ii) in immediately available funds wired to such
accounts as the Company may specify (with all costs and expenses
incurred by the Underwriters in connection with such settlement in
immediately available funds, including, but not limited to, interest or
cost of funds expense, to be borne by the Company). Time is of the
essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of each Underwriter's obligation
hereunder.
(c) The certificates representing the Firm Shares to be sold and
delivered will be in such denominations and registered in such names as
the Representative requests not less than two full business days prior
to the Closing Date, and will be made available to the Representative
for inspection, checking and packaging at the offices of Xxxxx &
Xxxxxxxxxxxx, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx, not less than
one full business day prior to the Closing Date. If the Representative
so elects, delivery of the Firm Shares may be made by credit through
full fast transfer to the accounts at The Depository Trust Company
designated by the Representative.
(d) The Company shall not be obligated to deliver any Firm Shares
to be delivered on the Closing Date, except upon payment for all the
Firm Shares to be purchased on such date.
4. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in connection
with the distribution and sale of the Firm Shares as contemplated by the
Prospectus, subject to the terms and conditions herein set forth, the
several Underwriters are hereby granted an option by the Company to
purchase all or any part of the Optional Shares (the "Over-allotment
Option"). The purchase price to be paid for the Optional Shares shall be
the Offering Price less the Underwriting Discounts and Commissions shown
on the cover page of the Prospectus. The Over-allotment Option granted
hereby may be exercised by the Representative on behalf of the several
Underwriters as to all or any part of the Optional Shares at any time
and from time to time within 30 days after the date of the Prospectus.
No Underwriter shall be under any obligation to purchase any Optional
Shares prior to an exercise of the Over-allotment Option.
(b) The Over-allotment Option granted hereby may be exercised by
the Representative on behalf of the several Underwriters by giving
notice to the Company by a letter delivered by hand or sent by
registered or certified mail, postage prepaid, or by courier, telegram
or facsimile (such notice to be effective when received), addressed as
provided in Section 13 hereof, setting forth the number of Optional
Shares to be purchased, the date and time for delivery of, and payment
for, such Optional Shares and stating that the Optional Shares referred
to therein are to be used for the purpose of covering over-allotments in
connection with the distribution and sale of the Firm Shares. If such
notice is given at least two full business days prior to the Closing
Date, the date set forth therein for such delivery and payment shall be
the Closing Date. If such notice is given less than two full business
days prior to the Closing Date, the date set forth therein for such
delivery and payment shall be a date selected by the Representative that
is not more than three full business days after the date the notice is
effective. The date and time set forth in such a notice is referred to
herein as an "Option Closing Date," and a closing held pursuant to such
a notice is referred to herein as an "Option Closing." Upon each
exercise of the Over-allotment Option, and on the basis of the
representations, warranties, covenants and agreements herein contained,
and subject to the terms and conditions herein set forth, the several
Underwriters shall become severally, but not jointly, obligated to
purchase from the Company the number of Optional Shares specified in
each notice of exercise of the Over-allotment Option (allocated among
the several Underwriters in accordance with Section 4(c) hereof.)
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(c) The number of Optional Shares purchased and sold pursuant to
each exercise of the Over-allotment Option shall be subject to such
adjustment as the Representative may approve to eliminate fractional
shares and shall be subject to the provisions for the allocation of
Optional Shares purchased for the purpose of covering over-allotments
set forth in the agreement entered into by and among the Underwriters in
connection herewith (the "Agreement Among Underwriters").
(d) Delivery of and payment for the Optional Shares to be purchased
by the several Underwriters pursuant to any exercise of the
Over-allotment Option shall be made at the offices of Xxxxx &
Xxxxxxxxxxxx, Inc., 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx, or such
other place as shall be agreed upon by the Company and the
Representative at 10:00 a.m., Richmond, Virginia time on the Option
Closing Date set forth in the notice of such exercise. On such Option
Closing Date, the Company shall deliver or cause to be delivered
certificates representing the Optional Shares to the Representative for
the account of each Underwriter against payment to or upon the order of
the Company (with respect to Optional Shares sold by it, if any), (i) by
certified or official bank check or checks payable in New York Clearing
House (next-day) funds, or (ii) in immediately available funds wired to
such accounts as the Company may specify (with all costs and expenses
incurred by the Underwriters in connection with such settlement in
immediately available funds, including, but not limited to, interest or
cost of funds expense, to be borne by the Company). Time shall be of the
essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder.
(e) The certificates representing the Optional Shares to be issued
and delivered will be in such denominations and registered in such names
as the Representative requests not less than two full business days
prior to the Option Closing Date, and will be made available to the
Representative for inspection, checking and packaging at the office of
the Company's transfer agent not less than one full business day prior
to the Option Closing Date. If the Representative so elects, delivery of
the Option Shares may be made by credit through full fast transfer to
the accounts at The Depository Trust Company designated by the
Representative.
5. CERTAIN COVENANTS AND AGREEMENTS. The Company covenants and agrees
with the several Underwriters as follows:
(a) if the Rule 462(b) Registration Statement has not been filed at
the time this Agreement is executed and delivered by the parties hereto
and such Rule 462(b) Registration Statement is required to be filed, the
Company will use its best efforts to cause such registration statement
to be filed and become effective as promptly as possible;
(b) if the Company omitted information from the Primary
Registration Statement at the time it was declared effective in reliance
upon Rule 430A of the Regulations, the Company will timely file the
Prospectus pursuant to and in compliance with Rule 424(b)(1) or (4) and
Rule 430A(a)(3) of the Regulations and will advise the Representative of
the time and manner of such filing; provided, however, that if the
Representative shall agree to the utilization of Rule 434 of the
Regulations, the Company will timely file pursuant to and in compliance
with Rule 424(b)(7) and Rule 430A(a)(3) of the Regulations the
information required to be included in the Term Sheet, and will advise
the Representative of the time and manner of such filing;
(c) if for any reason the filing of a form of Prospectus is
required under Rule 424(b)(3) of the Regulations, the Company will
timely file such Prospectus pursuant to and in compliance with such Rule
and will advise the Representative of the time and manner of such
filing;
(d) the Company will not file or publish any Rule 462(b)
Registration Statement or any amendment or supplement to the
Registration Statement(s), Preliminary Prospectus or Prospectus at any
time before the completion (in the opinion of the Underwriters' counsel)
of the distribution of the Shares by the Underwriters that is not (i) in
compliance with the Regulations; and (ii) approved by the
Representative;
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(e) the Company will advise the Representative immediately, and
confirm such advice in writing, (i) when any Rule 462(b) Registration
Statement or post-effective amendment to the Registration Statements is
filed with the SEC, (ii) of the receipt of any comments from the SEC
concerning the Registration Statements, (iii) when any post-effective
amendment to the Registration Statements becomes effective, or when any
supplement to the Prospectus or any amended Prospectus has been filed,
(iv) of any request of the SEC for amendment or supplementation of the
Registration Statements or Prospectus or for additional information, (v)
during the period when the Prospectus is required to be delivered under
the Act and Regulations, of the happening of any event as a result of
which the Registration Statements would include an untrue statement of a
material fact or omit to state a material fact required therein or
necessary to make the statements therein not misleading, or as a result
of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (vi) during
the period noted in clause (vii) above, of the need to amend the
Registration Statements or supplement the Prospectus to comply with the
Act, (viii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statements or of any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus,
and (ix) of the suspension of the qualification of any the Shares for
offering or sale in any jurisdiction in which the Underwriters intend to
make such offers or sales, or of the initiation or threatening of any
proceedings for any of such purposes known to the Company. The Company
will use its best efforts to prevent the issuance of any such stop order
or of any order preventing or suspending such use, and if any such order
is issued, to obtain as soon as possible the lifting thereof;
(f) in case of any event (occurring at any time within the period
during which, in the opinion of counsel for the Underwriters
("Underwriters' Counsel"), a prospectus is required to be delivered
under the Act and Regulations), as a result of which any Preliminary
Prospectus or the Prospectus, as then amended or supplemented, would
contain, in the opinion of Underwriters' Counsel, an untrue statement of
a material fact, or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading, or, if it is necessary at any time
to amend any Preliminary Prospectus or the Prospectus to comply with the
Act and Regulations or any applicable securities or Blue Sky laws, the
Company promptly will prepare and file with the SEC, and any applicable
state or foreign securities commission, an amendment, supplement or
document that will correct such statement or omission or effect such
compliance and will furnish to the several Underwriters such number of
copies of such amendments, supplements or documents (in form and
substance satisfactory to the Representative and Underwriters' Counsel)
as the Representative may reasonably request. For purposes of this
Section 5(f), the Company will provide such information to the
Representative, the Underwriters' Counsel and counsel to the Company as
shall be necessary to enable such persons to consult with the Company
with respect to the need to amend or supplement the Registration
Statements, Preliminary Prospectus or Prospectus or file any document,
and shall furnish to the Representative and the Underwriters' Counsel
such further information as each may from time to time reasonably
request;
(g) the Company has delivered to the Representative, without
charge, as many copies of each Preliminary Prospectus as the
Representative has reasonably requested. The Company will deliver to the
Representative, without charge, from time to time during the period when
delivery of the Prospectus is required under the Act, such number of
copies of the Prospectus (as supplemented or amended) as the
Representative may reasonably request. The Company hereby consents to
the use of such copies of the Preliminary Prospectus and the Prospectus
for purposes permitted by the Act, the Regulations and the securities or
Blue Sky laws of the states or foreign jurisdictions in which the Common
Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale
of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection with sales by any
Underwriter or dealer. The Company has furnished or will furnish to the
Representative at least three original signed copies of the Registration
Statements as originally filed and of all amendments
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and supplements thereto, whether filed before or after the Effective
Date, at least three copies of all exhibits filed therewith and of all
consents and certificates of experts, and will deliver to the
Representative such number of conformed copies of the Registration
Statements, including financial statements and exhibits, and all
amendments thereto, as the Representative may reasonably request;
(h) the Company will comply with the Act, the 1940 Act, the
Regulations, the Exchange Act and the rules and regulations thereunder
so as to permit the continuance of sales of, and dealings in, the Shares
, the Representative's Warrant and the Warrant Stock for as long as may
be necessary to complete the distribution of the Shares, the
Representative's Warrant and the Warrant Stock as contemplated hereby;
(i) the Company will furnish such information and pay such filing
fees and other expenses as may be required, and otherwise cooperate in
the registration or qualification of the Shares, the Representative's
Warrant and the Warrant Stock, or exemption therefrom, for offering and
sale by the several Underwriters and by dealers under the securities or
Blue Sky laws of such jurisdictions in which the Representative
determines to offer the Shares, the Representative's Warrant and the
Warrant Stock, after consultation with the Company, and will file such
consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification;
provided, however, that no such qualification shall be required in any
jurisdiction where, solely as a result thereof, the Company would be
subject to taxation or qualification as a foreign corporation doing
business in such jurisdiction where it is not now so qualified or to
take any action that would subject it to service of process in suits,
other than those arising out of the offering or sale of the Shares, the
Representative's Warrant and the Warrant Stock, in any jurisdiction
where it is not now so subject. The Company will, from time to time,
prepare and file such statements and reports as are or may be required
to continue such qualification in effect for so long a period as is
required under the laws of such jurisdictions for such offering and
sale;
(j) the Company will make generally available to its security
holders, as soon as practicable, but not later than 45 days after the
end of the period covered thereby, an earnings statement of the Company
(which need not be audited unless required by the Act or the
Regulations) that shall comply with Section 11 (a) of the Act and the
Regulations (including, at the option of the Company, Rule 158) and
cover a period of at least 12 consecutive months beginning not later
than the first day of the Company's fiscal quarter next following the
Effective Date;
(k) beginning with the quarter ended September 30, 1999, the
Company will file quarterly and annual reports with the SEC to the same
extent as issuers subject to the periodic reporting requirements of the
Exchange Act, and for a period of five years from the Effective Date,
the Company will deliver to the Representative: (i) a copy of each
report or document, including, without limitation, reports on Forms 8-K,
10-K and 10-Q (or such similar forms as may be designated by the SEC),
registration statements and any exhibits thereto, filed with or
furnished to the SEC or any securities exchange or the Nasdaq Stock
Market's SmallCap Market or the NASD, on the date each such report or
document is so filed or furnished; (ii) as soon as practicable, copies
of any reports or communications (financial or other) of the Company
mailed to its security holders; and (iii) every press release in respect
of the Company or its affairs that is released or prepared by the
Company;
(l) during the course of the distribution of the Shares, the
Company will not take, directly or indirectly, any action designed to,
or that could reasonably be expected to, cause or result in
stabilization or manipulation of the price of the Common Shares;
(m) the Company will not engage in any transactions with affiliates
(as defined in the Regulations) without the prior approval of a majority
of the disinterested members of its Board of Directors;
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(n) the Company will use all reasonable efforts to list the Common
Shares (including, without limitation, the Shares and the Warrant Stock)
for quotation on the Nasdaq Stock Market's SmallCap Market;
(o) the Company shall, at its sole cost and expense, supply and
deliver to the Representative and Underwriters' Counsel, within a
reasonable period from the Closing Date, closing binders, in such number
as the Representative shall reasonably request, each of which shall
include the Registration Statements, as amended or supplemented, all
exhibits to the Registration Statements, the Prospectus, as amended or
supplemented, the Preliminary Blue Sky Memorandum and any supplement
thereto, all underwriting and closing documents and all other
correspondence, filings and applications with the SEC, the NASD and the
Nasdaq Stock Market's SmallCap Market;
(p) the Company will use the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description set forth under the caption "Use of Proceeds" in the
Prospectus and shall file such reports with the SEC with respect to the
sale of such Shares and the application of the proceeds therefrom as may
be required under the Regulations, including, but not limited to, Rule
463;
(q) the Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common
Shares;
(r) the Company will take such steps as shall be necessary to
insure that it complies with all requirements of an "investment company"
within the meaning of such term under the Investment Company Act, and
the rules and regulations of the SEC thereunder;
(s) during the Lock-Up Period, the Company will not, without the
prior written consent of the Representative, effect the Disposition of,
directly or indirectly, any Securities other than the sale of the Firm
Shares, the Optional Shares, the Representative's Warrant and the
Warrant Stock hereunder and the Company's issuance of Common Stock upon
the exercise of options, presently outstanding, under the Company's
stock option plans (the "Stock Plans") and expressly described in the
Prospectus;
(t) for a period of five years from the Effective Date, the Company
will deliver to the Representative, subject to execution of an
appropriate confidentiality agreement, such additional information
concerning the business and financial condition of the Company as the
Representative may from time to time reasonably request, and which can
be prepared or obtained by the Company without unreasonable effort or
expense;
(u) on or prior to the Closing Date, the Company shall sell to the
Representative or its designees, individually and not as representatives
of the Underwriters, the Representative's Warrant to purchase an
aggregate of 66,204 shares of Warrant Stock;
(v) if the officers, directors or certain shareholders of the
Company are required by the "blue sky" or securities authority of any
jurisdiction selected by the Representative pursuant to Section 5(i) to
escrow or agree to restrict the sale of any security of the Company
owned by them for the Company to qualify or register the Shares, the
Representative's Warrant or the Warrant Stock for sale under the "blue
sky" or securities laws of any such jurisdiction, the Company shall
cause each such person to escrow or restrict the sale of such security
on the terms and conditions and in the form specified by the securities
administrator of such jurisdiction;
(w) until the expiration of years from the Closing Date, if
the Representative, individually and not as representative of the
Underwriters, shall so indicate in writing to the Company, the Company
shall use its best efforts to cause an individual selected from time to
time by the Representative to be elected a director of the Company;
(x) until the expiration of years from the Closing Date, the
Company shall afford the Representative, individually and not as
representative of the Underwriters, the right of first refusal to
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purchase for the Representative's own account or to sell for the account
of the Company or any subsidiary of the Company (or any successor to any
of them), or any of the Company's stockholders owning at least %
of the Common Stock (the "Principal Shareholders"), any securities of
the Company or any such subsidiary (or successor to any of them) which
the Company or any such subsidiary or successor or any of the Principal
Shareholders may seek to sell whether pursuant to registration under the
Act or otherwise. Any of the Company or any subsidiary or such successor
intending to make such an offering is hereinafter referred to as a
"Company Offeror." If during such year period any Company
Offeror or Principal Shareholder intends to make an offering, before any
discussions of the proposed offering with any other prospective
underwriter or agent shall occur, the Company shall notify the
Representative of such intention and of the proposed terms of the
offering and will offer to the Representative the opportunity to
purchase or sell any such securities on terms not more favorable to the
Company Offeror or such Principal Shareholder, as the case may be, than
those of the proposed offering. The Company shall thereafter promptly
furnish the Representative with such information concerning the
operations, business, properties, assets, liabilities, or future
prospects of the Company or such subsidiary or successor and, if
applicable, the Principal Shareholder shall furnish such information
concerning such Principal Shareholder as the Representative may
reasonably request. If within 30 business days after receipt of all such
information the Representative does not accept in writing the offer to
purchase or sell such securities for the Representative's own account
or, at the Representative's option, act as sole underwriter or sole
agent or as co-underwriter or co-agent with others, as the case may be,
as aforesaid with respect to such offering upon the terms proposed, the
Company Offeror or Principal Shareholder, as the case may be, shall be
free to enter into discussions with other underwriters or agents with
respect to such offering and to effect such offering upon such proposed
terms within six months of the date of such notice. Before the Company
Offeror or Principal Shareholder, as the case may be, shall accept any
proposal less favorable to the Company or such Principal Shareholder, as
the case may be, than that conveyed to the Representative in such
notice, the rights set forth in this Section 5(x) shall be reinstated
and the same procedure with respect to such modified proposal as
provided above shall be adopted. In connection with any public offering,
the Representative may include other persons as underwriters or dealers.
The Representative's failure to exercise its rights under this Section
5(x) with respect to any particular proposed offering shall not affect
the Representative's rights under this Section 5(x) with respect to any
other proposed offering. The Company will use its best efforts to cause
its Principal Shareholders to comply with the provisions of this Section
5(x);
(y) if, at any time after the date that the Registration Statement
is declared effective with the Commission or with the Florida Department
of Banking and Finance (the "Florida Department"), whichever date is
later, and prior to the end of the period during which a Prospectus
relating to the Shares or the Warrant Stock is required to be delivered
hereunder or under the Act or the Regulations, the Company or any of its
affiliates commences doing business with the government of Cuba or with
any person or affiliate located in Cuba, the Company will so inform the
Florida Department within ninety days after such commencement of
business in Cuba, and if, during such period when a Prospectus is
required to be delivered, any change occurs with respect to previously
reported information, the Company will inform the Florida Department
within ninety days after the occurrence of such change;
(z) if at any time during the thirty (30) day period after the
Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which, in the Representative's reasonable opinion, the market price of
the Common Shares has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates an
amendment of or supplement to the Prospectus), the Company will, after
written notice from the Representative advising the Company to the
effect set forth above, forthwith prepare, consult with the
Representative concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to the
Representative, responding to or commenting on such rumor, publication
or event;
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(aa) the Company will not establish a record date for the payment
of dividends or other distributions which is earlier than seven (7) full
business days after the last day on which the several Underwriters
exercise their option to purchase the Optional Shares pursuant to this
Agreement; and
(bb) the Company will deliver to the Representative copies of all
financial statements forwarded to the Company by the various entities in
which the Company holds debt or equity interests within five (5)
business days of the receipt of such financial statements by the
Company.
6. PAYMENT OF FEES.
(a) Whether or not the transactions contemplated by this Agreement
are consummated and regardless of the reason this Agreement is
terminated, the Company will pay or cause to be paid, and bear or cause
to be borne, all costs and expenses incident to the performance of the
obligations of the Company under this Agreement, including:
(i) the fees and expenses of the accountants and counsel for the
Company incurred in the preparation of the Registration Statements
and any post-effective amendments thereto (including financial
statements and exhibits), Preliminary Prospectuses and the Prospectus
and any amendments or supplements thereto;
(ii) printing and mailing expenses associated with the
Registration Statements and any post-effective amendments thereto,
Preliminary Prospectus, the Prospectus, this Agreement, the Agreement
Among Underwriters, the Underwriters' Questionnaire submitted to each
of the Underwriters by the Representative in connection herewith, the
Power of Attorney executed by each of the Underwriters in favor of
the Representative, the Selected Dealer Agreement and related
documents and the preliminary Blue Sky memorandum (collectively with
any supplement thereto, the "Blue Sky Memorandum");
(iii) the costs (other than fees and expenses of the
Underwriters' Counsel, except such fees incurred in connection with
Blue Sky and NASD filings or exemptions as provided herein and any
fees incurred under Section (6)(a)(xiv)) incident to the
authentication, insurance, sale and delivery of the Shares, the
Representative's Warrant and the Warrant Stock to the Underwriters;
(iv) the fees, expenses and all other costs of qualifying the
Shares, the Representative's Warrant and the Warrant Stock for sale
under the securities or Blue Sky laws of those states in which the
Shares, the Representative's Warrant and the Warrant Stock are to be
offered or sold, including, without limitation, the reasonable fees
and expenses of Underwriters' Counsel and such local counsel as may
have been reasonably required and retained for such purpose;
(v) the fees, expenses and other costs of, or incident to,
securing any review or approvals by or from the NASD, including the
reasonable fees and expenses of the Underwriters' Counsel;
(vi) the filing fees of the SEC;
(vii) the cost of furnishing to the Underwriters copies of the
Registration Statements, Preliminary Prospectuses and Prospectuses as
herein provided;
(viii) the Company's travel expenses in connection with meetings
with the brokerage community and institutional investors;
(ix) the costs and expenses associated with settlement in same
day funds (including, but not limited to, interest or cost of funds
expenses), if desired by the Company;
(x) any fees or costs payable to the Nasdaq Stock Market's
SmallCap Market as a result of the offering;
(xi) the cost of printing certificates for the Shares, the
Representative's Warrant and the Warrant Stock;
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(xii) the cost and charges of any transfer agent;
(xiii) all taxes, if any, on the issuance, delivery and transfer
of the Shares, the Representative's Warrant and the Warrant Stock
sold by the Company; and
(xiv) all other costs and expenses reasonably incident to the
performance of the Company's obligations hereunder that are not
otherwise specifically provided for in this Section 6(a); provided,
however, that, except as specifically set forth in Section 6(c)
hereof, the Company shall pay to the Representative, an accountable
expense allowance of $100,000 to cover expenses incurred by the
Representative in connection with the Offering (including price
stabilization transactions).
(b) The Company shall pay as due any state or foreign registration,
qualification and filing fees and any accountable out-of-pocket
disbursements in connection with such registration, qualification or
filing in the states and foreign jurisdictions in which the
Representative determines to offer or sell the Shares.
(c) If the Underwriters are willing to proceed with the offering,
and the transactions contemplated by this Agreement are not consummated
because the Company elects not to proceed with the offering for any
reason or if the Representative terminates this Agreement pursuant to
Section 10(b) hereof, then the Company will reimburse the Representative
for its out-of-pocket expenses, including, without limitation, fees and
disbursements of Underwriters' Counsel, incurred in connection with
investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder, in an amount
not to exceed $100,000.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligation of each Underwriter to purchase and pay for the Firm
Shares that it has agreed to purchase hereunder on the Closing Date, and to
purchase and pay for any Optional Shares as to which it exercises its right
to purchase under Section 4 on an Option Closing Date, is subject at the
date hereof, the Closing Date and any Option Closing Date, to the
continuing accuracy and fulfillment of the representations and warranties
of the Company, to the performance by the Company of their covenants and
obligations hereunder, and to the following additional conditions:
(a) if required by the Regulations, the Prospectus shall have been
filed with the SEC pursuant to Rule 424(b) of the Regulations within the
applicable time period prescribed for such filing by the Regulations. On
or prior to the Closing Date or any Option Closing Date, as the case may
be, no stop order or other order preventing or suspending the
effectiveness of the Primary Registration Statement or the Rule 462(b)
Registration Statement, if any, or the sale of any of the Shares shall
have been issued under the Act or any state securities law, and no
proceedings for that purpose shall have been initiated or shall be
pending or, to the Representative's knowledge or the knowledge of the
Company, shall be contemplated by the SEC or by any authority in any
jurisdiction designated by the Representative pursuant to Section 5(i)
hereof. Any request on the part of the SEC for additional information
shall have been complied with to the reasonable satisfaction of
Underwriters' Counsel;
(b) all corporate proceedings and other matters incident to the
authorization, from and validity of this Agreement, the Shares, the
Representative's Warrant Agreement, the Representative's Warrant or the
Warrant Stock, and the form of the Registration Statements and the
Prospectus, as amended and supplemented, and all other legal matters
relating to this Agreement and the transactions contemplated hereby
shall be satisfactory in all material respects to Underwriters' Counsel.
The Company shall have furnished to such counsel all documents and
information that they may have reasonably requested to enable them to
pass upon such matters;
(c) the NASD shall have indicated it has no objection to the
underwriting arrangements pertaining to the sale of any Shares, the
Representative's Warrant or the Warrant Stock;
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(d) the Company shall have entered into the Representative's
Warrant Agreement with the Representative and the Representative shall
have received a copy of an executed Lock-up Agreement from each person
described on Schedule hereto;
(e) the Representative shall have received at or prior to the
Closing Date from the Underwriters' Counsel a memorandum or summary, in
form and substance satisfactory to the Representative, with respect to
the qualification for offering and sale by the Underwriters of the
Shares under the securities or Blue Sky laws of such jurisdictions
designated by the Representative pursuant to Section 5(i) hereof;
(f) on the Closing Date and any Option Closing Date, there shall
have been delivered to the Representative a signed opinion of Xxxxx &
Stant, a professional corporation, counsel for the Company in the form
attached hereto as Exhibit 1, dated as of each such date and addressed
to the Representative individually and as representatives of the several
Underwriters to such effect as is reasonably satisfactory to the
Representative;
(g) at the Closing Date and any Option Closing Date: (i) the
Registration Statements and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the
Act and the Regulations and in all material respects shall conform to
the requirements of the Act and the Regulations, and the Registration
Statements and any Post-effective amendment thereto shall not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus, as amended or supplemented,
shall not contain any untrue statement of a material fact or omit 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; (ii) since the respective dates as of which information
is given in the Registration Statements and any post-effective amendment
thereto and the Prospectus and any amendments or supplements thereto,
except as otherwise expressly stated therein, there shall have been no
material adverse change in the properties, condition (financial or
otherwise), results of operations, prospects, stockholders' equity,
business or management of the Company from that set forth therein,
whether or not arising in the ordinary course of business; (iii) since
the respective dates as of which information is given in the
Registration Statements and any post-effective amendment thereto and the
Prospectus or any amendment or supplement thereto, there shall have been
no event or transaction, contract or agreement entered into by the
Company, other than in the ordinary course of business and as set forth
in the Registration Statements or Prospectus, that has not been, but
would be required to be, set forth in the Registration Statements or
Prospectus; and (iv) no action, suit or proceeding at law or in equity
shall be pending or threatened against the Company that would be
required to be set forth in the Prospectus, other than as set forth
therein, and no proceedings shall be pending or threatened against or
directly affecting the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect other
than as set forth in the Prospectus;
(h) the Representative shall have received at the Closing Date and
any Option Closing Date certificates of the Company signed by the Chief
Executive Officer and the Chief Financial Officer of the Company dated
as of the date of the Closing Date or Option Closing Date, as the case
may be, and addressed to the Representative, individually and as
representative of the several Underwriters, to the effect that (i) the
signers of the certificate have read this Agreement, and the
representations and warranties of the Company in this Agreement are true
and correct in all material respects, as if made at and as of the
Closing Date or the Option Closing Date, as the case may be, and the
Company has complied in all material respects with all the agreements,
fulfilled in all material respects all the covenants and satisfied in
all material respects all the conditions on its part to be performed,
fulfilled or satisfied at or prior to the Closing Date or the Option
Closing Date, as the case may be, and (ii) the signers of the
certificate have carefully examined the Registration
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Statement and the Prospectus and any amendments or supplements thereto,
and the conditions set forth in Section 7(h) hereof have been satisfied;
(i) at the time this Agreement is executed and at the Closing Date
and any Option Closing Date, the Representative shall have received a
letter addressed to the Representative, individually and as
representatives of the several Underwriters, in form and substance
satisfactory to the Representative in all respects (including, without
limitation, the non-material nature of the changes or decreases, if any,
referred to in clause (iii) below) from Xxxxxxx, Xxxxxxxx & Xxxxxxxxxx,
P.C., dated as of the date of this Agreement, the Closing Date or the
Option Closing Date, as the case may be:
(i) confirming they are independent certified public accountants
within the meaning of the Act and the Regulations, and stating that
the section of the Primary Registration Statement under the caption
"Experts" is correct insofar as it relates to them;
(ii) stating that, in their opinion, the consolidated financial
statements, schedules and notes of the Company audited by them and
included in the Registration Statements comply in form in all
material respects with the applicable accounting requirements of the
Act and the Regulations;
(iii) stating that, on the basis of specified procedures, which
included the applicable procedures specified by the American
Institute of Certified Public Accountants for a review of interim
financial information, as described in SAS No. 71, Interim Financial
Information, a reading of the latest available unaudited interim
consolidated financial statements of the Company (with an indication
of the date of the latest available unaudited interim financial
statements), a reading of the minutes of the meetings of the
stockholders and the Board of Directors of the Company and executive,
audit and compensation committees of such Board, if any, and
inquiries to certain officers and other employees of the Company
responsible for operational, financial and accounting matters and
other specified procedures and inquiries, nothing has come to their
attention that would cause them to believe that (A) the unaudited
consolidated financial statements of the Company included in the
Registration Statements and related schedules if any, (1) do not
comply in form and in all material respects with the applicable
accounting requirements of the Act and the Regulations, or (2) should
be materially modified in order for such unaudited financial
statements to be in conformity with generally accepted accounting
principles; (B) at a specified date not more than five business days
prior to the date of such letter, there was any change in the capital
stock or debt of the Company or any decrease in net current assets,
total assets or stockholders' equity of the Company as compared with
the amounts shown in the December 31, 1997 consolidated balance sheet
of the Company included the Registration Statements, or that for the
period from January 1, 1998 to a specified date not more than five
days prior to the date of the letter, there were any decreases in
revenues, operating income or total or per share amounts of net
income, except in all instances for changes, decreases or increases
that the Registration Statements disclose have occurred or may occur
and except for such other changes, decreases or increases which the
Representative shall in its sole discretion accept; or (C) the
unaudited pro forma financial statements included in the Registration
Statements, if any, do not comply as to form in all material respects
with the applicable accounting requirements of Regulation S-X under
the Act and that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of those
statements; and
(iv) stating that they have compared specific dollar amounts,
numbers of shares and other numerical data and financial information
set forth in the Registration Statement that have been specified by
the Representative prior to the date of this Agreement (to the extent
that such information is derived from the accounting records subject
to the internal control structure, policies and procedures of the
Company's accounting system, or has been derived directly from such
accounting records by analysis or comparison or has been derived from
other records and
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analyses maintained or prepared by the Company) with the results
obtained from the application of readings, inquiries and other
appropriate procedures (which procedures do not constitute an audit
in accordance with generally accepted auditing standards) set forth
in the letter, and found them to be in agreement;
(j) the Representative shall have received from Xxxxxxx, Xxxxxxxx &
Xxxxxxxxxx, P.C., a letter addressed to the Company and made available
to the Representative for the use of the Underwriters stating that their
review of the Company's system of internal accounting controls, to the
extent they deem necessary in establishing the scope of their audit of
the Company's consolidated financial statements as of June 30, 1997 did
not disclose any weaknesses in internal controls that they considered to
be material weaknesses;
(k) there shall have been duly tendered to the Representative for
the respective accounts of the Underwriters certificates representing
all of the Shares to be purchased by the Underwriters on the Closing
Date or any Option Closing Date, as the case may be;
(l) at the Closing Date and any Option Closing Date, the
Representative shall have been furnished such additional documents,
information and certificates as they shall have reasonably requested;
(m) the issuance and sale of the Shares, the Representative's
Warrant and the Warrant Stock shall be legally permitted under
applicable Blue Sky or state securities laws so long as such sales are
made in accordance with the Blue Sky Memorandum;
(n) Prior to or on the Closing Date, the application for quotation
of the Shares and the Warrant Stock on NASDAQ shall have been approved
for quotation on NASDAQ subject to notice of issuance;
(o) all corporate and other proceedings and other matters incident
to the authorization, form and validity of this Agreement and the
Representative's Warrant Agreement and the form of the Registration
Statements and Prospectus and all other legal matters related to this
Agreement and the transactions contemplated hereby (including but not
limited to all opinions, certificates, letters and documents required or
permitted hereunder) shall be reasonably satisfactory in all respects to
Underwriters' Counsel. The Company shall have furnished to such counsel
all documents and information that they shall have reasonably requested
to enable them to pass upon such matters.
The Company shall furnish the Representative with such conformed
copies of such opinions, certificates, letters and other documents as they
shall reasonably request. All such opinions, certificates, letters and
documents shall be in compliance with the provisions hereof only if they
are reasonably satisfactory in form and substance to the Representative and
the Underwriters' Counsel. If any condition to the Underwriters'
obligations hereunder to be fulfilled prior to or at the Closing Date or
any Option Closing Date, as the case may be, is not fulfilled, the
Representative may on behalf of the several Underwriters terminate this
Agreement with respect to the Closing Date or such Option Closing Date, as
applicable, or, if they so elect, waive any such conditions that have not
been fulfilled or extend the time for their fulfillment. Any such
termination shall be without liability of the Underwriters to the Company.
8. INDEMNIFICATION AND CONTRIBUTION
(a) The Company shall indemnify and hold harmless each Underwriter,
and each person, if any, who controls each Underwriter within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, against any and
all loss, liability, claim, damage and expense whatsoever, including, but
not limited to, any and all reasonable expenses incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or
any claim whatsoever or in connection with any investigation or inquiry of,
or action or proceeding that may be brought against, the respective
indemnified parties, arising out of or based upon (i) any breach of
representations and warranties made in this Agreement; (ii) any untrue
statements or alleged untrue statements of material fact contained in any
Preliminary Prospectus, the Registration Statements or the Prospectus, or
any amendment or supplement thereto, any
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application or other document (in this Section 8 collectively called
"application") executed by the Company and based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order
to qualify all or any part of the Shares, the Representative's Warrant or
the Warrant Stock under the securities laws thereof or with the SEC or the
NASD, (iii) the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, (iv) any untrue statement or alleged untrue statement of
material fact contained in any audio or visual materials used in connection
with the marketing of the Shares, including without limitation, slides,
videos, films and tape recordings, or (v) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby,
and which is included as part of or referenced in any claim or action
arising out of or based upon matters covered by (i) or (ii) above;
provided, however, that the foregoing indemnity:
(i) shall not apply in respect of any statement or omission made in
reliance upon and in conformity with written information furnished to
the Company by any Underwriter through the Representative expressly for
use in any Preliminary Prospectus, the Registration Statements or
Prospectus, or any amendment or supplement thereto, as the case may be;
and
(ii) with respect to any Preliminary Prospectus, shall not inure to
the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages, liabilities or expenses purchased the Shares,
the Representative's Warrant or the Warrant Stock if, at or prior to the
written confirmation of the sale of such Shares, a copy of an amended
Preliminary Prospectus or the Prospectus (or the Prospectus as amended
or supplemented) was delivered to such Underwriter, but was not sent, or
delivered to such person and the untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected in
the amended Preliminary Prospectus or Prospectus (or the Prospectus as
amended or supplemented), unless such failure on the part of such
Underwriter is the result of noncompliance by the Company with Section
5(g) hereof.
The obligations of the Company under this Section 8(a) will be in
addition to any liability the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, each of the directors of the Company, each of
the officers of the Company who shall have signed the Registration
Statements, and each other person, if any, who controls the Company within
the meaning of the Act to the same extent as the foregoing indemnities from
the Company to the several Underwriters, but only with respect to any loss,
liability, claim, damage or expense resulting from statements or omissions,
or alleged statements or omissions, if any, made in any Preliminary
Prospectus, the Registration Statements or Prospectus or any amendment or
supplement thereto, and in conformity with written information furnished to
the Company by any Underwriter through the Representative expressly for use
in any Preliminary Prospectus, the Registration Statements or Prospectus,
or any amendment or supplement thereto, or any application, as the case may
be.
(c) If any action, inquiry, investigation or proceeding is brought
against any person in respect of which indemnification may be sought
pursuant to Section 8(a) or (b) hereof, such person (hereinafter called the
"indemnified party") shall, promptly after notification of, or receipt of
service of process for, such action, inquiry, investigation or proceeding,
notify in writing the party or parties against whom indemnification is to
be sought (hereinafter called the "indemnifying party") of the institution
of such action, inquiry, investigation or proceeding. The indemnifying
party, upon the request of the indemnified party, shall assume the defense
of such action, inquiry, investigation or proceeding, including, without
limitation, the employment of counsel (reasonably satisfactory to such
indemnified party) and payment of expenses. No indemnification provided for
in this Section 8 shall be available to any indemnified party who shall
fail to give such notice if the indemnifying party does not have knowledge
of such action, inquiry, investigation or proceeding, to the extent that
such indemnifying party has been materially prejudiced by the failure to
give such notice, but the omission to so notify the indemnifying party
shall not relieve the indemnifying party otherwise than under this Section
8. Such indemnified party or controlling
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person thereof shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless the employment of such counsel
shall have been authorized in writing by the indemnifying party in
connection with the defense of such action. If such indemnified party or
parties shall have been advised by counsel that there may be a conflict
between the positions of the indemnifying party or parties and of the
indemnified party or parties or that there may be legal defenses available
to such indemnified party or parties different from or in addition to those
available to the indemnifying party or parties, the indemnified party or
parties shall be entitled to select counsel to conduct the defense to the
extent determined by such counsel to be necessary to protect the interests
of the indemnified party or parties, and the reasonable fees and expenses
of such counsel shall be borne by the indemnifying party. Expenses covered
by the indemnification in this Section 8 shall be paid by the indemnifying
party as they are incurred by the indemnified party. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have
been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such action.
Anything in this Section 8 to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any such claim
effected without its written consent.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) hereof in respect of any losses, liabilities, claims,
damages or expenses (or actions, inquiries, investigations or proceedings
in respect thereof) referred to herein, except by reason of the provisos
set forth in Section 8(a) hereof or the failure to give notice as required
in Section 8(c) hereof (provided that the indemnifying party does not have
knowledge of the action, inquiry, investigation or proceeding and to the
extent such party has been materially prejudiced by the failure to give
such notice), then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
liabilities, claims, damages or expenses (or actions, inquiries,
investigations or proceedings in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence
is not permitted by applicable law, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions that resulted
in such losses, liabilities, claims or reasonable expenses (or actions,
inquiries, investigations or proceedings in respect thereof), as well as
any other relevant equitable considerations. The relative benefits received
by the Company an the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bears to the
total underwriting discount and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Underwriters on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to above in this Section
8(d). The amount paid or payable by an indemnified party as a result of the
losses, liabilities, claims, damages or reasonable expenses (or actions,
inquiries, investigations or proceedings in respect thereof) referred to
above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), (i) the provisions of the Agreement Among
Underwriters shall govern contribution among Underwriters, (ii) no
Underwriter shall be required to
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contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, and
(iii) no person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 8(d) to contribute are several in
proportion to their individual underwriting obligations and number of
Shares sold, respectively, and not joint.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements made as of the Closing Date and any Option Closing Date. All such
representations, warranties and agreements of the Underwriters and the Company,
including, without limitation, the indemnity and contribution agreements
contained in Section 8 hereof and the agreements contained in Sections 6, 9, 10
and 13 hereof, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any Underwriter or any controlling
person, and shall survive delivery of the Shares and termination of this
Agreement, whether before or after the Closing Date or any Option Closing Date.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
(a) This Agreement shall become effective at the earlier of (i) 10:00
a.m., Richmond, Virginia time, on the first business day following the
Effective Date or (ii) at the time of the public offering by the
Underwriters of the Shares, whichever is earlier, except that the
provisions of Sections 6, 8, 10 and 13 hereof shall be effective upon
execution hereof. The time of the public offering, for the purpose of this
Section 10, shall mean the time when any of the Shares are first released
by the several Underwriters for offering by dealers. The Representative may
prevent the provisions of this Agreement (other than those contained in
Sections 6, 8, 10 and 13) hereof from becoming effective without liability
of any party to any other party, except as provided in Sections 6 and 8
hereof, by giving the notice indicated in Section 10(c) hereof before the
time the other provisions of this Agreement become effective.
(b) The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date as provided in Sections 7
and 11 hereof or if any of the following have occurred:
(i) since the respective dates as of which information is given in
the Registration Statements and the Prospectus, any material adverse
change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the
Company, or the earnings, business affairs, management or business
prospects of the Company, whether or not arising in the ordinary course
of business, that would, in the Representative's reasonable judgment,
make the offering or delivery of the Shares impracticable;
(ii) any outbreak of hostilities or other national or international
calamity or crisis or change in economic, political or financial market
conditions if the effect on the financial markets of the United States
of such outbreak, calamity, crisis or change would, in the
Representative's reasonable judgment, make the offering or delivery of
the Shares impracticable;
(iii) suspension of trading generally in securities on the New York
Stock Exchange, the American Stock Exchange, or the over-the-counter
market (including, without limitation, the Nasdaq Stock Market's
SmallCap Market) or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities or the promulgation
of any federal or state statute, regulation, rule or order of any court
or other governmental authority that in the Representative's sole
opinion materially and adversely affects trading of the Shares on such
exchange or over-the-counter market;
(iv) the enactment, publication, decree or other promulgation of
any federal or state statute, regulation, rule or order of any court or
other governmental authority that in the Representative's reasonable
opinion materially and adversely affects or will materially or adversely
affect the business or operations of the Company;
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(v) the taking of any action by any federal, state or local
government or agency in respect of monetary or fiscal affairs that in
the Representative's reasonable opinion has a material adverse effect on
the securities markets in the United States; or
(vi) trading in any securities of the Company shall have been
suspended or halted by the Nasdaq Stock Market's National Market System,
the Nasdaq SmallCap Market, or the SEC.
(c) If the Representative elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this
Section 10, the Representative shall notify the Company thereof promptly by
telephone, telegram or facsimile, confirmed by letter.
11. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter shall default in its or their obligation to
purchase Firm Shares or Optional Shares hereunder, and if the Firm Shares
or Optional Shares with respect to which such default relates do not exceed
in the aggregate 10% of the number of Firm Shares or Optional Shares, as
the case may be, that all Underwriters have agreed to purchase hereunder,
then such Firm Shares or Optional Shares to which the default relates shall
be purchased severally by the non-defaulting Underwriters in proportion to
their respective commitments hereunder.
(b) If such default relates to more than 10% of the Firm Shares or
Optional Shares, as the case may be, the Representative may in its sole
discretion arrange for another party or parties (including a non-defaulting
Underwriter) to purchase such Firm Shares or Optional Shares to which such
default relates, on the terms contained herein. In the event that the
Representative does not arrange for the purchase of the Firm Shares or
Optional Shares to which a default relates as provided in this Section
11(b), this Agreement may be terminated by the Representative or by the
Company without liability on the part of the several Underwriters (except
as provided in Section 8 hereof) or the Company (except as provided in
Sections 6 and 8 hereof); provided that if such default occurs with respect
to Optional Shares after the Closing Date, this Agreement will not
terminate as to the Firm Shares or any Optional Shares purchased prior to
such termination. Nothing herein shall relieve a defaulting Underwriter of
its liability, if any, to the other several Underwriters and to the Company
for damages occasioned by its default hereunder.
(c) If the Firm Shares or Optional Shares to which the default relates
are to be purchased by the nondefaulting Underwriters, or are to be
purchased by another party or parties, the Representative or the Company
shall have the right to postpone the Closing Date or any Option Closing
Date, as the case may be, for a reasonable period, but not in any event
exceeding seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statements or the Prospectus or in any
other documents and arrangements, and the Company agrees to file promptly
any amendment to the Registration Statements or supplement to the
Prospectus that in the opinion of Underwriters' Counsel may thereby be made
necessary. The terms "Underwriters" and "Underwriter" as used in this
Agreement shall include any party substituted under this Section 11 with
like effect as if it had originally been a party to this Agreement with
respect to the Firm Shares and/or Optional Shares purchased by it.
(d) It is understood that the Representative, individually and not as
the representatives of the several Underwriters, may (but shall not be
obligated to) make payment of the purchase price on behalf of any
Underwriter or Underwriters whose check or checks shall not have been
received by them prior to the Closing Date or the Option Closing Date for
the Firm Shares or Optional Shares, as the case may be, to be purchased by
such Underwriter or Underwriters. Any such payment by the Representative
shall not relieve any such Underwriter or Underwriters of any of its or
their obligations hereunder.
12. INFORMATION FURNISHED BY UNDERWRITERS. For all purposes of this
Agreement, the amounts of the selling concession and reallowance set forth in
the Prospectus constitute the only information furnished in writing by or on
behalf of any Underwriter expressly for inclusion in any Preliminary Prospectus,
the Registration Statement, or the Prospectus (as from time to time amended or
supplemented), or any amendment or supplement thereto, or in any application, as
the case may be.
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13. NOTICE. All communications hereunder, except as otherwise specifically
provided herein, shall be in writing and, if sent to the Representative or any
Underwriter, shall be mailed, delivered, telegrammed or faxed and confirmed to
such Underwriter, c/o Scott & Xxxxxxxxxxxx, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxx 00000, Attention: Mr. J. Xxxxx Xxxxxxx, with a copy to Xxxxxxx &
Xxxxxxx, Xxx Xxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxx X.
Paris, Jr., Esq., and T. Xxxxxxx Xxxxxx, Xx., Esq. if sent to the Company, shall
be mailed, delivered, telegrammed or faxed and confirmed to Waterside Capital
Corporation, 000 Xxxx Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000,
Attention: Xxxx Xxxxxxxx, Chairman, President and Chief Executive Officer, with
a copy to Xxxxx & Stant, Xxx Xxxxxxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxxxxxxx 00000,
Attention: Xxxxxxxxx X. Xxxxx, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, the Company, the controlling
persons, directors and officers thereof, and their respective successors,
assigns, heirs, legatees and legal representatives, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. The terms "successors" and "assigns" shall not include any purchaser
of the Shares merely because of such purchase.
15. DEFINITION OF BUSINESS DAY. For purposes of this Agreement, "business
day" means any day on which the Nasdaq Stock Market's SmallCap Market is opened
for trading.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and all such counterparts will constitute one and the same
instrument.
17. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia applicable to
agreements made and performed entirely within the Commonwealth.
18. CONSENT TO JURISDICTION. The Company irrevocably consents to the
jurisdiction of the courts of the Commonwealth of Virginia in Richmond, Virginia
and of any federal court located in the Commonwealth of Virginia in Richmond,
Virginia in connection with any action or proceeding arising out of or relating
to this Agreement, any document or instrument delivered pursuant to, in
connection with, or simultaneously with this Agreement, or a breach of this
Agreement or any such document or instrument. In any such action or proceeding,
the Company waives personal service of any summons, complaint, or other process
and agrees that service thereof may be made in accordance with Section 13.
Within 30 days after such service, or such other time as may be mutually agreed
upon in writing by the attorneys for the parties to such action or proceeding,
the Company shall appear or answer such summons, complaint, or other process.
Should the Company fail to appear or answer within such 30-day period or such
extended period, as the case may be, the Company shall be deemed in default and
judgment may be entered against the Company for the amount as demanded in any
summons, complaint, or other process so served.
If the foregoing correctly sets forth your understanding of our agreement,
please sign and return to the Company the enclosed duplicate hereof, whereupon
it will become a binding agreement in accordance with its terms.
Very truly yours,
WATERSIDE CAPITAL CORPORATION
By:
----------------------------------
Xxxx Xxxxxxxx, Chairman, President
and Chief Executive Officer
BY: XXXXX & XXXXXXXXXXXX, INC.
By:
-----------------------------
Authorized Representative
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SCHEDULE I
UNDERWRITERS
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
------------------------------------------------------------------------ ---------------------
Xxxxx & Xxxxxxxxxxxx, Inc...............................................
------------
TOTAL...................................................................
------------
============
I-1
27
SCHEDULE II
PERSONS WHO ARE TO DELIVER LOCK-UP AGREEMENTS
Officers and Directors
J. Xxxx Xxxxxxxx
[INSERT]
Shareholders
[INSERT]
I-2
