X-Xxxxxxx.xxx Inc.
2,131,838 Common Shares
(No Par Value Per Share)
UNDERWRITING AGREEMENT
----------------------
Whale Securities Co., L.P. New York, New York
000 Xxxxx Xxxxxx ___________, 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
X-Xxxxxxx.xxx Inc., a corporation incorporated under the laws of Canada
(the "Company"), proposes to issue and sell to Whale Securities Co., L.P. (the
"Underwriter") two million (2,000,000) common shares of the Company, no par
value (the "Company Offered Shares"), which Company Offered Shares are presently
authorized but unissued common shares, no par value (individually a "Common
Share" and collectively the "Common Shares"), of the Company. In addition,
____________________, ____________________ and ____________________ (the
"Selling Shareholders") propose to sell to the Underwriter an aggregate of one
hundred xxxxxx one thousand eight hundred thirty eight (131,838) Common Shares,
as set forth on Schedule A hereto (the "Selling Shareholders' Shares"). The
Company Offered Shares and the Selling Shareholders' Shares are sometimes
collectively referred to herein as the "Offered Shares". In addition, the
Underwriter, in order to cover over-allotments in the sale of the Offered
Shares, may purchase from the Company up to an aggregate of three hundred
nineteen thousand seven hundred seventy six (319,776) Common Shares (the
"Optional Shares"; the Offered Shares and the Optional Shares are hereinafter
sometimes collectively referred to as the "Shares"). The Company also proposes
to issue and sell to the Underwriter for its own account and the accounts of its
designees, warrants (the "Underwriter's Warrants") to purchase up to an
aggregate of two hundred thirteen thousand one hundred eighty four (213,184)
Common Shares (the "Warrant Shares") at an exercise price of $9.90 per
Warrant Share, which sale will be con-summated in accordance with the terms and
conditions of the form of Underwriter's Warrant filed as an exhibit to the
Registration Statement, as defined in Section 4(d) below. The Shares, the
Underwriter's Warrants and the Warrant Shares are more fully described in the
Registration Statement and the Prospectus, as defined in Section 4(d) below.
The Company and the Selling Shareholders hereby confirm their
respective agreements with the Underwriter as follows:
1. Purchase and Sale of Offered Shares. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company and the Selling Shareholders hereby
agree to sell the Company Offered Shares and the Selling Shareholder's Shares,
respectively, to the Underwriter, and the Underwriter agrees to purchase the
Company Offered Shares from the Company and the Selling Shareholders' Shares
from the Selling Shareholders, at a purchase price of $5.42 per Offered Share.
The Underwriter plans to offer the Offered Shares to the public at a public
offering price of $6.00 per Offered Share.
2. Payment and Delivery.
(a) Payment for the Offered Shares will be made to the Company and
the Selling Shareholders by wire transfer or certified or official bank check or
checks payable to their respective order in New York Clearing House funds, at
the offices of the Underwriter, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
against delivery of the Offered Shares to the Underwriter. Such payment and
delivery will be made at 10:00 A.M., New York City time, on the third business
day following the Effective Date (as defined in Section 4(d) below) (the fourth
business day following the Effective Date in the event that trading of the
Offered Shares commences on the day following the Effective Date), the date and
time of such payment and delivery being herein called the "Closing Date." The
certificates representing the Offered Shares to be delivered will be in such
denominations and registered in such names as the Underwriter may request not
less than two full business days prior to the Closing Date, and will be made
available to the Underwriter for inspection, checking and packaging at the
office of American Stock Transfer & Trust Company, the Company's transfer agent,
at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 not less than one full business day
prior to the Closing Date.
(b) On the Closing Date, the Company will sell the Underwriter's
Warrants to the Underwriter or to the Underwriter's designees, which designees
may only be officers and partners of the Underwriter and members of the selling
group and/or their officers and partners (collectively, the "Underwriter's
Designees"). The Underwriter's Warrants will be in the form of, and in
accordance with, the provisions of the Underwriter's Warrant Agreement attached
as an exhibit to the Registration Statement. The aggregate purchase price for
the Underwriter's Warrants is One Hundred Dollars ($100.00). The Underwriter's
Warrants will be restricted from sale, transfer,
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assignment or hypothecation for a period of one (1) year from the Effective
Date, except to the Underwriter's Designees. Payment for the Underwriter's
Warrants will be made to the Company by check or checks payable to its order on
the Closing Date against delivery of the certificates representing the
Underwriter's Warrants. The certificates representing the Underwriter's Warrants
will be in such denominations and such names as the Underwriter may request
prior to the Closing Date.
3. Option to Purchase Optional Shares.
(a) For the purposes of covering any over- allotments in connection
with the distribution and sale of the Offered Shares as contemplated by the
Prospectus, the Underwriter is hereby granted an option to purchase all or any
part of the Optional Shares from the Company. The purchase price to be paid for
the Optional Shares will be the same price per Optional Share as the price per
Offered Share set forth in Section 1 hereof. The option granted hereby may be
exercised by the Underwriter as to all or any part of the Optional Shares at any
time within 45 days after the Effective Date. The Underwriter will not be under
any obligation to purchase any Optional Shares prior to the exercise of such
option.
(b) The option granted hereby may be exercised by the Underwriter by
giving oral notice to the Company, which must be confirmed by a letter, telex or
telegraph setting forth the number of Optional Shares to be purchased, the date
and time for delivery of and payment for the Optional Shares to be purchased 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 Offered Shares. If such notice is given prior to the Closing Date, the
date set forth therein for such delivery and payment will not be earlier than
either two full business days thereafter or the Closing Date, whichever occurs
later. If such notice is given on or after the Closing Date, the date set forth
therein for such delivery and payment will not be earlier than two full business
days thereafter. In either event, the date so set forth will not be more than 15
full business days after the date of such notice. The date and time set forth in
such notice is herein called the "Option Closing Date." Upon exercise of such
option, through the Underwriter's delivery of the aforementioned notice, the
Company will become obligated to convey to the Underwriter, and, subject to the
terms and conditions set forth in Section 3(d) hereof, the Underwriter will
become obligated to purchase, the number of Optional Shares specified in such
notice.
(c) Payment for any Optional Shares purchased will be made to the
Company by wire transfer or certified or
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official bank check or checks payable to its order in New York Clearing House
funds, at the office of the Underwriter, against delivery of the Optional Shares
purchased to the Underwriter. The certificates representing the Optional Shares
to be delivered will be in such denominations and registered in such names as
the Underwriter requests not less than two full business days prior to the
Option Closing Date, and will be made available to the Underwriter for
inspection, checking and packaging at the aforesaid office of the Company's
transfer agent not less than one full business day prior to the Option Closing
Date.
(d) The obligation of the Underwriter to purchase and pay for any of
the Optional Shares is subject to the accuracy and completeness (as of the date
hereof and as of the Option Closing Date) of and compliance in all material
respects with the representations and warranties of the Company herein, to the
accuracy and completeness of the statements of the Company or its officers made
in any certificate or other document to be delivered by the Company pursuant to
this Agreement, to the performance in all material respects by the Company of
its obligations hereunder, to the satisfaction by the Company of the conditions,
as of the date hereof and as of the Option Closing Date, set forth in Section
3(b) hereof, and to the delivery to the Underwriter of opinions, certificates
and letters dated the Option Closing Date substantially similar in scope to
those specified in Sections 6 and 7(b), (c), (d) and (e) hereof, but with each
reference to "Offered Shares" and "Closing Date" to be, respectively, to the
Optional Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Canada, with full corporate power and
authority to own or lease, as the case may be, and operate its properties,
whether tangible or intangible, and to conduct its business as described in the
Registration Statement and to execute, deliver and perform this Agreement and
the Underwriter's Warrant Agreement and to consummate the transactions
contemplated hereby and thereby. The Company has no subsidiaries other than
E-Cruiter Software Inc., a corporation duly organized, validly existing and in
good standing under the laws of ___________________________ (the "Subsidiary").
Unless the context otherwise requires, all references to the "Company" in this
Agreement shall include the Subsidiary. The Subsidiary has full power and
authority, corporate and other, necessary to own or lease, as the case may be,
and operate its properties, whether tangible or intangible, and to conduct its
business as described in the Registration Statement. Each of the Company and the
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Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions wherein such qualification is necessary and
where failure so to qualify could have a material adverse effect on the
financial condition, results of operations, business or properties of the
Company or the Subsidiary (a "Material Adverse Effect").
The Company owns all of the issued and outstanding shares of capital
stock of the Subsidiary, free and clear of any security interests, liens,
encumbrances, claims and charges, and all of such shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
options or warrants for the purchase of, or other rights to purchase or acquire,
or outstanding securities convertible into or exchangeable for, any capital
stock or other securities of the Subsidiary. Other than the Subsidiary, the
Company has no equity interests in any entity.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company, and the
Underwriter's Warrant Agreement, when executed and delivered by the Company on
the Closing Date, will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms. The
execution, delivery and performance of this Agreement and the Underwriter's
Warrant Agreement by the Company, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms of this Agreement and the Underwriter's Warrant Agreement have
been duly authorized by all necessary corporate action and do not and will not,
with or without the giving of notice or the lapse of time, or both, (i) result
in any violation of the Articles of Incorporation or By-Laws, each as amended,
of the Company or the Subsidiary; (ii) result in a breach of or conflict with
any of the terms or provisions of, or constitute a default under, or result in
the modification or termination of, or result in the creation or imposition of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or the Subsidiary pursuant to any indenture, mortgage,
note, contract, commitment or other agreement or instrument to which the Company
or the Subsidiary is a party or by which the Company or the Subsidiary or any of
their respective properties or assets is or may be bound or affected; (iii)
violate any existing applicable law, rule, regulation, judgment, order or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company or the Subsidiary or any of their respective properties or
businesses; or (iv) have any effect on any permit, certification, registration,
approval, consent order, license, franchise or other authorization
(collectively, the "Permits") necessary for
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the Company or the Subsidiary to own or lease and operate, as the case may be,
its properties or conduct its businesses or the ability of the Company or the
Subsidiary to make use thereof.
(c) No Permits of any court or governmental agency or body, other
than under the Securities Act of 1933, as amended (the "Act"), the Regulations,
as defined in Section 4(d) below, and applicable state securities or Blue Sky
laws, are required (i) for the valid authorization, issuance, sale and delivery
of the Shares to the Underwriter, and (ii) the consummation by the Company of
the transactions contemplated by this Agreement and the Underwriter's Warrant
Agreement.
(d) The conditions for use of a registration statement on Form F-1
set forth in the General Instructions to Form F-1 have been satisfied with
respect to the Company, the transactions contemplated herein and in the
Registration Statement. The Company has prepared in conformity with the
requirements of the Act and the rules and regulations (the "Regulations") of the
Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333-_____________) on Form F-1 and
has filed one or more amendments thereto, covering the registration of the
Shares under the Act, including the related preliminary prospectus or
preliminary prospectuses (each thereof being herein called a "Preliminary
Prospectus") and a proposed final prospectus. Each Preliminary Prospectus was
endorsed with the legend required by Item 501(c)(5) of Regulation S-K of the
Regulations and, if applicable, Rule 430A of the Regulations. Such registration
statement including any documents incorporated by reference therein and all
financial schedules and exhibits thereto, as amended at the time it becomes
effective, and the final prospectus included therein are herein, respectively,
called the "Registration Statement" and the "Prospectus," except that, (i) if
the prospectus filed by the Company pursuant to Rule 424(b) of the Regulations
differs from the Prospectus, the term "Prospectus" will also include the
prospectus filed pursuant to Rule 424(b), and (ii) if the Registration Statement
is amended or such Prospectus is supplemented after the date the Registration
Statement is declared effective by the Commission (the "Effective Date") and
prior to the Option Closing Date, the terms "Registration Statement" and
"Prospectus" shall include the Registration Statement as amended or
supplemented.
(e) Neither the Commission nor, to the best of the Company's
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or has instituted or, to the
best of the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
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(f) The Registration Statement when it becomes effective, the
Prospectus (and any amendment or supplement thereto) when it is filed with the
Commission pursuant to Rule 424(b), and both documents as of the Closing Date
and the Option Closing Date, referred to below, will contain all statements
which are required to be stated therein in accordance with the Act and the
Regulations and will in all material respects conform to the requirements of the
Act and the Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, on such dates, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company in connection with the Registration Statement or Prospectus or any
amendment or supplement thereto by the Underwriter expressly for use therein.
(g) The Company had at the date or dates indicated in the Prospectus
a duly authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. Based on the assumptions stated in
the Registration Statement and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein. Except as set
forth in the Registration Statement or the Prospectus, on the Effective Date and
on the Closing Date, there will be no options to purchase, warrants or other
rights to subscribe for, or any securities or obligations convertible into, or
any contracts or commitments to issue or sell shares of the Company's capital
stock or any such warrants, convertible securities or obligations. Except as set
forth in the Prospectus, no holders of any of the Company's securities has any
rights, "demand," "piggyback" or otherwise, to have such securities registered
under the Act.
(h) The descriptions in the Registration Statement and the
Prospectus of contracts and other documents are accurate and present fairly the
information required to be disclosed, and there are no contracts or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement under the
Act or the Regulations which have not been so described or filed as required.
(i) PricewaterhouseCoopers, LLP, the accountants who have certified
certain of the consolidated financial statements filed and to be filed with the
Commission as part of the Registration Statement and the Prospectus, are
independent
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public accountants within the meaning of the Act and Regulations. The
consolidated financial statements and schedules and the notes thereto filed as
part of the Registration Statement and included in the Prospectus are complete,
correct and present fairly the financial position of the Company as of the dates
thereof, and the results of operations and changes in financial position of the
Company for the periods indicated therein, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved except as otherwise stated in the Registration Statement and
the Prospectus. The selected financial data set forth in the Registration
Statement and the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with that of the audited and unaudited
financial statements included in the Registration Statement and the Prospectus.
(j) Each of the Company and the Subsidiary has filed with the
appropriate federal, state and local governmental agencies, and all appropriate
foreign countries and political subdivisions thereof, all tax returns, including
franchise tax returns, which it is required to file or has duly obtained
extensions of time for the filing thereof and has paid all taxes shown on such
returns and all assessments received by it to the extent that the same have
become due; and the provisions for income taxes payable, if any, shown on the
consolidated financial statements filed with or as part of the Registration
Statement are sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the dates of such
consolidated financial statements. Except as disclosed in writing to the
Underwriter, neither the Company nor the Subsidiary has executed or filed with
any taxing authority, foreign or domestic, any agreement extending the period
for assessment or collection of any income taxes and is not a party to any
pending action or proceeding by any foreign or domestic governmental agency for
assessment or collection of taxes; and no claims for assessment or collection of
taxes have been asserted against the Company or the Subsidiary.
(k) The outstanding Common Shares, including, without limitation,
the Selling Shareholders' Shares, and the outstanding options and warrants to
purchase Common Shares have been duly authorized and validly issued. The
outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. The
Company has duly reserved a sufficient number of Common Shares from its
authorized but unissued Common Shares for issuance upon exercise of the
outstanding options and warrants. None of the outstanding Common Shares or
options or
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warrants to purchase Common Shares has been issued in violation of the
preemptive rights of any shareholder of the Company. None of the holders of the
outstanding Common Shares is subject to personal liability solely by reason of
being such a holder. The offers and sales of the outstanding Common Shares and
outstanding options and warrants to purchase Common Shares were at all relevant
times either registered under the Act and the applicable state securities or
Blue Sky laws or exempt from such registration requirements. The authorized
Common Shares and outstanding options and warrants to purchase Common Shares
conform to the descriptions thereof contained in the Registration Statement and
Prospectus. Except as set forth in the Registration Statement and the
Prospectus, on the Effective Date and the Closing Date, there will be no
outstanding options or warrants for the purchase of, or other outstanding rights
to purchase or acquire, Common Shares or securities convertible into Common
Shares.
(l) No securities of the Company have been sold by the Company or by
or on behalf of, or for the benefit of, 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 disclosed in the Registration Statement.
(m) The issuance and sale of the Company Offered Shares and Optional
Shares have been duly authorized and, when the Shares have been issued and duly
delivered against payment therefor as contemplated by this Agreement, the
Company Offered Shares and Optional Shares will be validly issued, fully paid
and nonassessable, and the holders thereof will not be subject to personal
liability solely by reason of being such holders. The Shares will not be subject
to preemptive rights of any shareholder of the Company.
(n) The issuance and sale of the Common Shares issuable upon
exercise of the Underwriter's Warrants have been duly authorized and, when such
Common Shares have been duly delivered against payment therefor, as contemplated
by the Underwriter's Warrant Agreement, such Common Shares will be validly
issued, fully paid and nonassessable. Holders of Common Shares issuable upon the
exercise of the Underwriter's Warrants will not be subject to personal liability
solely by reason of being such holders. Neither the Underwriter's Warrants nor
the Common Shares issuable upon exercise thereof will be subject to preemptive
rights of any shareholder of the Company. The Company has reserved a sufficient
number of Common Shares from its authorized but unissued Common Shares for
issuance upon exercise of the Underwriter's Warrants in accordance with the
provisions of the Underwriter's Warrant Agreement. The Underwriter's
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Warrants conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
(o) Neither the Company nor the Subsidiary is in violation of, or in
default under, (i) any term or provision of its articles of incorporation or
by-laws, each as amended; (ii) any term or provision or any financial covenants
of any indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party or by which it or any of its property or
business is or may be bound or affected; or (iii) any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company, the Subsidiary or any
of the properties or businesses of the Company or the Subsidiary, the default or
violation of which, in the case of clauses (ii) and (iii) of this Section 4(o),
could cause a Material Adverse Effect. Each of the Company and the Subsidiary
owns, possesses or has obtained all governmental and other (including those
obtainable from third parties) Permits, necessary to own or lease, as the case
may be, and to operate its properties, whether tangible or intangible, and to
conduct its business and operations as presently conducted and all such Permits
are outstanding and in good standing, and there are no proceedings pending or,
to the best of the Company's knowledge threatened, or any basis therefor,
seeking to cancel, terminate or limit such Permits.
(p) Except as set forth in the Prospectus, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, domestic or foreign, or before any
private arbitration tribunal, pending, or, to the best of the Company's
knowledge, threatened against the Company or the Subsidiary or involving the
properties or business of the Company or the Subsidiary which, if determined
adversely to the Company or the Subsidiary, would, individually or in the
aggregate, result in a Material Adverse Effect or which question the validity of
the capital stock of the Company or the Subsidiary or of this Agreement or of
any action taken or to be taken by the Company pursuant to, or in connection
with, this Agreement; nor, to the best of the Company's knowledge is there any
basis for any such claim, action, suit, proceeding, arbitration, investigation
or inquiry. There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company or the Subsidiary and
enjoining the Company or the Subsidiary from taking, or requiring the Company or
the Subsidiary to take, any action, or to which the Company or the Subsidiary,
or the property or business of the Company or the Subsidiary, is bound or
subject.
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(q) Neither the Company nor any of its affiliates has incurred any
liability for any finder's fees or similar payments in connection with the
transactions herein contemplated.
(r) Each of the Company and the Subsidiary owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of the Company's knowledge, neither the Company nor
the Subsidiary has infringed or is infringing upon the rights of others with
respect to Intangibles; and neither the Company nor the Subsidiary has received
any notice of conflict with the asserted rights of others with respect to the
Intangibles which could, singly or in the aggregate, cause a Material Adverse
Effect, and the Company knows of no basis therefor; and, to the best of the
Company's knowledge, no others have infringed upon the Intangibles of the
Company or the Subsidiary.
(s) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus and the Company's latest
consolidated financial statements, neither the Company nor the Subsidiary has
incurred any material liability or obligation, direct or contingent, or entered
into any material transaction, whether or not incurred in the ordinary course of
business, and has not sustained any material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there have not been, and prior
to the Closing Date referred to below there will not be, any changes in the
capital stock or any material increases in the long-term debt of the Company or
any change which has resulted or could result in a Material Adverse Effect,
other than as set forth or contemplated in the Prospectus.
(t) Neither the Company nor the Subsidiary owns any real property.
Each of the Company and the Subsidiary has good title to all personal property
(tangible and intangible) owned by it, free and clear of all security interests,
charges, mortgages, liens, encumbrances and defects, except such as are
described in the Registration Statement and Prospectus or such as do not
materially affect the value or transferability of such property and do not
interfere with the use of such property made, or proposed to be made, by the
Company or the Subsidiary. The leases, licenses or other contracts or
instruments under which
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the Company and the Subsidiary lease, hold or are entitled to use any property,
real or personal, are valid, subsisting and enforceable only with such
exceptions as are not material and do not interfere with the use of such
property made, or proposed to be made, by the Company or the Subsidiary, and all
rentals, royalties or other payments accruing thereunder which became due prior
to the date of this Agreement have been duly paid, and neither the Company nor
the Subsidiary, nor, to the best of the Company's knowledge, any other party is
in default thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a default thereunder, in each case that could cause a Material
Adverse Effect. Neither the Company nor the Subsidiary has received notice of
any violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. Each of the Company and of the
Subsidiary has adequately insured its properties against loss or damage by fire
or other casualty and maintains, in adequate amounts, such other insurance as is
usually maintained by companies engaged in the same or similar businesses.
(u) Each contract or other instrument (however characterized or
described) to which the Company or the Subsidiary is a party or by which the
properties or businesses of the Company or of the Subsidiary is or may be bound
or affected and to which reference is made in the Prospectus has been duly and
validly executed, is in full force and effect in all material respects and is
enforceable against the parties thereto in accordance with its terms, and none
of such contracts or instruments has been assigned by the Company or the
Subsidiary, and neither the Company nor the Subsidiary, nor, to the best of the
Company's knowledge, any other party, is in default thereunder and, to the best
of the Company's knowledge, no event has occurred which, with the lapse of time
or the giving of notice, or both, would constitute a default thereunder.
None of the provisions of such contracts or instruments violates any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or the
Subsidiary or any of their respective assets or businesses, including, without
limitation, those promulgated by the Commission, and comparable state and local
regulatory authorities.
(v) The employment, consulting, confidentiality and non-competition
agreements between the Company and its officers, employees and consultants and
between the Subsidiary and their respective officers, employees and consultants,
described in the Registration Statement, are binding and
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enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(w) Except as set forth in the Prospectus, neither the Company nor
any of the Subsidiaries has employee benefit plans (including, without
limitation, profit sharing and welfare benefit plans) or deferred compensation
arrangements that are subject to the provisions of the Employee Retirement
Income Security Act of 1974.
(x) To the best of the Company's knowledge, no labor problem exists
with any of the Company's employees or any of the employees of its Subsidiaries
or is imminent which could adversely affect the Company or the Subsidiary.
(y) Neither the Company nor the Subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by applicable
law. The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(z) The Shares have been approved for listing on the Nasdaq SmallCap
Market and [the Boston Stock Exchange] [Pacific Stock Exchange].
(aa) The Company has provided to Xxxxxx Xxxxxxxxxx LLP, counsel to
the Underwriter ("Underwriter's Counsel"), all agreements, certificates,
correspondence and other items, documents and information in its possession
and/or available to it requested by such counsel's Corporate Review Memorandum
dated April 21, 1999 (the "Memorandum") and the Company's response to such
Memorandum is accurate and complete.
Any certificate signed by an officer of the Company, by an officer
of a Subsidiary or by any of the Selling Shareholders and delivered to the
Underwriter or to Underwriter's Counsel shall be deemed to be a representation
and warranty by the Company, the Subsidiary or the Selling Shareholder, as the
case may be, to the Underwriter as to the matters covered thereby.
-13-
5. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder severally represents and warrants to the Underwriter that:
(a) The Shares to be sold by such Selling Shareholder are, and on
the Closing Date will be, duly and validly authorized and validly issued, fully
paid and nonassessable; the certificates for such Shares will be genuine; such
Selling Shareholder will have on the Closing Date valid, marketable title to
such Shares, free and clear of all security interests, liens, encumbrances,
claims, charges, restrictions on transfer or other defects whatsoever, with full
right and authority to sell and deliver such Shares; and upon the delivery of
and payment for such Shares as herein contemplated the Underwriter will receive
valid, marketable title thereto, free and clear of all security interests,
liens, encumbrances, claims, charges, restrictions on transfer or other defects,
except any that may be created by the Underwriter's own action.
(b) None of the information furnished to the Company in writing by
such Selling Shareholder for use in, or in connection with the preparation of,
the Registration Statement or the Prospectus contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and the statements with
respect to such Selling Shareholder contained in the "Principal and Selling
Shareholders" section of the Prospectus and in Item 15 of the Registration
Statement have been furnished to the Company by such Selling Shareholder for
such use.
(c) Such Selling Shareholder has duly authorized the Company to act
as attorney-in-fact (the "Attorney-in-Fact") for such Selling Shareholder
pursuant to a power of attorney (each, a "Power of Attorney") executed by such
Selling Shareholder (and, by the Company's execution of this Agreement on behalf
of the Selling Shareholders, it represents and warrants that it has been duly
appointed as Attorney-in-Fact by each of the Selling Shareholders) pursuant to
which the Attorney-in-Fact is authorized on behalf of the Selling Shareholder to
execute this Agreement and any other documents necessary or desirable in
connection with the sale of the Shares, to make delivery of the certificates for
the Shares, to receive the proceeds of the sale of the Shares and to give a
receipt therefor and to distribute the proceeds from the sale of such Selling
Shareholder's Shares to such Selling Shareholder. Such Selling Shareholder has
caused a certificate or certificates for the number of Shares to be sold by such
Selling Shareholder hereunder to be delivered to the Attorney-in-Fact with
irrevocable authority to purchase all requisite stock transfer tax stamps and to
hold such certificate
-14-
or certificates in custody for delivery, or for exchange for other certificates
in proper form for delivery, pursuant to the provisions hereof on the Closing
Date.
(d) This Agreement constitutes the valid and binding obligation of
such Selling Shareholder, enforceable against the Selling Shareholder in
accordance with its terms subject, as to enforcement of remedies, to applicable
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws affecting the rights of creditors generally and the discretion of
courts in granting equitable remedies and except that enforceability of the
indemnification provisions set forth in Section 8 hereof and the contribution
provisions set forth in Section 9 hereof may be limited by the United States
federal and state securities laws or public policy underlying such laws.
(e) All authorizations and consents necessary for the execution and
delivery by such Selling Shareholder of this Agreement and the sale and delivery
hereunder of such Selling Shareholder's Shares have been obtained and are in
full force and effect on the date hereof and will be in full force and effect at
the Closing Date.
(f) The sale of such Selling Shareholder's Shares by such Selling
Shareholder pursuant to this Agreement is not prompted by any material
information concerning the Company known by such Selling Shareholder which is
not set forth in the Prospectus.
6. Certain Covenants of the Company and the Selling Shareholders. The
Company and the Selling Shareholders covenant with the Underwriter as follows:
(a) The Company will not at any time, whether before the Effective
Date or thereafter during such period as the Prospectus is required by law to be
delivered in connection with the sales of the Shares by the Underwriter or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Underwriter has not been previously advised
and furnished a copy, or to which the Underwriter shall object in writing.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will advise the Underwriter immediately, and,
if requested by the Underwriter, confirm such advice in writing, (i) when the
Registration Statement, or any post-effective amendment to the Registration
Statement or any supplemented Prospectus is filed with the Commission; (ii) of
the receipt of any comments from the Commission; (iii) of any request of the
Commission for amendment
-15-
or supplementation of the Registration Statement or Prospectus or for additional
information; and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the initiation of any proceedings for any of such purposes.
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 to obtain as soon as
possible the lifting thereof, if any such order is issued.
(c) The Company will deliver to the Underwriter, without charge,
from time to time until the Effective Date, as many copies of each Preliminary
Prospectus as the Underwriter may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Act. The
Company will deliver to the Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as the Underwriter may
reasonably request. The Company has furnished or will furnish to the Underwriter
a signed copy of the Registration Statement as originally filed and of all
amendments thereto, whether filed before or after the Registration Statement
becomes effective, a copy of all exhibits filed therewith and a signed copy of
all consents and certificates of experts.
(d) The Company will comply with the Act, the Regulations, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder so as to permit the continuance of sales of and
dealings in the Offered Shares and in any Optional Shares which may be issued
and sold. If, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event occurs as a result of which the
Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it shall be necessary to amend or
supplement the Registration Statement and Prospectus to comply with the Act or
the regulations thereunder, the Company will promptly file with the Commission,
subject to Section 6(a) hereof, an amendment or supplement which will correct
such statement or omission or which will effect such compliance.
(e) The Company will furnish such proper information as may be
required and otherwise cooperate in qualifying the Shares for offering and sale
under the securities
-16-
or Blue Sky laws relating to the offering in such jurisdictions as the
Underwriter may reasonably designate, provided that no such qualification will
be required in any jurisdiction where, solely as a result thereof, the Company
would be subject to service of general process or to taxation or qualification
as a foreign corporation doing business in such jurisdiction.
(f) The Company will make generally available to its
securityholders, in the manner specified in Rule 158(b) under the Act, and
deliver to the Underwriter and Underwriter's Counsel as soon as practicable and
in any event not later than 45 days after the end of its fiscal quarter in which
the first anniversary date of the effective date of the Registration Statement
occurs, an earning statement meeting the requirements of Rule 158(a) under the
Act covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement.
(g) For a period of three years from the Effective Date, the Company
will deliver to the Underwriter and to Underwriter's Counsel on a timely basis
(i) a copy of each report or document, including, without limitation, reports on
Forms 6-K, 8-K, 20-F, 10-K (or 10-KSB) and 10-Q (or 10-QSB) and exhibits
thereto, filed or furnished to the Commission, any securities exchange or the
National Association of Securities Dealers, Inc. (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 securityholders; (iii) as soon as practicable, a copy of any
Schedule 13D, 13G, 14D-1 or 13E-3 received or prepared by the Company from time
to time; (iv) monthly statements setting forth such information regarding the
Company's results of operations and financial position (including balance sheet,
profit and loss statements and data regarding outstanding purchase orders) as is
regularly prepared by management of the Company; and (v) such additional
information concerning the business and financial condition of the Company as
the Underwriter may from time to time reasonably request and which can be
prepared or obtained by the Company without unreasonable effort or expense. The
Company will furnish to its shareholders annual reports containing audited
financial statements and such other periodic reports as it may determine to be
appropriate or as may be required by law.
(h) Neither the Company, nor any Selling Shareholder nor any person
that controls, is controlled by or is under common control with the Company or a
Selling Shareholder will take any action designed to or which might be
reasonably expected to cause or result in the stabilization or manipulation of
the price of the Common Shares.
-17-
(i) If the transactions contemplated by this Agreement are
consummated, the Underwriter shall retain the $50,000 previously paid to it, and
the Company will pay or cause to be paid the following: all costs and expenses
incident to the performance of the obligations of the Company under this
Agreement, including, but not limited to, the fees and expenses of accountants
and counsel for the Company; the preparation, printing, mailing and filing of
the Registration Statement (including financial statements and exhibits),
Preliminary Prospectuses and the Prospectus, and any amendments or supplements
thereto; the printing and mailing of the Selected Dealer Agreement, the issuance
and delivery of the Shares to the Underwriter; all taxes, if any, on the
issuance of the Shares; the fees, expenses and other costs of qualifying the
Shares for sale under the Blue Sky or securities laws of those states in which
the Shares are to be offered or sold, including fees and disbursements of
counsel in connection therewith (including those of such local counsel as may
have been retained for such purpose) and the cost of printing and mailing the
"Blue Sky Survey"; the filing fees incident to securing any required review by
the NASD, the NASDAQ Stock Market and [the Boston Stock Exchange] [the Pacific
Stock Exchange]; the cost of furnishing to the Underwriter copies of the
Registration Statement, Preliminary Prospectuses and the Prospectus as herein
provided; the costs, up to an aggregate maximum of $10,000, of placing
"tombstone advertisements" in any publications which may be selected by the
Underwriter; and all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 6(i).
In addition, at the Closing Date or the Option Closing Date, as the
case may be, the Underwriter will deduct from the payment for the Offered Shares
or any Optional Shares three percent (3%) of the gross proceeds of the offering
(less the sum of $50,000 previously paid to the Underwriter), as payment for the
Underwriter's nonaccountable expense allowance relating to the transactions
contemplated hereby, which amount will include the fees and expenses of
Underwriter's Counsel (other than the fees and expenses of Underwriter's Counsel
relating to Blue Sky qualifications and registrations, which, as provided for
above, shall be in addition to the three percent (3%) nonaccountable expense
allowance and shall be payable directly by the Company to Underwriter's Counsel
on or prior to the Closing Date).
(j) If the transactions contemplated by this Agreement or related
hereto are not consummated because the Company decides not to proceed with the
offering for any reason or because the Underwriter decides not to proceed with
the offering as a result of a breach by the Company of its
-18-
representations, warranties or covenants in the Agreement or as a result of
adverse changes in the affairs of the Company, then the Company will be
obligated to reimburse the Underwriter for its accountable expenses up to the
sum of $75,000, inclusive of the $50,000 previously paid to the Underwriter by
the Company. In the event the Company or the Underwriter decides not to proceed
with the offering for reasons other than those set forth in the preceding
sentence, the Company will only be obligated to reimburse the Underwriter for
its accountable expenses up to $50,000, inclusive of the $50,000 previously paid
to the Underwriter by the Company. In no event, however, will the Underwriter,
in the event the offering is terminated, be entitled to retain or receive more
than an amount equal to its actual accountable out-of-pocket expenses.
(k) The Company intends to apply the net proceeds from the sale of
the Shares for the purposes set forth in the Prospectus. Except as set forth in
the Prospectus, no portion of the net proceeds from the sale of the Shares will
be used to repay any indebtedness.
(l) During the period of twelve (12) months from the Effective Date
hereof, neither the Company nor any of its officers, directors or
securityholders will offer for sale or sell or otherwise dispose of, directly or
indirectly, any securities of the Company (other than the Selling Shareholders'
Shares by the Selling Shareholders), in any manner whatsoever, whether pursuant
to Rule 144 of the Regulations or otherwise, and no holder of registration
rights relating to securities of the Company will exercise any such registration
rights, in either case, without the prior written consent of the Underwriter.
During the 12-month period commencing one year from the date hereof, no officer,
director or securityholder who beneficially owns or holds 5% or more of the
outstanding Common Shares (calculated in accordance with Rule 13d-3(d)(i) under
the Exchange Act) may sell any Common Shares in excess of the amount that they
would be allowed to sell if they were deemed "affiliates" of the Company and
their shares were deemed "restricted," as those terms are defined in Rule 144
promulgated under the Securities Act, without the prior written consent of the
Underwriter. The Company will deliver to the Underwriter the undertakings, as of
the date hereof, of its officers, directors and shareholders to the effect of
the foregoing.
(m) The Company will not file any registration statement relating to
the offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the twelve (12) months from the Effective Date,
without the Underwriter's prior written consent.
-19-
(n) The Company maintains and will continue to maintain 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.
(o) The Company will use its best efforts to maintain the listing of
the Shares on the Nasdaq SmallCap Market and will, if so qualified, list the
Shares, and maintain such listing for so long as qualified, on the Nasdaq
National Market System.
(p) The Company will, concurrently with the Effective Date, register
the class of equity securities of which the Shares are a part under Section
12(b) or 12(g) of the Exchange Act and the Company will maintain such
registration for a minimum of five (5) years from the Effective Date.
(q) Subject to the sale of the Offered Shares, the Underwriter and
its successors will have the right to designate a nominee for election, at its
or their option, either as a member of or a non-voting advisor to the Board of
Directors of the Company (which board, during such period, shall meet at least
quarterly, have no members who are related (by marriage or otherwise) to other
of its board members, and be comprised of members, a majority of which are not
otherwise affiliated with the Company, its management or its founders), and the
Company will use its best efforts to cause such nominee to be elected and
continued in office as a director of the Company or as such advisor until the
expiration of three (3) years from the Effective Date. Each of the Company's
current officers, directors and shareholders agree to vote all of the Common
Shares owned by such person or entity so as to elect and continue in office such
nominee of the Underwriter. Following the election of such nominee as a director
or advisor, such person shall receive no more or less compensation than is paid
to other non-officer directors of the Company for attendance at meetings of the
Board of Directors of the Company and shall be entitled to receive reimbursement
for all reasonable costs incurred in attending such meetings including, but not
limited to, food, lodging and transportation. The Company agrees to indemnify
and hold such director or advisor harmless, to the maximum extent permitted by
law, against any and all claims, actions, awards and
-20-
judgments arising out of his service as a director or advisor and, in the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, to include such director or advisor as an
insured under such policy. The rights and benefits of such indemnification and
the benefits of such insurance shall, to the extent possible, extend to the
Underwriter insofar as it may be or may be alleged to be responsible for such
director or advisor. The Company will deliver to the Underwriter the
undertakings as of the date hereof of each of its officers, directors and
shareholders to be bound by the terms of this Section 6(q).
If the Underwriter does not exercise its option to designate a
member of or advisor to the Company's Board of Directors, the Underwriter shall
nonetheless have the right to send a representative (who need not be the same
individual from meeting to meeting) to observe each meeting of the Board of
Directors. The Company agrees to give the Underwriter notice of each such
meeting and to provide the Underwriter with an agenda and minutes of the meeting
no later than it gives such notice and provides such items to the directors.
(r) The Company shall retain American Stock Transfer and Trust
Company as its transfer agent for the Common Shares, or another transfer agent
reasonably acceptable to the Underwriter, for a period of three (3) years from
the Effective Date. In addition, for a period of three (3) years from the
Effective Date, the Company, at its own expense, shall cause such transfer agent
to provide the Underwriter, if so requested in writing, with copies of the
Company's daily transfer sheets, and, when requested by the Underwriter, a
current list of the Company's securityholders, including a list of the
beneficial owners of securities held by a depository trust company and other
nominees.
(s) The Company hereby agrees, at its sole cost and expense, to
supply and deliver to the Underwriter and Underwriter's Counsel, within a
reasonable period from the date hereof, four bound volumes, including the
Registration Statement, as amended or supplemented, all exhibits to the
Registration Statement, the Prospectus and all other underwriting documents.
(t) The Company shall, as of the date hereof, have applied for
listing in Standard & Poor's Corporation Records Service (including annual
report information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial Manual
not being sufficient for these purposes) and shall use its best efforts to have
the Company listed in such manual and shall maintain such listing for a period
of three (3) years from the Effective Date.
-21-
(u) For a period of three (3) years from the Effective Date, the
Company shall provide the Underwriter, on a not less than annual basis, with
internal forecasts setting forth projected results of operations for each
quarterly and annual period in the two (2) fiscal years following the respective
dates of such forecasts. Such forecasts shall be provided to the Underwriter
more frequently than annually if prepared more frequently by management, and
revised forecasts shall be prepared and provided to the Underwriter when
required to reflect more current information, revised assumptions or actual
results that differ materially from those set forth in the forecasts.
(v) For a period of three (3) years from the Effective Date, the
Company shall continue to retain PricewaterhouseCoopers, LLP (or such other
nationally recognized accounting firm acceptable to the Underwriter) as the
Company's independent public accountants.
(w) For a period of three (3) years from the Effective Date, the
Company, at its expense, shall cause its then independent certified public
accountants, as described in Section 6(v) above, to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q (or 10-QSB) quarterly report (or other equivalent report) and the
mailing of quarterly financial information to shareholders.
(x) For a period of twenty-five (25) days from the Effective Date,
neither the Company nor any Selling Shareholder will issue press releases or
engage in any other publicity without the Underwriter's prior written consent,
other than normal and customary releases issued in the ordinary course of the
Company's business or those releases required by law.
(y) For a period of three (3) years from the Effective Date, the
Company will not offer or sell any of its securities (i) pursuant to Regulation
S promulgated under the Act or (ii) at a discount to market or in a discounted
transaction, without the prior written consent of the Underwriter, other than
the issuance of Common Shares upon exercise of options and warrants outstanding
on the Closing Date and described in the Prospectus.
(z) For a period of three (3) years from the Effective Date, the
Company will provide to the Underwriter ten day's written notice prior to any
issuance by the Company or its subsidiaries of any equity securities or
securities exchangeable for or convertible into equity securities of the
Company, except for (i) Common Shares issuable upon exercise of currently
-22-
outstanding options and warrants or conversion of currently outstanding
convertible securities and (ii) options available for future grant pursuant to
any stock option plan in effect on the Effective Date and the issuance of shares
of Common Shares upon the exercise of such options.
(aa) Prior to the Effective Date and for a period of three (3) years
thereafter, the Company will retain a financial public relations firm reasonably
acceptable to the Underwriter.
(ab) For a period of three (3) years from the Effective Date, the
Company will cause its Board of Directors to meet, either in person or
telephonically, a minimum of four (4) times per year and will hold a
shareholder's meeting at least once per annum.
(ac) Prior to the Effective Date, the Company shall have obtained
Director's and Officer's insurance naming the Underwriter as an additional
insured party, in an amount equal to twenty-five percent (25%) of the gross
proceeds of the offering, and the Company will maintain such insurance for a
period of at least three (3) years from the Closing Date.
7. Conditions of the Underwriter's Obligation to Purchase the Offered
Shares from the Company and the Selling Shareholders. The obligation of the
Underwriter to purchase and pay for the Offered Shares which it has agreed to
purchase from the Company and the Selling Shareholders is subject (as of the
date hereof and the Closing Date) to the accuracy of and compliance in all
material respects with the representations and warranties of the Company and the
Selling Shareholders herein, to the accuracy of the statements of the Company
and its officers and of the Selling Shareholders made pursuant hereto, to the
performance in all material respects by the Company and the Selling Shareholders
of their respective obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement will have become effective not later
than 10:00 A.M., New York City time, on the day following the date of this
Agreement, or at such later time or on such later date as the Underwriter may
agree to in writing; prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or will be pending or, to
the best of the Underwriter's or the Company's knowledge, will be contemplated
by the Commission; and any request on the part of the Commission for additional
information will have been complied with to the satisfaction of Underwriter's
Counsel.
-23-
(b) At the time that this Agreement is executed and at the Closing
Date, there will have been delivered to the Underwriter the signed opinion of
Weil, Gotshal & Xxxxxx LLP and Xxxxxx-Xxxxxxxxx, Hill and XxXxxxxx, counsels for
the Company ("Company Counsel"), dated as of the date hereof or the Closing
Date, as the case may be (and any other opinions of counsel referred to in such
opinion of Company Counsel or relied upon by Company Counsel in rendering their
opinion), reasonably satisfactory to Underwriter's Counsel, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing and in good standing under the laws of Canada, with full corporate
power and authority, and with all Permits necessary, to own or lease, as the
case may be, and operate its properties, whether tangible or intangible, and to
conduct its business as described in the Registration Statement. To the best of
Company Counsel's knowledge, the Company has no subsidiaries, other than
E-Cruiter Software Inc., a corporation duly organized, validly existing and in
good standing under the laws of _____________________ (the "Subsidiary"). Unless
the context otherwise requires, all references to the "Company" shall include
the Subsidiary. The Subsidiary has full corporate power and authority and all
Permits necessary, to own or lease, as the case may be, and operate its
properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement. Each of the Company and the Subsidiary
is duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions wherein such qualification is necessary and
failure so to qualify could have a Material Adverse Effect.
The Company owns all of the issued and outstanding shares of capital
stock of the Subsidiary, free and clear of any security interests, liens,
encumbrances, claims and charges of any nature whatsoever, except as set forth
in the Registration Statement and all of such shares have been duly authorized
and validly issued and are fully paid and nonassessable. There are no options or
warrants for the purchase of, or other rights to purchase or acquire, or
outstanding securities convertible into or exchangeable for, any capital stock
or other securities of the Subsidiary. To the best of Company Counsel's
knowledge, other than the Subsidiary, the Company has no equity interests in any
entity.
(ii) The Company has full corporate power and authority to
execute, deliver and perform this Agreement and the Underwriter's Warrant
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Underwriter's
Warrant Agreement by the Company, the consummation
-24-
by the Company of the transactions herein and therein contemplated and the
compliance by the Company with the terms of this Agreement and the Underwriter's
Warrant Agreement have been duly authorized by all necessary corporate action,
and this Agreement has been duly executed and delivered by the Company. This
Agreement is (assuming for the purposes of this opinion that it is valid and
binding upon the other party thereto) and, when executed and delivered by the
Company on the Closing Date, the Underwriter's Warrant Agreement will be, valid
and binding obligations of the Company, enforceable in accordance with their
respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions set
forth in Section 8 hereof and the contribution provisions set forth in Section 9
hereof may be limited by the federal securities laws or public policy underlying
such laws.
(iii) The execution, delivery and performance of this Agreement
and the Underwriter's Warrant Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms of this Agreement and the Underwriter's Warrant
Agreement do not, and will not, with or without the giving of notice or the
lapse of time, or both, (A) result in a violation of the Articles of
Incorporation or ByLaws, each as amended, of the Company or the Subsidiary, (B)
to the best of Company Counsel's knowledge, result in a breach of or conflict
with any terms or provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or the Subsidiary pursuant to any indenture, mortgage,
note, contract, commitment or other material agreement or instrument to which
the Company or the Subsidiary is a party or by which the Company, the Subsidiary
or any of the properties or assets of the Company or the Subsidiary are or may
be bound or affected; (C) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company, the Subsidiary or any of the
properties or businesses of the Company or the Subsidiary; or (D) to the best of
Company Counsel's knowledge, have any effect on any Permit necessary for the
Company or the Subsidiary to own or lease, as the case may be, and operate its
properties or conduct its business or the ability of the Company or the
Subsidiary to make use thereof.
(iv) To the best of Company Counsel's knowledge, no Permits of
any court or governmental agency or body
-25-
(other than under the Act, the Regulations and applicable state securities or
Blue Sky laws) are required for the valid authorization, issuance, sale and
delivery of the Shares or the Underwriter's Warrants to the Underwriter, and the
consummation by the Company and the Selling Shareholders of the transactions
contemplated by this Agreement or the Underwriter's Warrant Agreement.
(v) Each Selling Shareholder has duly executed and delivered a
Power of Attorney appointing the Company as Attorney-in-Fact with authority to
execute and deliver this Agreement on behalf of such Selling Shareholder, to
authorize the delivery of the Selling Shareholders' Shares to be sold by such
Selling Shareholder thereunder and otherwise to act on behalf of such Selling
Shareholder in connection with the transactions contemplated by this Agreement.
This Agreement has been duly and validly authorized, executed and delivered on
behalf of each of the Selling Shareholders by the Attorney-in-Fact and is a
valid and binding obligation of each of the Selling Shareholders, enforceable
against such Selling Shareholders in accordance with their respective terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the discretion of courts in granting equitable remedies and except
that enforceability of the indemnification provisions set forth in Section 8 of
the Agreement and the contribution provisions set forth in Section 9 of the
Agreement may be limited by the federal securities laws or public policy
underlying such laws.
(vi) The Registration Statement has become effective under the
Act; to the best of Company Counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued, and no proceedings
for that purpose have been instituted or are pending, threatened or contemplated
under the Act or applicable state securities laws.
(vii) The Registration Statement and the Prospectus, as of the
Effective Date, and each amendment or supplement thereto as of its effective or
issue date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which Company Counsel need not
express an opinion) comply as to form in all material respects with the
requirements of the Act and Regulations.
(viii) The descriptions in the Registration Statement and the
Prospectus of statutes, regulations, government classifications, contracts and
other documents (including opinions of such counsel); and the response to Item
10 of Form F-1 have been reviewed by Company Counsel,
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and, based upon such review, are accurate in all material respects and present
fairly the information required to be disclosed, and there are no material
statutes, regulations or government classifications, or, to the best of Company
Counsel's knowledge, material contracts or documents, of a character required to
be described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement, which are not so described or filed as
required.
None of the material provisions of the contracts or instruments
described above violates any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company, the Subsidiary or any of their
respective assets or businesses.
(ix) The outstanding Common Shares, including, without
limitation, the Selling Shareholders' Shares, and outstanding options and
warrants to purchase Common Shares have been duly authorized and validly issued.
The outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. None of
the outstanding Common Shares or options or warrants to purchase Common Shares
has been issued in violation of the preemptive rights of any shareholder of the
Company. None of the holders of the outstanding Common Shares is subject to
personal liability solely by reason of being such a holder. The offers and sales
of the outstanding Common Shares and outstanding options and warrants to
purchase Common Shares were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws or exempt from such
registration requirements. The authorized Common Shares and outstanding options
and warrants to purchase Common Shares conform to the descriptions thereof
contained in the Registration Statement and Prospectus. To the best of Company
Counsel's knowledge, except as set forth in the Prospectus, no holders of any of
the Company's securities has any rights, "demand", "piggyback" or otherwise, to
have such securities registered under the Act.
(x) To the best of Company Counsel's knowledge, each Selling
Shareholder has valid and marketable title to the Selling Shareholders' Shares
to be sold by such Selling Shareholder, free and clear of any security interest,
lien, encumbrance claim, charge, restriction on transfer or other defect, and
each Selling Shareholder is an adult individual having full legal capacity and
power to enter into the Agreement and his or her Power of Attorney and to sell
the Selling Shareholders' Shares.
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(xi) The issuance and sale of the Company Offered Shares and
Optional Shares have been duly authorized and, when the Shares have been issued
and duly delivered against payment therefor as contemplated by this Agreement,
the Shares will be validly issued, fully paid and nonassessable, and the holders
thereof will not be subject to personal liability solely by reason of being such
holders. The Shares are not subject to preemptive rights of any shareholder of
the Company. The certificates representing the Shares are in proper legal form.
(xii) The issuance and sale of the Common Shares issuable upon
exercise of the Underwriter's Warrants have been duly authorized and, when such
Common Shares have been duly delivered against payment therefor, as contemplated
by the Underwriter's Warrant Agreement, such Common Shares will be validly
issued, fully paid and nonassessable. Holders of Common Shares issuable upon
exercise of the Underwriter's Warrants will not be subject to personal liability
solely by reason of being such holders. Neither the Underwriter's Warrants nor
the Common Shares issuable upon exercise thereof will be subject to preemptive
rights of any shareholder of the Company. The Company has reserved a sufficient
number of Common Shares from its authorized, but unissued Common Shares for
issuance upon exercise of the Underwriter's Warrants in accordance with the
provisions of the Underwriter's Warrant Agreement. The Underwriter's Warrants
conform to the descriptions thereof in the Registration Statement and
Prospectus.
(xiii) Upon delivery of the Offered Shares to the Underwriter
against payment therefor as provided in this Agreement, the Underwriter
(assuming it is a bona fide purchaser within the meaning of the Business
Corporations Act (Ontario) will acquire title to the Offered Shares, free of any
adverse claims as defined in the Business Corporations Act (Ontario).
(xiv) Assuming that the Underwriter exercises the over-allotment
option to purchase any of the Optional Shares and makes payment therefor in
accordance with the terms of this Agreement, upon delivery of the Optional
Shares to the Underwriter hereunder, the Underwriter (assuming it is a bona fide
purchaser within the meaning of the Uniform Commercial Code) will acquire good
title to such Optional Shares, free and clear of any adverse claims as defined
in the Business Corporations Act (Ontario).
(xv) To the best of Company Counsel's knowledge, there are no
claims, actions, suits, proceedings, arbitrations, investigations or inquiries
before any governmental agency, court or tribunal, foreign or domestic, or
before any
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private arbitration tribunal, pending or threatened against the Company or the
Subsidiary, or involving the Company's or any Subsidiary's properties or
businesses, other than as described in the Prospectus, such description being
accurate, and other than litigation incident to the kind of business conducted
by the Company which, individually and in the aggregate, could result in a
Material Adverse Effect.
(xvi) Each of the Company and the Subsidiary owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of Company Counsel's knowledge, neither the Company
nor the Subsidiary has infringed nor is infringing with the rights of others
with respect to the Intangibles; and, to the best of Company Counsel's
knowledge, neither the Company nor the Subsidiary has received any notice that
it has or may have infringed, is infringing upon or is conflicting with the
asserted rights of others with respect to the Intangibles which might, singly or
in the aggregate, materially adversely affect its business, results of
operations or financial condition and such counsel is not aware of any licenses
with respect to the Intangibles which are required to be obtained by the Company
or the Subsidiary other than those licenses which the Company and the Subsidiary
have obtained. The opinions described in this Section 7(b)(xvi) may be given by
Company Counsel in reliance on the opinion of an attorney, reasonably acceptable
to Underwriter's Counsel, practicing in the patent area.
Company Counsel has participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus, and in the course of such reviews and discussions and such other
investigation as Company Counsel deemed necessary, no facts came to its
attention which lead it to believe that (A) the Registration Statement (except
as to the financial statements and other financial data contained therein, as to
which Company Counsel need not express an opinion), on the Effective Date,
contained any untrue statement of a material fact required to be stated therein
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or that (B) the Prospectus (except as to the
financial statements and other financial data contained therein, as to which
Company Counsel need not express an opinion) contains any untrue statement of a
material fact or omits to state any material fact
-29-
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Each counsel giving an
opinion must give the opinion set forth in this paragraph as to such subject
matter of its opinion.
In rendering its opinion pursuant to this Section 7(b), Company
Counsel may rely upon the certificates of government officials and officers of
the Company as to matters of fact, provided that Company Counsel shall state
that they have no reason to believe, and do not believe, that they are not
justified in relying upon such opinions or such certificates of government
officials and officers of the Company as to matters of fact, as the case may be.
The opinion letter delivered pursuant to this Section 7(b) shall
state that any opinion given therein qualified by the phrase "to the best of our
knowledge" is being given by Company Counsel after due investigation of the
matters therein discussed.
(c) At the Closing Date, there will have been delivered to the
Underwriter a signed opinion of Underwriter's Counsel, dated as of the Closing
Date, to the effect that the opinions delivered pursuant to Section 7(b) hereof
appear on their face to be appropriately responsive to the requirements of this
Agreement, except to the extent waived by the Underwriter, specifying the same,
and with respect to such related matters as the Underwriter may require.
(d) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or general affairs of
the Company from that set forth or contemplated in the Registration Statement
and the Prospectus, except changes which the Registration Statement and the
Prospectus indicate might occur after the Effective Date; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no material
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transaction, contract or agreement entered into by the Company, other than in
the ordinary course of business, which would be required to be set forth in the
Registration Statement and the Prospectus, other than as set forth therein; and
(iv) no action, suit or proceeding at law or in equity will be pending or, to
the best of the Company's knowledge, threatened against the Company which is
required to be set forth in the Registration Statement and the Prospectus, other
than as set forth therein, and no proceedings will be pending or, to the best of
the Company's knowledge, threatened against the Company before or by any
federal, state or other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially adversely affect the
business, property, financial condition or results of operations of the Company,
other than as set forth in the Registration Statement and the Prospectus. At the
Closing Date, there will be delivered to the Underwriter a certificate signed by
the Chairman of the Board or the President or a Vice President of the Company,
dated the Closing Date, evidencing compliance with the provisions of this
Section 7(d) and by the Selling Shareholders and stating that the
representations and warranties of the Company set forth in Sections 4 and 5
hereof were accurate and complete in all material respects when made on the date
hereof and are accurate and complete in all material respects on the Closing
Date as if then made; that each of the Company and each Selling Shareholder has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by each of them prior to or as of the
Closing Date; and that, as of the Closing Date, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or, to the best of his knowledge, are
contemplated or threatened. In addition, the Underwriter will have received such
other and further certificates of officers of the Company and of the Selling
Shareholders as the Underwriter or Underwriter's Counsel may reasonably request.
(e) At the time that this Agreement is executed and at the Closing
Date, the Underwriter will have received a signed letter from
PricewaterhouseCoopers LLP, dated the date such letter is to be received by the
Underwriter and addressed to it, confirming that it is a firm of independent
public accountants within the meaning of the Act and Regulations and stating
that: (i) insofar as reported on by such firm, in its opinion, the financial
statements of the Company included in the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited
-31-
interim financial statements of the Company, if any, appearing in the
Registration Statement and the Prospectus and the latest available unaudited
interim financial statements of the Company, if more recent than that appearing
in the Registration Statement and Prospectus, inquiries of officers of the
Company responsible for financial and accounting matters as to the transactions
and events subsequent to the date of the latest audited financial statements of
the Company, and a reading of the minutes of meetings of the shareholders, the
Board of Directors of the Company and any committees of the Board of Directors,
as set forth in the minute books of the Company, nothing has come to its
attention which, in its judgment, would indicate that (A) during the period from
the date of the latest financial statements of the Company appearing in the
Registration Statement and Prospectus to a specified date not more than three
business days prior to the date of such letter, there have been any decreases in
net current assets or net assets as compared with amounts shown in such
financial statements or decreases in net sales or decreases [increases] in total
or per share net income [loss] compared with the corresponding period in the
preceding year or any change in the capitalization or long-term debt of the
Company, except in all cases as set forth in or contemplated by the Registration
Statement and the Prospectus, and (B) the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus, do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations or are not
fairly presented in conformity with generally accepted accounting principles and
practices on a basis substantially consistent with the audited financial
statements included in the Registration Statement or the Prospectus; and (iii)
it has compared specific dollar amounts, numbers of shares, numerical data,
percentages of revenues and earnings, and other financial information pertaining
to the Company set forth in the Prospectus (with respect to all dollar amounts,
numbers of shares, percentages and other financial information contained in the
Prospectus, to the extent that such amounts, numbers, percentages and
information may be derived from the general accounting records of the Company,
and excluding any questions requiring an interpretation by legal counsel) with
the results obtained from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter, and found them to be in agreement.
(f) There shall have been duly tendered to the Underwriter
certificates representing the Offered Shares to be sold on the Closing Date.
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(g) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of the Shares by the
Underwriter.
(h) No action shall have been taken by the Commission or the NASD
the effect of which would make it improper, at any time prior to the Closing
Date or the Option Closing Date, as the case may be, for any member firm of the
NASD to execute transactions (as principal or as agent) in the Shares, and no
proceedings for the purpose of taking such action shall have been instituted or
shall be pending, or, to the best of the Underwriter's or the Company's
knowledge, shall be contemplated by the Commission or the NASD. Each of the
Company and each of the Selling Shareholders represent at the date hereof, and
shall represent as of the Closing Date or Option Closing Date, as the case may
be, that it has no knowledge that any such action is in fact contemplated by the
Commission or the NASD.
(i) The Company meets the current and any existing and proposed
criteria for inclusion of the Shares on Nasdaq SmallCap Market.
(j) All proceedings taken at or prior to the Closing Date or the
Option Closing Date, as the case may be, in connection with the authorization,
issuance and sale of the Shares shall be reasonably satisfactory in form and
substance to the Underwriter and to Underwriter's Counsel, and such counsel
shall have been furnished with all such documents, certificates and opinions as
they may request for the purpose of enabling them to pass upon the matters
referred to in Section 7(c) hereof and in order to evidence the accuracy and
completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company and the Selling
Shareholders, or the compliance by the Company and the Selling Shareholders with
any of the conditions herein contained.
(k) As of the date hereof, the Company will have delivered to the
Underwriter the written undertakings of its officers, directors and
securityholders and/or registration rights holders, as the case may be, to the
effect of the matters set forth in Sections 6(l) and (q).
If any of the conditions specified in this Section 7 have not been
fulfilled, this Agreement may be terminated by the Underwriter on notice to the
Company.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter, each officer, director, partner,
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employee and agent of the Underwriter, and each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof), to which they or
any of them may become subject under the Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse the
Underwriter and each such person, if any, for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained (i) in the Registration Statement, in any Preliminary Prospectus
or in the Prospectus (or the Registration Statement or Prospectus as from time
to time amended or supplemented) or (ii) in any application or other document
executed by the Company, or based upon written information furnished by or on
behalf of the Company, filed in any jurisdiction in order to qualify the Shares
under the securities laws thereof (hereinafter "application"), or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances under which they were
made, unless such untrue statement or omission was made in such Registration
Statement, Preliminary Prospectus, Prospectus or application in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by the Underwriter or any such person through the
Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 8(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 8(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares which are the subject thereof from the
Underwriter or other indemnified person; (B) the Underwriter or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person; and (C) the Prospectus did not contain any untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
cause, claim, damage, expense or liability.
(b) The Selling Shareholders agree to indemnify and hold harmless
the Underwriter, each officer, director, partner, employee and agent of any
Underwriter, the Company and each of its directors, each of its officers who
have signed the Registration Statement and each person, if any, who controls the
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Underwriter or the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several (and actions in respect
thereof), to which they or any of them may become subject under the Act or under
any other statute or at common law or otherwise, and, except as hereinafter
provided, will reimburse each such indemnified persons for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon (A) any untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration Statement,
in any Preliminary Prospectus or in the Prospectus (or the Registration
Statement of Prospectus as from time to time amended or supplemented) or (ii) in
any application (including any applicable for registration of the Shares under
state securities or Blue Sky laws), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by such Selling Shareholders expressly for use therein or (B) any
action taken by such Selling Shareholders in connection with the offering of the
Selling Shareholders' Shares (including, without limitation, the dissemination
of any written materials or the making of any oral statement).
(c) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several (and actions in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Company and
each such director, officer or controlling person for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or
-35-
supplemented) or (ii) in any application (including any application for
registration of the Shares under state securities or Blue Sky laws), or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances under which
they were made, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by the Underwriter expressly for use therein.
(d) Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against any indemnifying
party under this Section 8, the indemnified party will notify the indemnifying
party in writing of the commencement thereof, and the indemnifying party will,
subject to the provisions hereinafter stated, assume the defense of such action
(including the employment of counsel satisfactory to the indemnified party and
the payment of expenses) insofar as such action relates to an alleged liability
in respect of which indemnity may be sought against the indemnifying party.
After notice from the indemnifying party of its election to assume the defense
of such claim or action, the indemnifying party shall no longer be liable to the
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
if, in the reasonable judgment of the indemnified party or parties, it is
advisable for the indemnified party or parties to be represented by separate
counsel, the indemnified party or parties shall have the right to employ a
single counsel to represent the indemnified parties who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the indemnified parties thereof against the indemnifying party, in which
event the fees and expenses of such separate counsel shall be borne by the
indemnifying party. Any party against whom indemnification may be sought under
this Section 8 shall not be liable to indemnify any person that might otherwise
be indemnified pursuant hereto for any settlement of any action effected without
such indemnifying party's consent, which consent shall not be unreasonably
withheld.
9. Contribution. To provide for just and equitable contribution, if (i)
an indemnified party makes a claim for indemnification pursuant to Section 8
hereof (subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claim for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution
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under the Act, the Exchange Act, or otherwise, then the Company (including, for
this purpose, any contribution made by or on behalf of any Selling Shareholder,
any director of the Company, any officer of the Company who signed the
Registration Statement and any controlling person of the Company) as one entity
and the Underwriter (including, for this purpose, any contribution by or on
behalf of each person, if any, who controls the Underwriter within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee and agent of the Underwriter) as a second entity,
shall contribute to the losses, liabilities, claims, damages and expenses
whatsoever to which any of them may be subject, so that the Underwriter is
responsible for the proportion thereof equal to the percentage which the
underwriting discount per Share set forth on the cover page of the Prospectus
represents of the initial public offering price per Share set forth on the cover
page of the Prospectus and the Company is responsible for the remaining portion;
provided, however, that if applicable law does not permit such allocation, then,
if applicable law permits, other relevant equitable considerations such as the
relative fault of the Company and the Underwriter in connection with the facts
which resulted in such losses, liabilities, claims, damages and expenses shall
also be considered. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission or
alleged omission relates to information supplied by a Selling Shareholder or the
Company or by the Underwriter, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the Selling
Shareholders, on the one hand, and the Underwriter, on the other hand, agree
that it would be unjust and inequitable if the respective obligations of the
Company and the Selling Shareholders and of the Underwriter for contribution
were determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method of allocation
that does not reflect the equitable considerations referred to in this Section
9. No person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person, if any, who controls the Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee and agent of the Underwriter will have the same
rights to contribution as the Underwriter, and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who has signed the Registration
Statement and each
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director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 9. Anything in
this Section 9 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 9 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
10. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Selling Shareholders and of the Underwriter contained in
Sections 8 and 9 hereof, and the representations and warranties of the Company
and the Selling Shareholders contained herein shall remain operative and in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of the Underwriter, the
Company or any of its directors and officers, any of the Selling Shareholders or
any controlling person referred to in said Sections, and shall survive the
delivery of, and payment for, the Shares.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the
Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Offered Shares for public offering. The time when the
Underwriter "releases the Offered Shares for public offering" for the purposes
of this Section 11 means the time when the Underwriter releases for publication
the first newspaper advertisement, which is subsequently published, relating to
the Offered Shares, or the time when the Underwriter releases for delivery to
members of a selling group copies of the Prospectus and an offering letter or an
offering telegram relating to the Offered Shares, whichever will first occur.
(b) This Agreement, including without limitation, the obligation to
purchase the Shares and the obligation to purchase the Optional Shares after
exercise of the option referred to in Section 3 hereof, are subject to
termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Offered Shares or such
Optional Shares, as the case may be, if, prior to such time, any of the
following shall have occurred: (i) the Company withdraws the Registration
Statement from the Commission or the Company does not or cannot expeditiously
proceed with the
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public offering; (ii) the representations and warranties in Section 4 or 5
hereof are not materially correct or cannot be complied with; (iii) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange will have been suspended; (iv) limited or minimum prices will have been
established on either such Exchange; (v) a banking moratorium will have been
declared either by federal or New York State authorities; (vi) any other
restrictions on transactions in securities materially affecting the free market
for securities or the payment for such securities, including the Offered Shares
or the Optional Shares, will be established by either of such Exchanges, by the
Commission, by any other federal or state agency, by action of the Congress or
by Executive Order; (vii) trading in any securities of the Company shall have
been suspended or halted by any national securities exchange, the NASD or the
Commission; (viii) there has been a materially adverse change in the condition
(financial or otherwise), prospects or obligations of the Company; (ix) the
Company will have sustained a material loss, whether or not insured, by reason
of fire, flood, accident or other calamity; (x) any action has been taken by the
government of the United States or any department or agency thereof which, in
the judgment of the Underwriter, has had a material adverse effect upon the
market or potential market for securities in general; or (xi) the market for
securities in general or political, financial or economic conditions will have
so materially adversely changed that, in the judgment of the Underwriter, it
will be impracticable to offer for sale, or to enforce contracts made by the
Underwriter for the resale of, the Offered Shares or the Optional Shares, as the
case may be.
(c) If this Agreement is terminated pursuant to Section 7 hereof or
this Section 11 or if the purchases provided for herein are not consummated
because any condition of the Underwriter's obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company or any Selling Shareholder to comply with any of the terms or to fulfill
any of the conditions of this Agreement, or if for any reason the Company or any
of the Selling Shareholders shall be unable to or do not perform all of their
respective obligations under this Agreement, the Company will not be liable to
the Underwriter for damages on account of loss of anticipated profits arising
out of the transactions covered by this Agreement, but the Company will remain
liable to the extent provided in Sections 6(j), 8, 9 and 10 of this Agreement.
12. Information Furnished by the Underwriter to the Company. It is
hereby acknowledged and agreed by the parties hereto that for the purposes of
this Agreement, including, without limitation, Sections 4(f), 8(a), 8(b) and 9
hereof, the only information given by the Underwriter to the Company for use in
the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement appearing in the last paragraph on
page __ with respect to
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stabilizing the market price of Shares, the information in the __ paragraph on
page __ with respect to concessions and reallowances, and the information in the
___ paragraph on page ___ with respect to the determination of the public
offering price, as such information appears in any Preliminary Prospectus and in
the Prospectus.
13. Notices and Governing Law. All communications hereunder will be in
writing and, except as otherwise provided, will be delivered at, or mailed by
certified mail, return receipt requested, or telecopied to, the following
addresses: if to the Underwriter, to Whale Securities Co., L.P., Attention:
Xxxxxxx X. Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, with a copy to
Xxxxxx Xxxxxxxxxx LLP, Attention: Xxxxxx X. Xxxxxxx, Esq., 000 Xxxxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000; if to the Company, addressed to it at X-Xxxxxxx.xxx
Inc. 0000-000 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxx X0X 0X0, attention: Xxxxx Xxxxxxx,
Chairman, with a copy to Weil, Gotshal & Xxxxxx LLP, Attention: Xxxxxx Xxxxxxx,
Esq., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; and if to a Selling
Shareholder, at its address set forth on Schedule A hereto.
This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company and the Selling Shareholders (1) agree that any legal
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York, (2)
waive any objection which any of them may have now or hereafter to the venue of
any such suit, action or proceeding, and (3) irrevocably consent to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The Company and the Selling Shareholders further
agree to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York State Supreme
Court, County of New York, or in the United States District Court for the
Southern District of New York and agree that service of process upon the Company
or the Selling Shareholders mailed by certified mail to the Company's address
shall be deemed in every respect effective service of process upon the Company
and the Selling Shareholders, as the case may be, in any such suit, action or
proceeding.
14. Parties in Interest. This Agreement is made solely for the benefit
of the Underwriter, the Company and the Selling Shareholders and, to the extent
expressed, any person controlling the Company or the Underwriter, each officer,
director, partner, employee and agent of the Underwriter, the directors of the
Company, its officers who have signed the
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Registration Statement, and their respective executors, administrators,
successors and assigns, and, no other person will acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" will not
include any purchaser of the Shares from the Underwriter, as such purchaser.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
X-XXXXXXX.XXX INC.
By_______________________
Name:
Title:
SELLING SHAREHOLDERS
_______________________
Name:
_______________________
Name:
_______________________
Name:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By_____________________________
Name:
Title:
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SCHEDULE A
Selling Shareholder Address Number of Shares
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