1,200,000 Units
XXXXXXXXXXXX.XXX, INC.
Each Unit consisting of one share of Common Stock and a Series B Redeemable
Common Stock Purchase Warrant to purchase one share of Common Stock
Underwriting Agreement
As of , 2000
HD Xxxxx & Co, Inc.
Solid ISG Capital Markets, L.L.C.
As Representatives of the several
Underwriters named in Schedule I
annexed to this Agreement
00 Xxxxxxxxxx Xxxx
Xxxxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Xxxxxxxxxxxx.xxx, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several underwriters named in Schedule I to
this Agreement for whom HD Xxxxx & Co., Inc., a New York corporation ("Xxxxx"),
and Solid ISG Capital Markets, L.L.C. ("Solid ISG") are the representatives (the
"Representatives"). The Representatives, along with such other underwriters
named on Schedule I, are referred to in this Agreement collectively as the
"Underwriters." Upon the basis of the representations, warranties, and
agreements of the Company contained in this Agreement and, subject to the terms
and conditions of this Agreement, the Underwriters propose to purchase from the
Company, an aggregate of 1,200,000 Units, each Unit to consist of one (1) share
of the Company's common stock, par value $.001 per share ("Common Stock"), and a
Series B Redeemable Common Stock Purchase Warrant ("Warrant") to purchase one
(1) share of Common Stock at a price of $ per share, subject to
adjustment. The 1,200,000 Units are hereinafter collectively referred to as the
"Firm Units." The shares of Common Stock issuable upon exercise of the Warrants
are presently authorized but unissued shares of the Common Stock of the Company.
In addition, the Company proposes to grant the Underwriters the option to
purchase from the Company up to an additional 180,000 Units (collectively
"Option Units") solely for the purpose of covering over-allotments, if any, in
connection with the sale of the Firm Units. The Option Units may by purchased by
the Representatives for their own account or for the account of the several
Underwriters, as the Representatives may determine. The Company also proposes to
issue and sell to the Representatives or their designees, Unit Purchase Options
(collectively, the "Unit Purchase Option") to purchase 120,000 Units
(collectively the "Purchase Option Units") as more fully described in Paragraph
5(a) of this Agreement. The Warrants included in the Firm Units, the Option
Units and the Purchase Option Units are referred to in this Agreement
collectively as the "Warrants." The Firm Units, Option Units and Purchase Option
Units are referred to in this Agreement collectively as the "Securities."
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The Company hereby confirms the agreement made by it with respect to
the purchase of the Firm Units and the Option Units by the Underwriters, as
follows. The Representatives hereby represent and warrant that, if any
Underwriters other than the Representatives are named on Schedule I to this
Agreement, the Representatives are acting as the representatives of the several
Underwriters and you have been authorized by each of the other Underwriters to
enter into this Underwriting Agreement on its behalf and to act for it in the
manner herein provided.
1. Purchase, Sale, and Delivery of the Securities
(a) Purchase and Sale of Firm Units. Subject to the terms and
conditions of this Agreement, and upon the basis of the representations and
warranties contained in this Agreement, the Company agrees to issue and sell to
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at a price of and /100
dollars ($ . ) per Unit, the number of Firm Units set forth opposite such
Underwriter's name on Schedule I to this Agreement. The Underwriters plan to
offer the Firm Units for sale to the public at the price and upon the terms set
forth in the Prospectus (the "Public Offering") as soon as practicable after the
date the Registration Statement, as hereinafter defined, is declared effective
(the "Effective Date") by the Securities and Exchange Commission (the
"Commission"). The Company acknowledges that the Underwriters shall have the
right to enter into agreements with co-underwriters and with selected dealers
for the sale of the Units to the public.
(b) Over-Allotment Option.
(i) The Company hereby grants to the Underwriters an option
(the "Over- Allotment Option") to purchase from the Company, solely for the
purpose of covering over-allotments in connection with the sale of Firm Units,
all or any portion of the Option Units for a period of forty-five (45) days from
the date of this Agreement at the same purchase price payable by the Underwriter
for Firm Units as provided in Paragraph 1(a) of this Agreement. The Option Units
shall be purchased from the Company, either for the accounts of the
Representatives on their own behalf or for the account of the several
Underwriters, severally and not jointly, in proportion to the number of Firm
Units set opposite the Underwriters' respective names in Schedule I to this
Agreement, as the Representatives shall determine, except that the respective
purchase obligations of each Underwriter shall be adjusted by the
Representatives so that no Underwriter shall be obligated to purchase fractional
Option Units.
(ii) The Over-Allotment Option may be exercised during the term
thereof by written notice to the Company from the Representatives. Such notice
shall set forth the aggregate number of Option Units as to which the option is
being exercised and the time and date of payment and delivery therefor. Such
time and date of delivery shall not be earlier than either the Closing Date (as
defined below) or the second business day after the day on which the option
shall have been exercised, nor later than the fifth business day after the date
of such exercise, as determined by the Representatives (the "Option Closing
Date"). Delivery and payment for such Option Units shall be at the offices set
forth below for delivery and payment of the Firm Units.
(iii) The obligation of the Underwriters to purchase and pay
for any of the Option Units is subject to the accuracy and completeness (as of
the date of this Agreement and as of the Option Closing Date) of and compliance
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in all material respects with the representations and warranties of the Company
in this Agreement, to the accuracy and completeness of the statements of the
Company or its officers made in any certificate or other documents 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 of this Agreement
and as of the Option Closing Date set forth in Paragraph 1(c) of this Agreement
and to the delivery to the Underwriters of opinions, certificates and letters
dated the Option Closing Date substantially similar in scope to those specified
in Paragraph 6 of this Agreement, but with each reference to the "Closing Date"
being deemed to be the "Option Closing Date." Notwithstanding the exercise of
the Over-Allotment Option, the Underwriters may, at any time prior to the
payment for the purchase price of the Option Units, cancel, in whole or in part,
the exercise of the Over-Allotment Option, in which event, the Underwriters
shall only be obligated to purchase and pay for those only Option Units, if any,
remaining subject to the exercise of the Over-Allotment Option after such
cancellation.
(c) Delivery of and Payment for Securities.
(i) Delivery of the stock and warrant certificates representing
the securities comprising the Firm Units shall be made to the Underwriters at
the offices of Xxxxx, 00 Xxxxxxxxxx Xxxx, Xxxxx Xxxx, Xxx Xxxx 00000, or such
other location as you shall determine and advise the Company upon at least two
(2) full business days' notice in writing, against payment therefor by certified
or bank cashier's check drawn in New York clearing house funds or similar next
day funds or by wire transfer payable to the order of the Company, at 10:00
A.M., Eastern Time, on ____________, 2000, or at such other time and business
day (Saturdays, Sundays, and legal holidays in New York, New York not being
considered business days for the purposes of this Agreement), not later than the
10th business day following the Effective Date, as shall be determined by the
Representatives, which time and date are herein called the "Closing Date."
(ii) Delivery of certificates for the Common Stock and Warrants
comprising the Units shall be made in registered form in such name or names and
in such denominations as you shall specify to the Company upon at least two (2)
full business days' notice in writing prior to the Closing Date or the Option
Closing Date, as the case may be. The Company will make the certificates
available to the Underwriters for examination at the offices of Xxxxx, 00
Xxxxxxxxxx Xxxx, Xxxxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxx,
Chairman, or at such other location as you shall specify to the Company, not
later than 2:00 P.M., Eastern Time, on the business day immediately preceding
the Closing Date or the Option Closing Date, as the case may be. At the request
of the Representatives, delivery of the Common Stock and Warrants comprising the
Units shall be made through the facilities of Depository Trust Company ("DTC").
(d) Use of Preliminary Prospectus. The Company hereby confirms its
authorization to the Underwriters to use, and to make available for use by
prospective dealers, the Preliminary Prospectus, and the Company hereby
authorizes the Underwriters, all selected dealers, and all other dealers to whom
any of the Securities may be sold by the Underwriters or selected dealers, to
use the Prospectus, as from time to time amended or supplemented, in connection
with the sale of the Securities in accordance with the applicable provisions of
the Securities Act of 1933, as amended (the "Securities Act"), the rules and
regulations (the "Regulations") of the Commission thereunder, and applicable
state law until completion of the Public Offering and for such longer period as
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an Underwriter may request if the Prospectus is required to be delivered in
connection with sales of the Securities by an Underwriter or a dealer.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) Filing of Registration Statement. The Company has prepared in
conformity with the requirements under the Securities Act and the Regulations,
and has filed with the Commission under the Securities Act, a registration
statement on Form SB-2, File No. 333-85095, including the related preliminary
prospectus, for the registration of the Securities. The conditions for the use
of a registration statement on Form SB-2 set forth in the General Instructions
thereto have been satisfied with respect to the Company, the transactions
contemplated by this Agreement, and the Registration Statement. As used in this
Agreement, the term "Registration Statement" means such registration statement
of the Company, as amended, on file with the Commission at the time the
registration statement becomes effective under the Securities Act (including all
financial statements and financial schedules, exhibits, all other documents
filed as a part thereof or incorporated by reference therein, and all the
information contained in any final prospectus filed with the Commission pursuant
to Rule 424(b) under the Securities Act or deemed by virtue of Rule 430A of this
Commission under the Securities Act to be part of the Registration Statement).
The term "Prospectus" as used in this Agreement means the final prospectus
included as part of the Registration Statement, including, if applicable, the
information contained in any final prospectus filed with the Commission pursuant
to Rule 424(b) of the Commission under the Securities Act or deemed by virtue of
Rule 430A of the Commission under the Securities Act to be part of the
Registration Statement. The term "Preliminary Prospectus" refers to and means
any prospectus included in the Registration Statement or any amendment thereto
prior to the Registration Statement becoming effective under the Securities Act.
(b) Use and Accuracy of Preliminary Prospectus. To the Company's
Knowledge, the Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus or any part thereof, and each Preliminary
Prospectus delivered to the Representatives for dissemination in connection with
the offering, at the time of filing thereof and delivery to the Representatives
for such dissemination, did not contain any untrue statement of a material fact,
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; the foregoing shall not apply, however, to statements
in, or omissions from, any Preliminary Prospectus that are based upon and
conform to written information furnished to the Company with respect to any
Underwriter (or any affiliate or associate thereof) by or on behalf of the
Representatives or such Underwriter specifically for use in the preparation
thereof. As used in this Agreement, the term "the Company's Knowledge" or words
of like import shall mean and include (i) actual knowledge of the Company or any
executive officer or " of the Company and (ii) that knowledge which a prudent
businessperson could reasonably have obtained in the management of such person's
business affairs after exercising reasonable due diligence.
(c) Effectiveness and Accuracy of Registration Statement. The
Registration Statement and the Prospectus, from the Effective Date through the
Closing Date and, if Option Units are purchased, up to the Option Closing Date,
will comply as to form in all material respects with the applicable requirements
of the Securities Act and the Regulations, and neither the Registration
Statement nor the Prospectus will, on such dates, contain any untrue statement
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of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, on such dates, no
event will have occurred that should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus that has not then
been set forth in such an amendment or supplement; the foregoing shall not
apply, however, to statements in, or omissions from, the Registration Statement
or Prospectus that are based upon and conform to written information furnished
to the Company with respect to any Underwriter (or any affiliate or associate
thereof) by or on behalf of such Underwriter specifically for use in the
preparation thereof. The descriptions in the Registration Statement and the
Prospectus of contracts and other documents of the Company 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 Prospectus or to be filed as exhibits to the Registration Statement
under the Securities Act or the Regulations which have not been so described or
filed as required.
(d) Independent Public Accountants. Panel Xxxx Forrester, PC, the
accountants whose reports on the financial statements of the Company are filed
with the Commission as a part of the Registration Statement, are, and were
during the periods covered by its report, independent public accountants with
respect to the Company as required by the Securities Act and the Regulations.
(e) Organization and Qualification. Each of the Company and its
wholly-owned subsidiary, Activeworlds, Inc., a Nevada Corporation (the
"Subsidiary"), is (i) a corporation duly organized and existing in good standing
under the laws of the state of its incorporation and has the requisite corporate
power to own its properties and to carry on its business as now being conducted
and (ii) qualified to conduct business as a foreign corporation to do business
and in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify would have a Material Adverse Effect. Other than the Subsidiary, the
Company has no subsidiaries and has no equity interest in, and, the Company has
no loans to or guarantee of obligations of, any other corporation, limited
liability company, partnership or other entity. As used in this Agreement, the
term "Material Adverse Effect" means any material adverse effect on (A) the
Common Stock and the Warrants; (B) the ability of the Company to perform its
obligations under this Agreement, the Warrant Agreement or the Unit Purchase
Option or (C) the business, operations, properties, financial condition or
prospects of the Company or the Subsidiary.
(f) No Other Interests of Investments. Except for the Company's
ownership of and advances to the Subsidiary, neither the Company nor the
Subsidiary controls, directly or indirectly, or has any direct or indirect
interest or investment in any corporation, firm, partnership, association,
limited liability company, business trust or other business organization, and
does not own any shares of stock or any other securities of (other than bank
certificates of deposit, shares or units of interest in "money market" funds, or
as set forth in the Prospectus) and, except as set forth in the Prospectus,
neither the Company nor the Subsidiary has made any loans (other than advances
to employees in the ordinary course of business, none of which are material or
made to officers or "s) to or guaranteed any obligations of, any other
corporation, firm, partnership, association, limited liability company, business
trust or other business organization.
(g) Capitalization and Legality of Securities. (i) The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization." The capital stock and other
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securities of the Company conform to the descriptions thereof contained in the
Prospectus under the caption "Description of Capital Stock." Except as otherwise
set forth in the Prospectus, there are no outstanding options, warrants, or
other rights to purchase any shares of Common Stock or other capital stock, or
to purchase any other securities convertible into or exchangeable for Common
Stock. The outstanding securities of the Company and the outstanding securities
of the Subsidiary have been duly authorized and validly issued and are fully
paid and non-assessable. All the shares of Common Stock which are (i) registered
pursuant to the Registration Statement, (ii) issuable upon exercise of the
Warrants registered pursuant to the Registration Statement, and (iii) issuable
upon exercise of the Unit Purchase Option and the warrants issuable upon
exercise of the Unit Purchase Option have been duly authorized and, when issued
and delivered against payment therefor as provided in this Agreement, the
Prospectus, Warrant Agreement or the Unit Purchase Option, as applicable, will
be validly issued, fully paid and nonassessable.
(ii) The Company owns all of the issued and outstanding capital
stock of the Subsidiary. The Subsidiary has not granted any options, warrants or
rights or issued any convertible notes, debentures, preferred stock or other
securities or entered into any agreement or understanding upon the exercise or
conversion of which or pursuant to the terms of which any shares of any class or
series of capital stock of the Subsidiary may be issued.
(iii) This Agreement constitutes, and the Warrant Agreement,
the Warrants, Unit Purchase Option and the Warrants issuable upon exercise of
the Unit Purchase Option will constitute, when sold and delivered as
contemplated, valid and binding obligations of the Company enforceable in
accordance with their respective terms, except to the extent that enforcement
thereof may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and similar laws and court decisions now or
hereafter in effect relating to or affecting creditors' rights and remedies
generally and (B) general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity). A sufficient
number of shares of Common Stock have been reserved for issuance upon sale of
the Securities and Purchase Option Units and upon the exercise of all of the
above-referenced Warrants.
(h) Financial Statements. The financial statements (audited and
unaudited) of the Company and the related financial exhibits and schedules
included in the Prospectus or filed with and as part of the Registration
Statement present fairly the consolidated financial position of the Company (and
the Subsidiary) as of the balance sheet dates and the results of its
consolidated operations and cash flows for the respective periods then ended,
and such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved; all adjustments that are necessary for a fair presentation of
the results for such periods have been made. The financial statements filed with
the Registration Statement or included in the Prospectus are the only financial
statements required under the Securities Act or the Regulations to be included
in the Registration Statement and Prospectus.
(i) Material Loss. Neither the Company nor the Subsidiary has,
since the date of the latest financial statements included in the Prospectus,
sustained any material loss or interference with its business from fire,
explosion, flood, or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order, or decree, other
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than as set forth in the Prospectus. Since the respective dates as of which
information is set forth in the Prospectus, and except as otherwise set forth
therein: (i) there has not been any change in the capital stock, or material
increase in the long-term debt, of the Company or the Subsidiary; (ii) there has
not been any material adverse change in the condition (financial or otherwise),
business, results of operations, general affairs, or management of the Company
or the Subsidiary, whether or not arising in the ordinary course of business;
(iii) no event has occurred that would result in a material write-down of assets
of the Company or the Subsidiary; (iv) neither the Company nor the Subsidiary
has incurred any material liability or obligation, direct or contingent, or
entered into any material transaction, other than those in the ordinary course
of business; (v) neither the Company nor the Subsidiary has purchased any of the
Company's outstanding capital stock; (vi) there has been no dividend or
distribution of any kind declared, paid, or made by the Company or the
Subsidiary in respect of the Common Stock; (vii) there has not been any material
interruption in the availability of materials, supplies, or equipment necessary
for the conduct of the business of the Company or the Subsidiary; and (viii)
there has not been any execution or imposition of any material lien, charge, or
encumbrance upon any property or assets of the Company or the Subsidiary.
(j) Compliance with Documents and Laws. Neither the Company nor the
Subsidiary is in violation of its certificate of incorporation, by-laws, or
other governing documents, or in material default in the due performance of any
material lease or other material contract, indenture, mortgage, deed of trust,
note, loan, or other material agreement or instrument to which the Company or
the Subsidiary is a party or by which it or any of its properties or businesses
are subject or bound, or, to the Knowledge of the Company, any applicable
material license, franchise, certificate, permit, authorization, statute, rule
or regulation of or from any public, regulatory, or governmental agency or
authority having jurisdiction over the Company or the Subsidiary or any of their
respective properties or assets, or any approval, consent, order, judgment or
decree, except such as could not reasonably be expected to have a Material
Adverse Effect. The execution and performance of this Agreement by the Company
will not conflict with or result in a breach or violation of, or default under,
any material lease or other material contract, indenture, mortgage, deed of
trust, note, loan, 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 their respective properties or businesses are subject, and no consent,
approval, authorization, or order of any court or governmental authority or
agency having jurisdiction over any of the Company, the Subsidiary or any of
their respective properties or assets is required to be obtained by the Company
for the consummation by the Company of the transactions contemplated by this
Agreement, except such as have been obtained or may be required under the
Securities Act, the Regulations, the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the regulations of the Commission thereunder or state
securities (or "Blue Sky") laws or the applicable rules and regulations
promulgated thereunder.
(k) Authorization of Agreements. Each of this Agreement, the
Warrant Agreement, the Warrant, the Unit Purchase Options, has been duly
authorized, executed and delivered by the Company and constitutes the valid,
binding and enforceable obligation of the Company. The execution, delivery and
performance of this Agreement, the Warrant Agreement, the Warrants, and the Unit
Purchase Options 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, the Warrant Agreement, the Warrants, the Unit
Purchase Option have been duly authorized by all necessary corporate action and
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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 certificate of incorporation and
by-laws of the Company, (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 which the Company or the Subsidiary or any of
their respective properties or assets are 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, the Subsidiary or any of their respective properties or
business, or (iv) violate any permit, certification, registration, approval,
consent, license or franchise applicable to the business or properties of the
Company or the Subsidiary.
(l) Title to Property. The Company has good title to, and valid and
enforceable leasehold estates in, all items of property described in the
Registration Statement or Prospectus as owned or leased by it, as the case may
be, or that are material to the conduct of the Company's businesses, free and
clear of all liens, encumbrances, claims, security interests, and other
restrictions, other than those described in the Prospectus and those that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. The leases, licenses or other contracts or instruments
under which the Company leases, holds or is entitled to use any property, real
or personal, are valid, subsisting and enforceable as against the Company and,
to the Company's Knowledge, the other parties thereto, with only 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, 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, to its Knowledge,
any other party is in default thereunder and, to 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. The Company has not received notice
of any violation of any applicable law, ordinance, regulation, order or
requirement relating to its owned or leased properties except any such violation
that could not reasonably be expected to have a Material Adverse Effect. The
Company has insured their respective properties against loss or damage by fire
or other casualty and maintain such other insurance which management of the
Company believes is adequate for the Company's present and proposed business
operations.
(m) Copyrights, Trademarks and Intellectual Property Rights. Except
as set forth in the Prospectus, the Company owns or possesses the requisite
licenses or rights to use all trademarks, copyrights, service marks, service
names, and trade names, if any, presently used in or necessary to conduct their
respective businesses as described in the Prospectus. To the Company's
Knowledge, neither the Company nor the Subsidiary has infringed the rights of
another in any patent, trademark, copyright, service mark, service name, trade
name, trade secret, confidential information, or any other such intellectual
property, and there is no outstanding claim of others alleging any such
infringement. To the Company's Knowledge, there is no claim or action by any
person pertaining to, or proceeding pending, or threatened, which challenges the
exclusive rights of the Company or the Subsidiary with respect to any
trademarks, copyrights, service marks, service names and trade names used in the
conduct of the Company's or the Subsidiary's business.
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(n) Litigation. There is no litigation or governmental or other
proceeding or investigation before any court or before or by any public,
regulatory, or governmental agency or authority (or any judgment, decree, or
order of such court, agency, or authority) pending or, to the Company's
Knowledge, threatened, to which the Company or the Subsidiary is a party or of
which the business or property of the Company is the subject that is material to
the Company and is not disclosed in the Prospectus. 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, the Subsidiary or their respective properties or
businesses are bound or subject.
(o) Prohibited Payments. Neither the Company nor the Subsidiary nor
any of their respective "s or officers acting in any capacity on behalf of the
Company or the Subsidiary nor, to the Company's Knowledge, any of the Company's
or the Subsidiary's sales agents, directly or indirectly, has used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment.
(p) Internal Accounting Controls. The Company and the Subsidiary
maintain a system of internal accounting controls which, taken as a whole, is
sufficient to meet the broad objectives of preventing and detecting errors or
irregularities in amounts that would be material to the Company's and the
Subsidiary's financial statements, and neither the Company nor the Subsidiary
has received any formal or informal notice from its independent accountants to
the contrary. Except as specifically disclosed in the Prospectus, neither the
Company nor any of its employees or agents has made any payment or transfer of
any funds or assets of the Company, conferred any personal benefit by the use of
the assets of the Company or received any funds, assets, or personal benefit in
violation of any law, rule, or regulation, which is required to be stated in the
Prospectus or necessary to make the statements therein not misleading.
(q) Tax Returns. The Company and the Subsidiary have filed all
Federal, state, and local tax returns required to be filed through the date of
this Agreement, including but not limited to franchise tax returns, or has
obtained valid extensions with respect to such filings not made; neither the
Company nor the Subsidiary is in default in the payment of any taxes or other
amounts that were payable pursuant to said returns or any assessments with
respect thereto; and neither the Company nor the Subsidiary is aware of any tax
or other payment deficiency outstanding, proposed, or assessed against the
Company or the Subsidiary that could, in the aggregate, have a Material Adverse
Effect. Except as disclosed in writing to the Representatives, 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 and 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.
(r) Employee Plans. Except as set forth in the Prospectus, the
Company does not have any employee benefit plans (including, without limitation,
pension, profit sharing, and welfare benefit plans, but excluding health and
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disability insurance plans and disability provisions of employment contracts) or
deferred compensation arrangements.
(s) Labor Disputes. No labor dispute exists or, to the Company's
Knowledge, is imminent with the employees or other persons engaged by the
Company or the Subsidiary which could reasonably be expected to result in a
Material Adverse Effect.
(t) Registration Rights. No person, firm or entity of any nature
whatsoever has any right to require the Company to register or attempt to
register under the Securities Act or any other securities law any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
any shares of Common Stock, by reason of the filing of the Registration
Statement with the Commission, and, except as set forth in the Prospectus, no
person, firm or entity has any rights which may require the Company to file a
registration statement within eighteen (18) months from the Effective Date.
(u) Stabilization. Neither the Company nor any person that
controls, is controlled by or is under common control with the Company has taken
or will take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in under the Exchange Act,
stabilization or manipulation of the price of any security in order to
facilitate the sale or resale of any of the Securities.
(v) Finder or Broker. The Company has not retained or dealt with
any broker or finder with respect to the transactions contemplated hereby, and
the Company knows of no outstanding claims for services in the nature of a
finder's fee or origination fee with respect to the sale of the Securities. The
Company will indemnify and hold harmless Underwriters with respect to any claim
for a finder's fee by any party claiming to be owed such fee based on contacts,
conversations or arrangements with the Company.
(w) Employment Agreements. The employment agreements between the
Company and its officers named under the caption "Management -- Employment
Agreements" in the Prospectus, are binding and 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, and public policy considerations.
(x) Contracts. Each material contract or other instrument (however
characterized or described) to which the Company or the Subsidiary is a party or
by which it or its property or business is or may be bound or affected and to
which reference is made in the Prospectus has been duly and validly executed by
the Company or by the Subsidiary, as applicable, is in full force and effect in
all material respects and, assuming that each other party has full power,
corporate or other, to execute, deliver and perform such contracts, 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 or the Subsidiary, nor, to the Company's
Knowledge, any other party is in default thereunder and, to 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 material
provisions of such contracts or instruments violates any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency or
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court having jurisdiction over the Company or the Subsidiary or any of their
assets or businesses, where such violation or default would have a Material
Adverse Effect.
(y) Year 2000 Compliance. To the Company's Knowledge, except as
disclosed in the Prospectus, the Company's and the Subsidiary's computer systems
and products are designed to be year 2000 compliant, and the disclosure in the
Prospectus concerning Year 2000 compliance is true and correct in all material
respects.
3. Covenants of the Company. The Company covenants and agrees with the
Underwriters that:
(a) Effectiveness of Registration Statement. The Company will use
its best efforts to cause the Registration Statement and any subsequent
amendments thereto to become effective as promptly as possible. The Company will
notify you promptly (i) when the Registration Statement or any subsequent
amendment thereto has become effective or any supplement to the Prospectus has
been filed and (ii) of the receipt of any requests, and the nature and substance
thereof, by the Commission for any amendment or supplement to the Registration
Statement or Prospectus or for any other additional information. The Company
will prepare and file with the Commission, promptly upon your reasonable
request, any amendments or supplements to the Registration Statement or
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities or any of the Securities. The Company will file
no amendment or supplement to the Registration Statement or Prospectus (other
than any document required to be filed under the Exchange Act that upon filing
is deemed to be incorporated by reference therein) to which you shall reasonably
object by notice to the Company after having been furnished a copy within a
reasonable time, but no later than three (3) business days, prior to the
proposed filing thereof. The Company will furnish to you at or prior to the
filing thereof a copy of any document that upon filing is deemed to be
incorporated by reference in whole or in part in the Registration Statement or
Prospectus.
(b) Notice of Stop Order. The Company will advise you promptly, and
confirm in writing, when and if it receives notice or obtains Knowledge of (i)
the issuance by the Commission of any stop order or other order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or the
effectiveness of the Registration Statement, (ii) the suspension of the
qualification of any of the Securities for offering or sale in any jurisdiction
in which they were previously qualified, or (iii) the initiation or threat of
any proceeding for that purpose. The Company will promptly use its best efforts
to prevent the issuance, and to obtain the withdrawal if such issuance is not
prevented, of any such stop order or other suspension.
(c) Compliance with the Securities Act and the Exchange Act. Within
the time during which a prospectus relating to the Securities is required to be
delivered under the Securities Act, the Company will use its best efforts to
comply with all requirements imposed upon it by the Securities Act and the
Exchange Act, as now and hereafter amended, and by the Regulations, as from time
to time in force to permit the continuance of sales of or dealings in the
distribution of the Securities as contemplated by the provisions therein, in
this Agreement, and in the Prospectus. If during such period any event as to
which the Company has Knowledge occurs as a result of which the Prospectus as
then amended or supplemented includes an untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein, in the
light of the circumstances then existing, not misleading, or if during such
- 11 -
period it is necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Securities Act, the Company will notify you
promptly, will amend the Registration Statement or supplement the Prospectus to
comply with the Securities Act, the Company will notify you promptly, will amend
the Registration Statement or supplement the Prospectus (at the expense of the
Company) so as to correct such statement or omission or otherwise to effect such
compliance, and will furnish without charge to Underwriters and to any dealer in
securities as many copies of such amended or supplemented Prospectus as you may
from time to time reasonably request.
(d) Copies of Registration Statement. The Company will deliver to
Representatives, from time to time without charge, such number of copies of the
Registration Statement (at least one of which delivered to you shall be manually
signed and will include all exhibits), each Preliminary Prospectus, the
Prospectus, and all amendments and supplements thereto, in each case as soon as
available and in such quantities and to such persons as requested by you.
(e) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with you and your counsel, to register or qualify the Securities
for offering and sale under the securities laws of such jurisdictions as you
reasonably designate, and will continue such qualifications in effect for so
long as may be necessary to complete the distribution of such Securities;
provided that in no event shall the Company be required in connection therewith
to qualify to do business in any jurisdiction where it is not now so qualified
or to take any action which would subject it to general service of process in
any jurisdiction where it is not now so subject.
(f) Section 11(a) Earnings Statement. The Company will make
generally available to its security holders (within the meaning of Section 11(a)
of the Securities Act) and deliver to you as soon as practicable (but not later
than fifteen (15) months after the Effective Date), an earnings statement that
shall satisfy the requirements of Section 11(a) and Rule 158 under the
Securities Act, covering a period of at least twelve (12) consecutive months
after the Effective Date.
(g) Information to the Representatives. Until the earlier of the
third (3rd) anniversary of the Effective Date or such date as of which the
Warrants and the Unit Purchase Option have been exercised or have expired, the
Company will, at its cost and expense, furnish or cause to be furnished to you
and your counsel, with reasonable promptness, copies of (i) annual audited
balance sheets and audited statements of operations and changes in cash flows of
the Company, and quarterly balance sheets and statements of income of the
Company (which need not be audited), (ii) all reports, if any, to its
stockholders, (iii) all reports filed by the Company with the Commission, and
any securities exchange or the National Association of Securities Dealers, Inc.
("NASD") and (iv) such other material documents and information with respect to
the Company and its affairs as you may from time to time reasonably request and
which the Company can produce at reasonable cost; provided, however, that the
Company shall not be required to produce such information or documents if the
Company has received the opinion of its counsel that providing such information
to the Representatives is reasonably likely to create liability under applicable
Federal and state securities laws. Upon request, the Company shall also provide
the Representatives with current lists of its stockholders. In addition to the
foregoing, during the six months following the Effective Date, the Company
shall, at its cost and expense, furnish or cause to be furnished to the
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Representatives, (x) daily issuer transfer sheets by Depository Trust Company
("DTC"), which shall be transmitted to the Representatives by fax daily, and (y)
weekly transfer sheets provided by the Company's transfer agent, which shall be
provided to the Representatives at the end of each week. For the three years
subsequent to such six month period, upon request of the Representatives, the
Company shall furnish or cause to be furnished to the Representatives with
copies of the Company's monthly DTC transfer sheets and transfer sheets from the
Company's transfer agent.
(h) Listing in Securities Manual; Investor Relations Firm. The
Company shall, as soon as practicable after the Effective Date, use its best
efforts to obtain listing on an expedited basis in Standard and Poor's
Corporation Records or such other recognized securities manuals for which it may
qualify for listing, and the Company shall use its best efforts to maintain such
listings for at least three (3) years after the Closing Date. The Company
further agrees at any time during the three (3) year period following the
Closing Date, to engage within sixty (60) days of a written request by you, the
services of an investor relations firm reasonably acceptable to you, who will
act as investor relations liaison during such three (3) year period, which
spokesperson is not required to be the same person during the duration of the
three (3) year period, to consult with and advise the Company regarding
communications and relations with stockholders and the financial and investment
communities.
(i) Listing on Nasdaq. The Company shall apply for the inclusion of
the Units, Common Stock and Warrants on The Nasdaq SmallCap Market (the
"SmallCap Market") under the symbols AWLDU, AWLD and AWLDW or another symbol
acceptable to the Representatives, to take effect on the Effective Date;
provided, that if the Common Stock and Warrants are not separately transferable
on the Effective Date, then the Warrants need not be included in the SmallCap
Market at such date; provided, however, that, on the date on which the Common
Stock and Warrants first become separately transferable, the Warrants shall be
listed on the Small Cap Market. At such time as the Company meets the
eligibility requirements for the inclusion of the Common Stock on the Nasdaq
National Market ("NNM"), the Company shall use its best efforts to obtain such
listing. The Company shall use its best efforts to maintain the Nasdaq listing
provided for in this Paragraph 3(i) for at least three (3) years after the date
of this Agreement.
(j) Exchange Act Filings. The Company shall file such registration
statement and take such other reasonable action, including the filing of a
registration statement on Form 8-A and requesting effectiveness not later than
the date the Registration Statement becomes effective, to register Common Stock
and the Warrants pursuant to Section 12(g) of the Exchange Act, such
registration statement to become effective simultaneously with the effectiveness
of the Registration Statement, and shall thereafter use its best efforts to keep
such registration effective. The Company shall comply with the Securities Act,
the Regulations, the Exchange Act and the rules and regulations promulgated
Commission under the Exchange Act, the applicable rules and regulations of the
Nasdaq, and applicable state securities laws so as to permit the continuance of
sales of and dealings in the Securities in compliance with applicable provisions
of such laws, rules, and regulations, including the filing with the Commission
and the Nasdaq of all reports required to be so filed, and the Company will
deliver to the holders of the Securities all reports required to be provided to
such holders pursuant to such laws, rules, or regulations.
(k) Use of Proceeds. The Company shall apply the net proceeds
received from the sale of the Securities in the manner set forth under the
caption "Use of Proceeds" in the Prospectus. The Company shall report the use of
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proceeds from the Offering in accordance with the Regulations and will provide a
copy of each such report to you and your counsel.
(l) Board Meetings and Membership.
(i) For a period of five (5) years commencing on the Closing
Date, the Representatives shall have the right to designate one nominee
(reasonably acceptable to the Company based on the designee's character and
reputation) for election to the Company's Board of Directors. The Company shall
initially elect such designee as soon as possible after the identity of such
designee is provided to the Company and thereafter shall include the
Representatives' designee as a member of the board of directors' slate.
Following the election of such nominee as a director, such person shall receive
the same compensation, including options, that is paid to other non-employee
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 harmless to the maximum extent permitted by law, against any and
all claims, actions, awards and judgments arising out of his or her service as a
director 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 as an insured under such policy. Such director shall also serve on the
Company's audit, compensation and, if such committees are appointed, nominating
and executive committees. The rights and benefits of such indemnification and
the benefits of such insurance shall, to the extent possible, extend to the
Representatives insofar as it may be or may be alleged to be responsible for
such director, without additional cost to the Company.
(ii) In lieu of designating a member of the board of directors
pursuant to Paragraph 3(l)(i) of this Agreement, the Representatives shall have
the right, during the five-year period commencing on the Closing Date, to have
one observer to attend all meetings of the Board of Directors of the Company and
its executive, audit, compensation and such other committees as shall be
designated by the Representatives. Such observer shall be entitled to the same
compensation and reimbursement for expenses of attending meetings as is provided
to non-employee directors and committee members and, to the extent it may
legally do so, such indemnity as is provided to the Company's non-employee
directors.
(m) Future Sales. Except for the permitted issuances described
below, for a period of one (1) year from the Effective Date, the Company shall
not sell or otherwise dispose of any Common Stock (or securities convertible
into or exercisable for Common Stock) or Preferred Stock of the Company or any
subsidiary of the Company without the Representatives' prior written consent.
Permitted issuance shall mean shares of Common Stock issuable (i) upon the
exercise or conversion of options or warrants specifically contemplated in the
Prospectus or provided for in this Agreement, (ii) pursuant to and in order to
consummate a merger with or acquisition of an unaffiliated party in a
transaction negotiated at arms' length and approved by (A) a majority of the
Company's Board of Directors, and (B) all of the non-employee directors; (iii)
in a public offering approved by the Representatives, and (iv) pursuant to a
private placement, at a price per share, or, with respect to convertible
securities and warrants, having an exercise or conversion price, not less than
80% of the average of the closing bid prices of the Common Stock for ten (10)
consecutive trading days ending not earlier than three (3) days prior to the
date of such sale or on other terms acceptable to the Representatives.
- 14 -
(n) Preferred Stock. The Company shall not create any series of
preferred stock or issue any shares of preferred stock for two years from the
Effective Date without the consent of the Representatives.
(o) Press Releases. Prior to the later of the Closing Date or the
Option Closing Date, if any, the Company will not issue, directly or indirectly,
without your prior written consent (which consent shall not be unreasonably
withheld), any press release or other public communication or hold any press
conference with respect to the Company, its activities, or the public offering,
other than trade releases in the ordinary course of the Company's business.
(p) Undertakings. The Company will comply with the provisions of
all undertakings contained in the Registration Statement or made in connection
with any application to register or qualify any of the Securities under blue sky
laws.
(q) Certain Deliveries to the Representatives. The Company will
obtain from its officers, counsel, and accountants those certificates, opinions,
and letters referred to in Paragraph 6 of this Agreement.
(r) Key Man Life Insurance. The Company will obtain on or before
the Closing Date, and use its best efforts to maintain thereafter for the term
of their respective employment with the Company, key man life insurance policies
in the amount of $1,000,000 insuring the lives of Xxxxxxx X. Xxxx and X. X.
XxXxxxxxx, with the Company named as sole beneficiary.
(s) Employment Agreements. The Company has entered into employment
agreements with Xxxxxxx X. Xxxx and X. X. XxXxxxxxx on the terms that are
disclosed in the Prospectus.
(t) Redemption and Dividends. For a period of two (2) years from
the Closing Date, the Company shall not redeem any of its securities and shall
not pay any dividends or make any other cash distribution without obtaining the
Representatives' prior written consent. The Representatives shall either approve
or disapprove such contemplated redemption of securities or dividend payment or
distribution within ten (10) business days from the date the Representatives
receives written notice of the Company's proposal with respect thereto; a
failure of the Representatives to respond within the ten (10) business day
period shall be deemed approval of the transaction. Nothing in this Paragraph
3(t) shall be construed to prohibit the Company from calling the Warrants for
redemption subsequent to one year from the Effective Date.
(u) Restrictions on Sales, Options by Affiliates. The Company will
cause each of its officers, directors, five percent (5%) stockholders to agree
in writing that such person will not, during the six (6) month period
immediately following the Effective Date (the "Lockup Period"), offer, pledge,
sell (which term includes a short sale or sale against the box), contract to
sell, grant any option for the sale of, or otherwise transfer or dispose of,
directly or indirectly, any shares of the Company's Common Stock without
obtaining the Representatives' prior written approval; provided that such
persons may transfer such securities in a private transaction to a person who
agrees to be subject to these restrictions.
- 15 -
(v) Outstanding Warrants, Options and Other Rights. There shall not
be outstanding on the Closing Date any warrants, options, or other rights to
purchase any shares of Common Stock, except as otherwise set forth in the
Prospectus. During the two (2) years following the Effective Date, the Company
shall not, without the prior written consent of the Representatives, grant
options, rights or warrants or sell any securities to its officers, directors,
employees or consultants under its stock option plan as described in the
Prospectus or otherwise except at an exercise, purchase or conversion price
which is not less than the market price of the Common Stock on the date of
grant, issuance or sale, as the case may be.
(w) Restrictions on Filing Registration Statements. During the
eighteen (18) months following the Effective Date, the Company will not, without
the prior written consent of the Representatives, register any securities
pursuant to the Securities Act, except that such restriction shall not apply to
the registration of Common Stock issuable pursuant to the Company's present
stock option plan, as described in the Prospectus, on a Form S-8 registration
statement.
(x) Waiver of Registration Rights. The Company shall obtain a
waiver of so-called "piggy-back" registration rights from any holders of any
securities of the Company who have the right to require inclusion of any or all
of their securities in the Registration Statement contemplated by this
Agreement.
(y) Directors and Officers Liability Insurance. Within ninety (90)
days after the effective date of the Registration Statement, the Company will
use its best efforts to obtain Directors and Officers Liability Insurance in an
amount no less than $5,000,000 per occurrence.
(z) Accounting Firm. The Company shall retain an independent public
accounting firm reasonably acceptable to the Representatives for a period of
three (3) years from the Effective Date. The Representatives agree that the firm
of Panel Xxxx Forrester, PC, is acceptable to the Representatives. In addition,
for a period of two years from the Effective Date, the Company, at its expense,
shall cause its independent accounting firm 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 quarterly report on Form 10-QSB and the mailing of quarterly financial
information to stockholders, if applicable.
(aa) Restrictions on Acquisitions. During the one (1) year
following the Closing Date, without the prior consent of the Representatives,
the Company shall not enter into any agreement to acquire any other business or
the assets of any other business. The term "acquire" shall be broadly construed
and shall include the acquisition of assets, the merger with or into another
corporation or entity, whether directly by the Company or through a subsidiary,
or the acquisition of stock or other equity interests, however defined, of
another corporation, partnership, limited liability company, business trust,
sole proprietorship or other entity of any kind or description.
4. Offering Expenses and Related Matters
(a) General. Whether or not the Public Offering is consummated, the
Company will pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including without limiting the generality
of the foregoing, (i) the preparation, printing, filing, and copying of the
Registration Statement, Prospectus, this Agreement, blue sky memoranda, the
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Agreement Among Underwriters, if any, a selected dealers agreement, if any, and
other underwriting documents, if any, and any drafts, amendments or supplements
thereto, including the cost of all copies thereof supplied to the Underwriters
in such quantities as reasonably requested by the Representatives, the costs of
mailing Prospectuses to offerees and purchasers of the Securities, and the
out-of-pocket travel expenses of the Representatives and counsel to the
Representatives or other professionals designated by the Representatives to
visit the Company's facilities or its counsel's offices for purposes of
discharging due diligence responsibilities; (ii) the printing, engraving,
issuance and delivery of certificates representing Common Stock and Warrants,
including any transfer or other taxes payable thereon; (iii) the registration or
qualification of the Securities under state securities or "blue sky" laws,
including the reasonable fees and disbursements of counsel (regardless of
whether such counsel is also counsel to the Representatives, subject to the
limitation set forth in Paragraph 4(c) of this Agreement) and filing fees in
connection therewith; (iv) all reasonable fees and expenses of the Company's
counsel and accountants; (v) all filing fees in connection with review of the
terms of the Public Offering by the NASD; (vi) all costs and expenses of any
listing of the Securities, Common Stock and Warrants on the SmallCap Market or
the NNM and/or any other stock exchange and/or in Standard and Poor's Stock
Guide and/or any other securities manuals; (vii) all costs and expenses of four
(4) bound volumes provided to the Representatives and their counsel of all
closing documents, paper exhibits, correspondence and records forming the
materials included in the Public Offering; (viii) the reasonable costs and
expenses of all pre-closing and post-closing advertisements relating to the
Public Offering (such as tombstone adds), in addition to fifteen (15) lucite
cubes;(ix) all costs of holding informational meetings and "road shows;" and (x)
all other costs and expenses incurred or to be incurred by the Company in
connection with the transactions contemplated by this Agreement. The obligations
of the Company under this Paragraph 4(a) shall survive any termination or
cancellation of this Agreement.
(b) Non-Accountable Expense Allowance. In addition to the Company's
responsibility for payment of the foregoing expenses, the Company shall pay to
the Representatives a non-accountable expense allowance equal to three percent
(3%) of the gross proceeds of the Public Offering, including in such amount the
proceeds from any sale of Option Units. The non-accountable expense allowance
due shall be paid at the Closing Date and any Option Closing Date, as
applicable, and shall include fees and disbursements of Representatives counsel
(exclusive of legal fees for state registration and qualification as provided in
Paragraph 4(c) of this Agreement), but shall not include fees of the Company's
counsel, state registration filing fees, NASD filing fees, Nasdaq listing fees,
printing and mailing to members of the underwriting or selling group, and any
and all other expenses customarily paid by the issuer in a public offering of
securities.
You hereby acknowledge your prior receipt from the Company of $25,000,
which amount shall be applied to the non-accountable expense allowance due when
and if the Public Offering is closed. If the Public Offering does not close,
then any portion of such amount in excess of your actual out of pocket expenses
shall be returned promptly by you to the Company.
(c) Compliance with Blue Sky Laws. You shall determine in which
states or jurisdictions the Securities shall be registered or qualified for
sale. Copies of all applications and related documents for the registration or
qualification of securities (except for the Registration Statement and
Prospectus) filed with the various states shall be supplied to the Company's
- 17 -
counsel not later than one business day following their transmission to the
various states, and copies of all comments and orders received from the various
states shall be made available promptly to the Company's counsel. Immediately
prior to the Effective Date, counsel for the Representatives shall advise
counsel for the Company in writing of all states in which the offering has been
registered or qualified for sale or has been canceled, withdrawn, or denied, the
date of each such event, and the number of Securities registered or qualified
for sale in each such state. The Company shall be responsible for the cost of
state registration or qualification filing fees and the legal fees of
Representatives' counsel in connection with such filings, which filing fees are
payable to Representatives' counsel in advance of such filings. The legal fees
payable by the Company with respect to blue sky filings by Representatives'
counsel shall be fifty thousand dollars ($50,000), of which twenty five thousand
dollars ($25,000) has been paid. The Company hereby acknowledges that any
remaining balance with respect to legal fees or blue sky filing fees is
immediately due and payable.
5. Unit Purchase Option; Other Financial Arrangements
(a) Unit Purchase Option. On the Closing Date, the Company will
sell to the Representatives, for an aggregate price of $10, the Unit Purchase
Option to purchase an aggregate of one hundred twenty thousand (120,000) Units
from the Company at an exercise price equal to one hundred sixty five percent
(165%) of the public offering price of the Units. The Unit Purchase Option and
the underlying securities shall be non-transferable (other than to officers or
partners of members of the underwriting or selling group or as otherwise may be
permitted by the NASD) during the one (1) year period commencing on the
Effective Date. The Unit Purchase Option and the terms of the underlying
securities shall be exercisable for a period of four (4) years commencing one
(1) year from the Effective Date. The Unit Purchase Option shall be in
substantially the form provided by the Representatives and filed as an Exhibit
to the Registration Statement.
(b) M/A Agreement.
(i) The Company hereby agrees that if, during the five (5) year
period commencing on the Effective Date, the Representatives shall introduce to
the Company another party or entity (the "Introduced Party"), and, as a result
of such introduction, a Transaction is consummated with such Introduced Party,
the Company shall pay to the Representatives a finder's fee (the "Fee") equal to
six percent (6%) of the first five million dollars ($5,000,000) of the
consideration paid or received in such Transaction; plus five percent (5%) of
the consideration in excess of five million dollars ($5,000,000) and up to six
million dollars ($6,000,000); plus four percent (4%) of the consideration in
excess of six million dollars ($6,000,000) and up to seven million dollars
($7,000,000); plus three percent (3%) of the consideration in excess of seven
million dollars ($7,000,000) and up to eight million dollars ($8,000,000); plus
two percent (2%) of the consideration in excess of eight million dollars
($8,000,000). As used in this Paragraph 5(b), a "Transaction" shall mean any of
the following (i) the sale of all or substantially all of the assets and
properties of the Company or all or substantially all of the stock of the
Company, (ii) the merger or consolidation of the Company with or into any other
corporation or other entity (other than a merger with a company owned or
controlled by the Company), (iii) the acquisition by the Company of the assets
or stock of another business entity in which the Company may be involved, or
(iv) a joint venture, licensing or marketing agreement or arrangement, however
structured.
- 18 -
(ii) The Fee shall be paid in cash at the closing of the
particular Transaction, regardless of whether the Transaction involves
installment payments or the consideration paid includes securities or a
combination of securities and cash; provided, however, that in the event that
the Transaction is a marketing or license or other agreement pursuant to which a
stream of revenue or cash receipts may be generated or other Transaction where
it is impossible to determine the value of the consideration to be paid or
received or in the event that there are contingent payments, the Fee shall be
paid with respect to each payment at the same time as the payment is made or
received, as the case may be, regardless of when the payment is received as long
as the original agreement pursuant to which the payment is made was entered into
during the five (5) year period commencing on the Effective Date. No
modification of payment or other terms of any agreement shall impair the
Representatives' right to the Fee. In the event that the Transaction involves a
merger or sale of assets or tender offer or sale of stock where the
consideration is paid to any or all of the Company's stockholders, the
consideration paid to such stockholders shall be included in the consideration
paid or received for purposes of computing the Fee. All references to the
Company in the context of a Transaction shall include Xxxxxxxxxxxx.xxx, Inc.,
any of its present or future subsidiaries or any affiliate of the Company,
regardless of whether such party shall pay or receive the consideration paid in
the Transaction.
(iii) In determining the value of the consideration paid or
received, the following provisions shall apply:
(A) Any securities which are regularly traded on a
securities exchange or in the over-the-counter market shall be valued at the
average of the closing prices in the case of securities listed on the New York
or American Stock Exchange or the Nasdaq Stock Market (or the closing bid price
if there are no transactions on any of such days) or the average of the closing
bid prices, as reported by Nasdaq or the National Quotation Bureau, Inc. or
similar recognized reporting agency, in the case of securities not traded on
such exchanges or in such markets on the ten (10) trading days prior to the
earlier of (I) the date of the agreement or (II) in the event that a press
release or other announcement is made by the Company and/or the Introduced Party
concerning the Transaction and the consideration provided for in the agreement
includes the transfer of a fixed number of securities, the date of such press
release or announcement.
(B) Any debt securities which are not regularly traded on
a securities exchange or on the over-the-counter market shall be valued at the
principal amount thereof if such obligations bear a stated interest rate or, if
no interest rate is stated, at the present value of the payments due, discounted
using an interest rate equal to the prime rate of Chemical Bank in effect on the
second business day prior to the closing date.
(C) The consideration received in a joint venture shall
be based on the consideration paid to the joint venture by the Introduced Party
plus any additional consideration paid by or on behalf of the joint venture
partner to the Company.
(D) In the event that the Transaction involves the
receipt by the Company of property or equipment the consideration shall be fair
value of the property and equipment.
- 19 -
(E) In the event that the fair market value of any
property cannot be determined pursuant to the application of Paragraph 5(b)(iii)
of this Agreement and the Company and the Representatives shall not be able to
agree on a value, the value shall be determined by an appraiser jointly selected
by the Company and the Representatives.
(iv) Notwithstanding anything in this Paragraph 5(b) to the
contrary, if the Company shall, within one hundred eighty (180) days immediately
following the expiration of five (5) years from the Effective Date, consummate a
Transaction with an Introduced Party which was introduced by the Representatives
to the Company during such five (5) year period, the Company shall pay the
Representatives the Fee in the same manner as is otherwise provided in this
Paragraph 5(b).
6. Conditions to the Obligations of the Underwriters. The obligation
of Underwriters to purchase and pay for the Securities shall be subject to the
accuracy in all material respects, as of the date of this Agreement and each
Closing Date (whether the Closing Date with respect to the Firm Units or an
Option Closing Date with respect to the Option Units), as if made on such
Closing Date, of the representations and warranties of the Company contained in
this Agreement and the following additional conditions:
(a) Effectiveness of Registration Statement.
(i) The Registration Statement shall have become effective not
later than 5:30 P.M., Eastern Time, on the date of this Agreement, or such later
time or date as shall have been consented to by you in writing (the "Effective
Date").
(ii) On the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or registration
of the Securities under the blue sky laws of any jurisdiction (whether or not a
jurisdiction specified by the Underwriters) shall have been issued, and no
proceeding for that purpose shall have been initiated or shall be threatened or
contemplated by the Commission or the authorities of any such jurisdiction.
(iii) Any request of the Commission or any such authorities for
additional information to be included in the Registration Statement or
Prospectus or otherwise shall have been complied with to the reasonable
satisfaction of counsel for the Underwriters.
(b) Representations; Compliance with Agreement. The representations
and warranties of the Company in this Agreement shall be true and correct on and
as of the Closing Date, with the same effect as if made on the Closing Date, and
the Company shall have complied with all the agreements and satisfied all the
obligations required to be performed or satisfied by it at or prior to the
Closing Date.
(c) No Untrue Statements. The Registration Statement and the
Prospectus shall contain all statements required to be stated therein in
accordance with the Securities Act and the Regulation and the Registration
Statement and the Prospectus shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, since the
Effective Date, there shall not have occurred any event required to be set forth
in an amended or supplemented Prospectus that has not been so set forth (except
any such statement or omission based upon information furnished in writing by or
on behalf of the Underwriters for inclusion in the Registration Statement).
- 20 -
(d) No Material Change. Subsequent to the respective dates as of
which information is given in the Registration Statement and Prospectus, and
except as set forth or contemplated in the Prospectus, (i) there shall have been
no material adverse changes with respect to the officers, directors, operations,
capitalization, contractual obligations, legal proceedings, proposed use of
proceeds from the sale of the Securities, business, plans or prospects, net
assets or liabilities or obligations, properties, or any other aspect of the
financial condition or results of operations of the Company or the Subsidiary,
(ii) neither the Company nor the Subsidiary shall have entered into any material
transaction not in the ordinary course of business, (iii) neither the Company
nor the Subsidiary shall have paid or declared any dividends or other
distributions on its capital stock, (iv) the conduct of the business and
operations of the Company and the Subsidiary shall not have been materially
interfered with by strike, fire, flood, hurricane, accident or other calamity
(whether or not insured), or by any court or governmental action, order or
decree, and the properties of the Company and the Subsidiary shall not have
sustained any material loss or damage (whether or not insured) as a result of
any such occurrence, and (v) except as set forth in the Prospectus, there are no
actions, suits, proceedings or investigations pending before any arbitrator,
court or governmental agency, authority or body or, to the Company's Knowledge,
threatened, to which the Company or the Subsidiary is a party or of which the
business or property of the Company or the Subsidiary is the subject and which,
if adversely decided, could reasonably be expected to have a material adverse
affect on the business, property, condition (financial or otherwise), results of
operations or general affairs of the Company or the Subsidiary, and there have
been no material adverse development in any such suits, actions, proceedings or
investigations.
(e) NASD. The NASD shall have indicated that it has no objection to
the underwriting arrangements pertaining to the sale of the Securities by the
Underwriters. No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date,
for any member firm of the NASD to execute transactions (as principal or as
agent) in the Securities, Common Stock or Warrants and no proceedings for the
purpose of taking such action shall have been instituted or shall be pending,
or, to the Representatives' or the Company's Knowledge, shall be contemplated by
the Commission or the NASD. The Company represents at the date of this
Agreement, 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.
(f) Certificates, Bylaws and Proceedings. The Company's Certificate
of Incorporation and By-Laws, and all proceedings taken in connection with the
authorization, issuance, or sale of the Securities as herein contemplated, shall
be reasonably satisfactory in form and substance to you.
(g) Officers' Certificate. The Company shall have furnished to the
Representatives a certificate of the President and of the Chief Financial
Officer of the Company, dated the day of the Closing Date, to the effect that
each signer of such certificate has examined the Registration Statement, the
Prospectus, and this Agreement, and confirming, in form satisfactory to the
Representatives, that the compliance by the Company of the conditions set forth
in Paragraphs 6(a) through (d) of this Agreement have been satisfied.
- 21 -
(h) Opinion of Company Counsel. The Company shall have furnished to
the Representatives the opinion of Xxxx and Hazard, LLP, counsel for the
Company, dated the Closing Date, in form and substance reasonably satisfactory
to counsel to the Representatives and substantially in the form of Exhibit A
attached hereto. In rendering the opinion, such counsel may rely as to matters
of fact, to the extent they deem proper, upon certificates of the Company's
officers and governmental officials.
(i) Accountants' Letter. At the time this Agreement is executed and
as of the Closing Date, Panel Xxxx Forrester, PC, independent public accountants
for the Company, shall have furnished to you a letter addressed to the
Representatives and dated the date of this Agreement or the Closing Date, as
applicable, in form and substance previously approved by the Representatives and
its counsel.
(j) Agreements with Stockholders. The Representatives shall have
received the agreements, in form and substance satisfactory to the
Representatives, as contemplated by Paragraph 3(u) of this Agreement.
(k) Change in Capitalization. Subsequent to the respective dates as
of which information is given in the Registration Statement and the Prospectus,
there shall not have been any material adverse change or decrease in the capital
stock or long-term debt obligations of the Company or any decreases in
stockholders' equity, net assets or current net assets of the Company or any
material adverse change in the financial position, revenues, expenses or results
of operations of the Company or the Subsidiary, each as compared with the
amounts shown in the most recent financial statements included in the
Registration Statement, except as disclosed in the Prospectus, that makes it
impractical or inadvisable in the reasonable judgment of the Representatives to
proceed with the Public Offering or the delivery of the Securities, as the case
may be, as contemplated in the Prospectus.
(l) Other Agreements. The Company shall have executed and delivered
to the Representatives the Warrant Agreement and the Unit Purchase Option to
purchase one hundred twenty thousand (120,000) Units.
(m) Opinion of Representatives' Counsel. The Representatives shall
have received an opinion from Xxxxx Xxxxxx Xxxxxx & Siger, LLP, counsel for the
Representatives, as to the organization of the Company, the validity of the
Securities, the form of the Registration Statement and the Prospectus, and such
other related matters as you may request, and such counsel shall have been
furnished by the Company such papers and information as they request to enable
them to pass upon such matters. It is understood that such counsel will express
no opinion with respect to the financial statements and other financial,
accounting, and statistical data included in the Registration Statement and the
Prospectus. In rendering the foregoing opinion, such counsel shall be entitled
to rely upon the opinion delivered to the Representatives pursuant to Paragraph
6(h) of this Agreement as to matters of Federal securities law, and may rely as
to matters of fact upon such certificates and other documents and information as
they may reasonably request for purposes of such opinion.
(n) Other Information. Prior to the Closing Date, the Company shall
have furnished to the Representatives such further information, certificates,
and documents in connection with the Company's obligations set forth in this
Agreement as you may reasonably request.
- 22 -
If any of the conditions specified in this Paragraph 6 shall not have
been fulfilled when and as required by this Agreement, this Agreement and all
obligations of the Underwriters hereunder may be terminated by you at, or at any
time prior to, the Closing Date. Notice of such termination shall be given to
the Company in writing, or by facsimile transmission or telephone and confirmed
in writing.
7. Indemnification
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Underwriter and each person who controls any Underwriter
within the meaning of the Securities Act, from and against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act, or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact made by the Company in this Agreement, (ii) any
untrue statement or alleged untrue statement of a material fact made by the
Company contained in the Registration Statement, or any amendment thereof, or in
any Preliminary Prospectus or the Prospectus, or any amendment thereof or
supplement thereto, or in any blue sky application or other document executed by
the Company specifically for that purpose (or based upon written information
furnished by the Company) filed in any state or other jurisdiction in order to
qualify any of the Securities or other Securities under the securities laws
thereof (any such application, document or information being referred to as a
"Blue Sky Application"); or (iii) the omission or alleged omission to state in
any such Registration Statement, Preliminary Prospectus or Prospectus, or
amendment thereof or supplement thereto, or Blue Sky Application a material fact
required to be stated therein or necessary to make the statements made therein
not misleading, and agrees to reimburse each such indemnified party for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, or liability arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein or omitted therefrom in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
you or such Underwriter specifically for use in connection with the preparation
thereof, and further provided, however, that the foregoing indemnity with
respect to any untrue statement, alleged untrue statement, omission, or alleged
omission contained in any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any such loss, claims any of,
damage, or liability purchased any of the securities that are the subject
thereof (or to the benefit of any person who controls such Underwriter), if a
copy of the Prospectus was not delivered to such person with or prior to the
written confirmation of the sale of such security to such person. This indemnity
agreement will be in addition to any liability that the Company may otherwise
have.
(b) Indemnification by Underwriters. Each Underwriter, severally,
but not jointly, agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed or signs the Registration
Statement, and each person who controls the Company within the meaning of the
Securities Act, from and against any and all losses, claims, damages or
- 23 -
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act, or other Federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment thereof, or in
any Preliminary Prospectus or the Prospectus, or any amendment thereof or
supplement thereto, or in a Blue Sky Application, or (ii) the omission or the
alleged omission to state in any such Registration Statement, Preliminary
Prospectus or Prospectus, amendment thereof or supplement thereto, or Blue Sky
Application a material fact required to be stated therein or necessary to make
the statements made therein not misleading, in each case to the extent, but only
to the extent, that the same was made therein or omitted therefrom in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of you or such Underwriter specifically for use in the preparation
thereof, and agrees to reimburse each such indemnified party for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against any such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability that the Underwriters
may otherwise have.
(c) Claims. Within five (5) days after receipt by an indemnified
party under Paragraph 7(a) or (b) of this Agreement of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; the
failure so to notify the indemnifying party shall relieve the indemnifying party
from any liability under this Paragraph 7 as to the particular item for which
indemnification is then being sought, unless such indemnifying party has
otherwise received actual notice of the action at least thirty (30) days before
any answer or response is required by the indemnifying party in its defense of
such action, but will not relieve it from any liability that it may have to any
indemnified party otherwise than under this Paragraph 7. If any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof; provided, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and either (i) the indemnifying party or parties agree, or
(ii) representation of both the indemnifying party or parties and the
indemnified party or parties by the same counsel is inappropriate under
applicable standards of professional conduct because of actual or potential
conflicting interests between them, then the indemnified party or parties shall
have the right to select separate counsel to assume such legal defense and to
otherwise participate in the defense of such action. The indemnifying party will
not be liable to such indemnified party under this Paragraph 7 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
counsel in connection with the assumption of legal defenses in accordance with
the proviso to the immediately preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more than
one separate counsel approved by the indemnifying party for all indemnified
parties), (ii) the indemnifying party shall not have employed counsel to
represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall an indemnifying party be liable under this
Paragraph 7 for any settlement,
- 24 -
effected without its written consent, which consent shall not be unreasonably
withheld, of any claim or action against an indemnified party.
(d) Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) an indemnified
party makes a claim for indemnification pursuant to Paragraphs 7(a) or (b) of
this Agreement (subject to the limitations thereof) but is judicially
determined, by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal, that such indemnification may not be enforced in such case
notwithstanding that the provisions of this Paragraph 7 provide for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any indemnified or indemnifying party in
circumstances for which indemnification is provided under Paragraphs 7(a) or (b)
of this Agreement, then, and in each such case, the Company and the Underwriters
shall contribute to the aggregate losses, claims, damages, or liabilities to
which they may be subject (after contribution from all others) in such
proportion so that the Underwriters is responsible for that portion represented
by the percentage that the underwriting discount appearing on the cover page of
the Prospectus bears to the Public Offering Price appearing thereon, and the
Company is responsible for the remaining portion; provided, however, that if
such allocation is not permitted by applicable law, then the relative fault of
the Company and the Underwriters in connection with the statements or omissions
that resulted in such losses, liabilities, claims, and damages and other
relevant equitable considerations shall also be considered. The relative fault
shall be determined by reference to, among other things, whether in the case of
an untrue statement of a material fact or the omission to state a material fact,
such statement or omission relates to information supplied by the Company or by
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriters to
contribute pursuant to this Paragraph 7(d) were to be determined by pro rata or
per capita allocation of the aggregate damages (even if the Underwriters and
their respective controlling persons in the aggregate were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the first sentence of
this Paragraph 7(d). For purposes of this Paragraph 7(d), the term "damages"
shall include any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending against or appearing as a
third party witness in any action or claim that is the subject of the
contribution provisions of this Paragraph 7(d). Notwithstanding the provisions
of this Paragraph 7(d), an Underwriter and its controlling persons collectively
shall not be required to contribute any amount in excess of the difference
between the total price of the Securities purchased by the Underwriter, directly
or indirectly, from the Company pursuant to this Agreement and the amount of any
damages that such Underwriter and its controlling persons collectively have been
required to pay by reason of such untrue statement or omission other than
pursuant to this Paragraph 7(d). No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For the purposes of this Paragraph 7(d), any
person who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act shall have the same rights
to contributions as the Underwriter and each director of the Company, each
officer of the Company who signed the Registration Statement, and each person,
if any, who controls the Company within Section 15 of the Securities Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
the Company.
- 25 -
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any person having liability under Section 11 of the
Securities Act other than the Company and the Underwriters and persons
controlling the Company or the Underwriters.
After receipt by any party to this Agreement of notice of the
commencement of any action, suit, or proceeding, such person will, if a claim
for contribution in respect thereof is to be made against another party (the
"contributing party"), notify the contributing party of the commencement thereof
within a reasonable time thereafter, but the failure so to notify the
contributing party will not relieve the contributing party from any liability
that it may have to any party other than for contribution pursuant to this
Paragraph 7(d). Any notice given pursuant to any other provision of this
Paragraph 7 shall be deemed to be like notice pursuant to this Paragraph 7(d).
If any such action, suit or proceeding is brought against any party, and such
person notifies a contributing party of the commencement thereof, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified, subject to the
provisions of Paragraph 7(c) of this Agreement.
(e) Survival. The respective indemnity and contribution agreements
by the Underwriters and the Company contained in this Paragraph 7, and the
covenants, representations and warranties of the Company set forth in this
Agreement, shall remain operative and in full force and effect regardless of (i)
any investigation made by the Underwriters or on their behalf or by or on behalf
of any person who controls any Underwriter, by the Company or any controlling
person of the Company or any director or any officer of the Company, (ii)
acceptance of the Securities and payment therefor, or (iii) any termination of
this Agreement, and shall survive the delivery of the Securities, and any
successor to the Company or to any Underwriter or any person who controls any
Underwriter or the Company, as the case may be, shall be entitled to the benefit
of such respective indemnity and contribution agreements.
8. Effectiveness. This Agreement shall become effective
contemporaneously with the effectiveness of the Registration Statement, or at
such date after the effective time of the Registration Statement as you, in your
discretion, shall first release the Securities for sale to the public; provided,
however, that the provisions of Paragraphs 4, 6, and 7 of this Agreement shall
at all times be in full force and effect. For the purposes of this Paragraph 8,
the Securities shall be deemed to have been released for sale to the public upon
release by you after effectiveness of the Registration Statement of a newspaper
advertisement relating to the Securities or upon release by you thereafter of
telegrams advising securities dealers of the effectiveness of the Registration
Statement, whichever shall first occur.
9. Termination. This Agreement may be terminated, in your absolute
discretion, by notice given to the Company prior to the Closing Date if the
Company shall have failed, refused, or been unable, prior to the Closing Date,
to perform any material agreement required to be performed by it hereunder, or
if any other condition of the Underwriters' obligations hereunder required to be
fulfilled by the Company is not fulfilled. In addition, this Agreement may be
terminated, as set forth above, if, prior to the Closing Date, any of the
following shall have occurred: (a) material governmental restrictions (not in
force and effect on the date of this Agreement) have been imposed on trading in
securities on the New York Stock Exchange or American Stock Exchange or in the
over-the-counter market; (b) the determination by you that there shall have
occurred a material adverse change, beyond normal fluctuations, in general
financial market or economic conditions from such conditions on the date of this
Agreement; (c)
- 26 -
a material interruption in mail or telecommunications service or other general
means of communications within the United States after the execution and
delivery of this Agreement; (d) a banking moratorium has been declared by
Federal or New York state authorities; (e) an outbreak of major international
hostilities or other national or international calamity has occurred; (f) the
passage by the Congress of the United States or by any state legislative body of
any act or measure, or the adoption of any orders, rules, or regulations by any
governmental body or executive or any authoritative accounting institute or
board, that you believe will have a Material Adverse Effect on the business,
financial condition, or financial statements of the Company or the distribution
of the Securities or market for the Securities; or (g) any material adverse
change has occurred, since the respective dates of which information is given in
the Registration Statement and Prospectus, in the condition of the Company,
financial or otherwise, whether or not arising in the ordinary course of
business. Any such termination shall be without liability of any party to any
other party, except as provided in Paragraph 7 in this Agreement and except that
the Company shall remain obligated to pay costs and expenses pursuant to
Paragraph 4 in this Agreement. If you elect to prevent this Agreement from
becoming effective, or to terminate this Agreement, as provided in this
Paragraph 9, you shall promptly notify the Company by telecopier or telephone,
and confirm by letter, and the Underwriters shall not be under any liability to
the Company.
10. Default by One or More Underwriters or Selected Dealers.
(a) If one or more of the Underwriters or selected dealers shall
fail at the Closing Date to purchase the Firm Units that it or they are
obligated to purchase pursuant to this Agreement or a selected dealers agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters or selected dealers, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the terms in
this Agreement set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(i) If the number of Defaulted Securities does not exceed 10%
of the total number of Firm Units, the non-defaulting Underwriters and the
non-defaulting selected dealers shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations bear
to the underwriting obligations of the non-defaulting Underwriters and selected
dealers.
(ii) If the number of Defaulted Securities exceeds 10% of the
total number of Firm Units, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter or selected dealer.
(b) In the event of any such default that does not result in a
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone the Closing Date for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
(c) Any action taken under this Paragraph 10 shall not release any
defaulting Underwriter or selected dealer from liability in respect of such
default.
- 27 -
11. Survival of Representations, Warranties, and Indemnities. The
respective agreements, representations, warranties, and indemnities contained in
this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of you, any Underwriter or the Company, or
any of your or their respective officers or directors or controlling persons,
and will survive delivery of and payment for the Securities and the Unit
Purchase Option.
12. Notices. All notices and other communications hereunder (unless
otherwise expressly provided for in this Agreement) shall be in writing and
shall be deemed given when delivered in person or by overnight courier service
or Express Mail, on the business day (before 5:00 P.M.) transmitted if sent by
facsimile transmission or similar means of communication if receipt if confirmed
or if transmission is confirmed as otherwise provided in this Paragraph 12, or
the fifth (5th) day after mailing if mailed if sent by registered or certified
mail (return receipt requested) to the party to receive the same at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to the Company: Xxxxxxxxxxxx.xxx.,Inc.
00 Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxx, President
With a copy to: Peabody & Xxxxxx, LLP
00 Xxxxx Xxxxx
Xxxxxx, XX 00000-1745
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxxxx, Esq.
If to the Underwriters: HD Xxxxx & Co., Inc.
00 Xxxxxxxxxx Xxxx
Xxxxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxx, Chairman
and
Solid ISG Capital Markets, L.L.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxxxx
Senior Executive Vice President
With a copy to: Xxxxx Xxxxxx Xxxxxx & Siger, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx P.C.
- 28 -
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors. Except as to
the several Underwriters for whom you are acting as their representative, and
except and only to the extent stated in Paragraph 7 of this Agreement with
respect to the officers, directors and controlling persons referred to in such
Paragraph 7, no person other than the parties hereto and their respective
successors will have any right or obligation hereunder. The terms "successor"
and "successors and assigns" as used in this Agreement shall not include any
buyer, as such, of any of the Securities from the Underwriters.
14. Entire Understanding. This Agreement contains the entire
understanding between the parties to this Agreement and supersedes any prior or
contemporaneous oral or prior written agreement, understandings or letter of
intent, and may not be modified or amended nor may any right be waived except by
a writing signed by all parties in the case of a modification or amendment or
the party to be charged in the case of a waiver. No course of conduct or dealing
and no trade custom or practice shall be construed to modify any of the
provisions of this Agreement.
15. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which taken together
shall constitute one and same agreement.
16. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York applicable to
agreements executed and to be performed wholly within such State.
[Signatures on following page]
- 29 -
Please confirm, by signing and returning to the Company counterparts of
this Underwriting Agreement, that the foregoing correctly sets forth the
understanding between the Company and you, whereupon this Agreement will
constitute a binding agreement among us.
Very truly yours,
XXXXXXXXXXXX.XXX, INC.
By:___________________________
Xxxxxxx X. Xxxx, President
Confirmed and Accepted as of
the date first above-written:
HD XXXXX & CO, INC.
By:________________________________
Xxxxxx X. Xxxxx, Chairman
SOLID ISG CAPITAL MARKETS, L.L.C.
By:________________________________
Xxxxxxx Xxxxxxx, Senior Executive Vice President
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Exhibit A
Opinion of Company Counsel
1. The Company and the Subsidiary (a) has been duly incorporated and
is a validly existing corporation in good standing under the laws of the state
of its incorporation, with full corporate power and authority to own and operate
its properties and to carry on its business as set forth in the Registration
Statement and Prospectus; (b) on the Effective Date has authorized and
outstanding capital stock as set forth in the Prospectus, and (c) is duly
licensed or qualified as a foreign corporation in Massachusetts and all other
jurisdictions in which by reason of owning or leasing real property in such
jurisdiction it is required to be so licensed or qualified except where failure
to be so qualified or licensed would have no Material Adverse Effect.
2. All of the outstanding shares of Common Stock are duly and validly
authorized and issued and outstanding, fully paid and non-assessable, conform to
the description set forth in the Prospectus and do not have any, and were not
issued in violation of any, preemptive rights under the Company's certificate of
incorporation or by-laws or any other agreement known to such counsel.
3. The Company has authorized and reserved for issuance the shares of
Common Stock issuable (a) upon exercise of the outstanding options or warrants
(other than the Warrants) in accordance with the terms of the applicable options
or warrants, (b) upon exercise of the Warrants, including Warrants issued upon
exercise of the Unit Purchase Option, pursuant to the terms of the Warrants and
the Warrant Agreement, and (c) upon exercise of the Unit Purchase Option, and
when issued upon such exercise, such shares of Common Stock will be duly and
validly authorized and issued, fully paid and non-assessable and not subject to
any preemptive rights or rights of first refusal pursuant to the Company's
certificate of incorporation or by-laws or other agreement known to such
counsel.
4. The shares of Common Stock included in the Units offered pursuant
to the Prospectus (a) are duly and validly authorized and issued, fully paid and
non-assessable, (b) have not been issued in violation of the pre-emptive rights
or rights of first refusal pursuant to the Company's certificate of
incorporation or any agreement known to such counsel and (c) are not subject to
any liens, encumbrances, claims, security interests, stockholders agreements,
voting trusts or restrictions on voting or transfer other than as disclosed in
the Prospectus or as may be imposed under Federal and state securities laws.
5. The Warrants and the Unit Purchase Option, when issued as provided
in this Agreement and/or the Unit Purchase Option, will constitute the valid,
binding and enforceable obligations of the Company, subject to bankruptcy,
insolvency and other laws of general applications affecting the enforceability
of creditors' rights and subject to the discretionary nature of any remedies in
the nature of equitable relief and except that no opinion is given with respect
to the indemnification and contribution provisions of the Representatives'
Warrants.
6. The shares of Common Stock and Warrants included in the Units
offered pursuant to the Prospectus, when issued pursuant to this Agreement upon
payment of the consideration provided for in this Agreement, will, to such
counsel's knowledge, be free of all liens, encumbrances, claims, security
interests, restrictions (other than those disclosed in the
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Prospectus or imposed by Federal or state securities laws), stockholders'
agreements and voting trusts resulting from agreements known to such counsel to
which the Company is a party.
7. The shares of Common Stock issuable upon exercise of the Unit
Purchase Option and upon exercise of the Warrants issuable upon exercise of the
Unit Purchase Option have been duly and validly authorized for issuance, and
when issued pursuant to the terms of the Unit Purchase Option and/or the Warrant
Agreement, as the case may be, will be validly issued, fully paid and
non-assessable; the Warrants issuable upon exercise as provided in the Unit
Purchase Option, will constitute the valid and binding obligations of the
Company, subject to bankruptcy, insolvency and other laws of general
applications affecting the enforceability of creditors' rights and subject to
the discretionary nature of any remedies in the nature of equitable relief in
any legal or equitable action.
8. Except as set forth in or contemplated by the Prospectus, to such
counsel's knowledge, as of the date of this Agreement, there were no outstanding
options, warrants or other rights providing for the issuance of any class of
capital stock of the Company, or any security convertible into, or exchangeable
for, any shares of any class of capital stock of the Company.
9. To such counsel's knowledge, neither the filing of the Registration
Statement nor the offering of the Units as contemplated by this Agreement gives
rise to any registration rights or other rights, other than those which have
been waived or satisfied, relating to the registration under the Act of any
shares of Common Stock.
10. The certificates evidencing the shares of Common Stock and Warrants
are in proper legal form.
11. To such counsel's knowledge, no consents, approvals, authorizations
or orders of agencies, officers or other regulatory authorities are necessary
for the valid authorization, issue or sale of the Securities pursuant to this
Agreement, except such as may be required under the Securities Act, the Exchange
Act or state securities or blue sky laws or pursuant to the NASD's rules,
regulations and policies or as required under the regulations of the Nasdaq
SmallCap Market.
12. This Agreement, the Warrant Agreement and the Unit Purchase Option
have been duly authorized and executed by the Company and constitute the valid
and binding agreements of the Company, enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency and other laws of general
applications affecting the enforceability of creditors' rights and subject to
the discretionary nature of any remedies in the nature of equitable relief and
except that no opinion is given with respect to the provisions of Paragraph 7 of
this Agreement.
13. The Company has corporate power and authority to authorize, issue
and sell the Securities on the terms and conditions set forth in this Agreement,
the Warrant Agreement, the Unit Purchase Option, as the case may be, and in the
Registration Statement and in the Prospectus, and the execution and delivery of
this Agreement, the consummation of the transactions contemplated by this
Agreement, the Warrant Agreement and the Unit Purchase Option and compliance by
the Company with the terms of this Agreement, the Warrant Agreement and the Unit
Purchase Agreement will not conflict with, or constitute a default under, the
certificate of incorporation or by-laws of the Company or any indenture,
mortgage, deed or trust, note or any
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other agreement or instrument known to such counsel to which the Company or the
Subsidiary is a party or by which they or their respective businesses or their
properties are bound, or, to such counsel's knowledge, any law, order, rule or
regulation, writ, injunction or decree of any government, governmental
instrumentality, or court having jurisdiction over the Company, the Subsidiary
or their respective businesses or properties.
14. Such counsel knows of no actions, suits or proceedings at law or in
equity of a material nature pending, or to such counsel's knowledge, threatened,
against the Company before or by any state commission, regulatory body, or
administrative agency or other governmental body, wherein an unfavorable ruling,
decision or finding would materially adversely affect the business or financial
condition of the Company or which question either (a) the validity of the
issuance of the Securities, the execution of the Underwriting Agreement, the
Warrant Agreement or the Unit Purchase Option by the Company, or (b) any action
taken or to be taken by the Company pursuant to the Underwriting Agreement, the
Warrant Agreement or the Unit Purchase Option, which are not disclosed in or
contemplated by the Prospectus.
15. The Registration Statement has become effective under the Act.
Furthermore, the Registration Statement and the Prospectus (except as
to the financial statements and other financial, statistical and accounting
information contained therein or omitted therefrom, as to which no opinion is
expressed), comply as to form in all material respects with the requirements of
the Act and the rules and regulations (the "Rules") of the Commission under the
Securities Act. In passing upon the form of such documents, such counsel has
assumed the correctness and completeness of the statements made or included
therein by the Company and take no responsibility for the accuracy, completeness
or fairness of the statements contained therein except insofar as such
statements relate to the description of the Securities or relate to such
counsel. However, in the course of the preparation by the Company of the
Registration Statement and the Prospectus, such counsel had conferences with
officers and directors of the Company in connection with the preparation of the
Registration Statement and Prospectus, and, without independently verifying the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus and relying on the Company's officers
regarding materiality, no facts have come such counsel's attention which gave
such counsel reason to believe that the Registration Statement, as of the
effective date thereof (except as to the financial statements and other
financial, statistical and accounting information contained therein or omitted
therefrom, as to which no opinion is expressed), contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or that the Prospectus
(except as to the financial statements and other financial, statistical and
accounting information contained therein or omitted therefrom, as to which no
opinion is expressed) contained any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. Such counsel
does not know of any documents which are required to be filed as exhibits to the
Registration Statement which have not been so filed.
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SCHEDULE I
Underwriting Agreement Dated ___________, 2000
Underwriter Number of Firm
Units to be Purchased
HD Xxxxx & Co., Inc.
Solid ISG Capital Markets, L.L.C.
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