Exhibit 1.2
2,500,000 Shares of Class A Common Stock
and
1,000,000 Redeemable Class A Common Stock Purchase Warrants
of
OUTLOOK SPORTS TECHNOLOGY, INC.
UNDERWRITING AGREEMENT
Atlanta, Georgia
_______________, 1998
Argent Securities, Inc.
0000 Xxxxxxxxx Xxxx, X.X., Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Gentlemen:
Outlook Sports Technology, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), confirms its agreement with
Argent Securities, Inc. ("Argent") and each of the other underwriters, if
any, named in Schedule I hereto (collectively, the "Underwriters" which term
shall also include any underwriter substituted as hereinafter provided in
Section 11) for whom Argent is acting as representative (in such capacity,
Argent shall hereinafter be referred to as the "Representative") with respect
to the sale by the Company and the Selling Shareholders listed on Schedule
III, and the purchase by the Underwriters, acting severally and not jointly,
of 2,500,000 shares (the "Shares") of the Company's Class A Common Stock,
$0.01 par value per share (the "Common Stock"), and 1,000,000 Redeemable
Class A Common Stock Purchase Warrants (the "Redeemable Warrants") ("Firm
Securities"), each of the Redeemable Warrants entitles the holder thereof to
purchase one share of Class A Common Stock at an exercise price of $8.05 per
share pursuant to a warrant agreement (the "Warrant Agreement") between the
Company and the warrant agent, set forth in Schedule II, and with respect to
the grant by the Company and the Selling Shareholders to the Underwriters of
the option described in Section 2(b) hereof to purchase all or any part of
375,000 additional Shares (100,000 of the additional Shares to be purchased
from the Company and 275,000 of the additional Shares to be purchased from
the Selling Shareholders) and 150,000 Redeemable Warrants (the "Additional
Securities") for the purpose of covering over-allotments, if any. The
aforesaid Firm Securities together with all or any part of the Additional
Securities are hereinafter collectively referred to as the "Securities." The
Company also proposes to issue and sell to the Underwriters for an
approximate price of $__________ ($________ per warrant), ____________
non-callable warrants entitling the Underwriters to purchase from the Company
an Underwriter's Warrant (the "Underwriters' Warrant" or the "Underwriters'
Purchase Option") for the purchase of an aggregate of 250,000 shares of Class
A Common Stock (the "Underwriters' Shares") and 50,000 Underwriters' Class A
Common Stock Purchase Warrants (the "Underwriters' Redeemable Warrants"). The
shares of Class A Common Stock issuable upon exercise of the Redeemable
Warrants including the Underwriters' Redeemable Warrants are hereinafter
sometimes referred to as the "Warrant Shares." The Shares, the Redeemable
Warrants, the Class A Common Stock, Underwriters' Redeemable Shares,
Underwriters' Warrants and the Warrant
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Shares are more fully described in the Registration Statement (as defined in
Subsection 1(a) hereof) and the Prospectus (as defined in Subsection 1(a)
hereof) referred to below. Unless the context otherwise requires, all references
to the "Company" shall include all subsidiaries (as defined in Subsection 1(e)
hereof) referred to below and identified in the Prospectus, as if separately
stated herein. All representations, warranties and opinions of counsel shall
cover such subsidiaries.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters as of the
date hereof, and as of the Closing Date and any Option Closing Date, (as defined
in Subsection 2 (c) hereof), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement, and
an amendment or amendments thereto, on Form SB-2 (File No. 333-58631) under the
Act (the "Registration Statement"), including a prospectus subject to completion
relating to the Shares and Redeemable Warrants which registration statement and
any amendment or amendments have been prepared by the Company in material
compliance with the requirements of the Act and the rules and regulations of the
Commission under the Act. The term "Registration Statement" as used in this
Agreement means the registration statement (including all financial schedules
and exhibits), as amended at the time it becomes effective, or, if the
registration statement became effective prior to the execution of this
Agreement, as supplemented or amended prior to the execution of this Agreement.
If it is contemplated, at the time this Agreement is executed, that a
post-effective amendment to the registration statement will be filed and must be
declared effective before the offering of the Shares may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If an abbreviated
registration statement is prepared and filed with the Commission in accordance
with Rule 462(b) under the Act (an "Abbreviated Registration Statement"), the
term "Registration Statement" as used in this Agreement includes the Abbreviated
Registration Statement. The term "Prospectus" as used in this Agreement means
the prospectus in the form included in the Registration Statement, or, if the
prospectus included in the Registration Statement omits information in reliance
on Rule 430A under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b). The term "Preliminary Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the registration
statement at the time of the initial filing of the registration statement with
the Commission, and as such prospectus shall have been amended from time to time
prior to the date of the Prospectus.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or Prospectus or any part thereof and no proceedings
for a stop order have been instituted or are pending or, to the best knowledge
of the Company, threatened. Each of the Preliminary Prospectus, the Registration
Statement and Prospectus at the time of filing thereof conformed in all material
respects with the requirements of the Act and the Rules and Regulations, and
neither the Preliminary Prospectus, the Registration Statement or Prospectus at
the time of filing thereof contained an untrue
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statement of a material fact or omitted to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with written information furnished to
the Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Option Closing Date and
during such longer period as the Prospectus may be required to be delivered in
connection with sales by the Underwriters or a dealer, the Registration
Statement and the Prospectus will contain all material statements which are
required to be stated therein in material compliance with the Act and the Rules
and Regulations, and will in all material respects conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement,
nor any amendment thereto, at the time the Registration Statement or such
amendment is declared effective under the Act, will contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Prospectus at the time the Registration Statement becomes effective, at the
Closing Date and at any Option Closing Date, will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information supplied to the Company in writing by or
on behalf of the Underwriters expressly for use in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is now, and at the
Closing Date and any Option Closing Date will be, validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company does not own, directly or indirectly, an interest in any corporation,
partnership, trust, joint venture or other business entity; provided, that the
foregoing shall not be applicable to the investment of the net proceeds from the
sale of the Securities in short-term, low-risk investments as set forth under
"Use of Proceeds" in the Prospectus. The Company is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of its properties or the character of its operations
require such qualification or licensing, except where the failure to so register
or qualify does not have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of the
Company and the subsidiaries taken as a whole (a "Material Adverse Effect"). The
Company has all requisite power and authority (corporate and other), and has
obtained any and all necessary material applications, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; the Company
is and has been doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates, franchises and permits and all
material federal, state, local and foreign laws, rules and regulations; and the
Company has not received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, would have a Material
Adverse Effect. The disclosures in the
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Registration Statement concerning the effects of federal, state, local, and
foreign laws, rules and regulations on the Company's business as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact necessary to make the statements contained therein
not misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and will
have the adjusted capitalization set forth therein on the Closing Date and the
Option Closing Date, if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or other
arrangement providing for the Company to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and as
otherwise described in the Prospectus. The Securities, the Additional
Securities, the Shares, the Redeemable Warrants, the Warrant Shares and all
other securities issued or issuable by the Company conform or, when issued and
paid for, will conform in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company and the Selling Shareholders have been
duly authorized and validly issued and are fully paid and non-assessable; the
holders thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company, or similar contractual rights granted by the
Company. The Securities, the Additional Securities, the Shares, and the
Redeemable Warrants to be issued and sold by the Company and the Selling
Shareholders hereunder, and the Warrant Shares issuable upon exercise of the
Redeemable Warrants and the Underwriters' Warrants and payment therefor, are not
and will not be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and delivered
in accordance with the terms hereof and thereof, will be validly issued, fully
paid and non-assessable and will conform in all material respects to the
descriptions thereof contained in the Prospectus; the holders thereof will not
be subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the Securities,
the Additional Securities, the Shares, and the Redeemable Warrants, and the
Warrant Shares has been duly and validly taken; and the certificates
representing the Securities, the Redeemable Warrants, and the Warrant Shares
will be in due and proper form. Upon the issuance and delivery pursuant to the
terms hereof of the Securities to be sold by the Company and the Selling
Shareholders hereunder, the Underwriters will acquire good and marketable title
to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement, the
Preliminary Prospectus and the Prospectus fairly present the financial position
and the results of operations of the Company at the respective dates and for the
respective periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved. There has been no material
adverse change or development involving a prospective change in the condition,
financial or otherwise, or in the earnings, business affairs, position,
prospects, value, operation, properties, business, or results of operation of
the Company, whether or not arising in the ordinary course of business, since
the dates of the financial statements included in the Registration Statement and
the Prospectus and the outstanding debt, the
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property, both tangible and intangible, and the business of the Company,
conforms in all material respects to the descriptions thereof contained in the
Registration Statement and in the Prospectus.
(g) Price WaterhouseCoopers LLP, independent certified public
accountants, whose report is filed with the Commission as a part of the
Registration Statement, are independent certified public accountants as required
by the Act.
(h) The Company (i) has paid all federal, state, local, and
foreign taxes for which it is liable, including, but not limited to, withholding
taxes and taxes payable under Chapters 21 through 24 of the Internal Revenue
Code of 1986 (the "Code"), (ii) has furnished all tax and information returns it
is required to furnish pursuant to the Code, and has established adequate
reserves for such taxes which are not due and payable, and (iii) does not have
knowledge of any tax deficiency or claims outstanding, proposed or assessed
against it (other than certain state or local tax returns, as to which the
failure to file, singly or in the aggregate, would not have a Material Adverse
Effect.)
(i) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to be
necessary for its business, including, but not limited to, personal and product
liability insurance covering all personal and real property owned or leased by
the Company against fire, theft, damage and all risks customarily insured
against.
(j) There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or foreign,
pending (to the knowledge of the Company) or threatened against (or
circumstances known to the Company that may give rise to the same), or involving
the properties or business of the Company which: (i) is required to be disclosed
in the Registration Statement which is not so disclosed (and such proceedings as
are summarized in the Registration Statement are accurately summarized in all
respects); or (ii) singly or in the aggregate would have a Material Adverse
Effect.
(k) The Company has full legal right, power and authority to enter
into this Agreement, the Underwriters' Warrant and the Warrant Agreement and to
consummate the transactions provided for in such agreements; and this Agreement,
the Underwriters' Warrant and the Warrant Agreement have each been duly and
properly authorized, executed and delivered by the Company. Each of this
Agreement, the Underwriters' Warrant and the Warrant Agreement, constitutes a
legal, valid and binding agreement of the Company, subject to due authorization,
execution and delivery by the Representative and/or the Underwriters,
enforceable against the Company in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law). Neither the Company's
execution or delivery of this Agreement, the Underwriters' Warrant, and the
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, nor the conduct of its
business as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
5
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest defect or other restriction or equity of any kind whatsoever
upon any property or assets (tangible or intangible) of the Company pursuant to
the terms of: (i) the Articles of Incorporation or By-Laws of the Company; (ii)
any material license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of its properties or assets (tangible or intangible) is
or may be subject, other than conflicts that, singly or in the aggregate, will
not have a Material Adverse Effect; or (iii) any statute, judgment, decree,
order, rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the transactions contemplated hereby, except such as have been or may be
obtained under the Act or may be required under state securities or Blue Sky
laws in connection with (i) the Underwriters' purchase and distribution of the
Securities to be sold by the Company hereunder; or (ii) the issuance and
delivery of the Underwriters' Warrant, the Underwriters' Shares, the Redeemable
Warrants or the Warrant Shares.
(m) All executed agreements or copies of executed agreements filed
as exhibits to the Registration Statement to which the Company is a party or by
which the Company may be bound or to which any of its assets, properties or
businesses may be subject have been duly and validly authorized, executed and
delivered by the Company, and constitute the legal, valid and binding agreements
of the Company, enforceable against it in accordance with its respective terms.
The descriptions contained in the Registration Statement of contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by the Act and the Rules
and Regulations and there are no material contracts or other documents which are
required by the Act or the Rules and Regulations to be described in the
Registration Statement or filed as exhibits to the Registration Statement which
are not described or filed as required, and the exhibits which have been filed
are complete and correct copies of the documents of which they purport to be
copies.
(n) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has not:
(i) issued any securities or incurred any liability or obligation, direct or
contingent, for borrowed money in any material amount; (ii) entered into any
transaction other than in the ordinary course of business; (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock, material changes in debt (long
or short term) or liabilities other than in the ordinary course of business,
material changes in or affecting the general affairs, management, financial
operations, stockholders equity or results of operations of the Company.
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(o) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, no default exists in
the due performance and observance of any material term, covenant or condition
of any license, contract, indenture, mortgage, installment sales agreement,
lease, deed of trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
property or assets (tangible or intangible) of the Company is subject or
affected.
(p) To the best knowledge of the Company, the Company has
generally enjoyed a satisfactory employer-employee relationship with its
employees and is in compliance in all material respects with all federal, state,
local, and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours.
(q) To the best knowledge of the Company, since its inception, the
Company has not incurred any liability arising under or as a result of the
application of the provisions of the Act.
(r) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company does not
presently maintain, sponsor or contribute to, and never has maintained,
sponsored or contributed to, any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan" or a "multi-employer
plan" as such terms are defined in Sections 3(2), 3(l) and 3(37) respectively of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"). The Company does not maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of ERISA.
(s) The Company is not in violation in any material respect of any
domestic or foreign laws, ordinances or governmental rules or regulations to
which it is subject, except to the extent that any such violation would not,
singly or in the aggregate, have a Material Adverse Effect.
(t) No holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company
exercisable for or convertible or exchangeable for securities of the Company
have the right to include any securities issued by the Company in the
Registration Statement or any registration statement to be filed by the Company
within twelve (12) months of the date hereof or to require the Company to file a
registration statement under the Act during such twelve (12) month period,
except such registration rights as have been waived or disclosed in the
Prospectus.
(u) Neither the Company, nor, to the Company's best knowledge, any
of its employees, directors, principal stockholders or affiliates (within the
meaning of the Rules and Regulations) has taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
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(v) Except as described in the Prospectus, to the best of the
Company's knowledge, none of the patents, patent applications, trademarks,
service marks, trade names and copyrights, or licenses and rights to the
foregoing presently owned or held by the Company is in dispute or are in any
conflict with the right of any other person or entity within the Company's
current area of operations nor has the Company received notice of any of the
foregoing. To the best of the Company's knowledge, the Company: (i) owns or has
the right to use, free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing; and (ii) except as set forth in the Prospectus, is not obligated
or under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
(w) Except as described in the Prospectus, to the best of the
Company's knowledge, the Company owns and has the unrestricted right to use all
material trade secrets, trademarks, trade names, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein "Intellectual
Property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of and without violating any right, lien, or claim of
others, including without limitation, former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company, or employees or agents, could have
developed trade secrets or items of technical information similar or identical
to those of the Company.
(x) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects, or other restrictions or equities of any
kind whatsoever, other than those referred to in the Prospectus and liens for
taxes or assessments not yet due and payable.
(y) The Company has obtained such duly executed legally binding
and enforceable agreements as required by the Representative pursuant to which
the Company's President and certain Directors and affiliates described in the
Prospectus, have agreed not to, directly or indirectly, offer to sell, sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber any of their shares of Class A Common Stock or other
securities of the Company (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for
certain periods of up to 60 months subject to earlier release upon the Company's
achievement of certain performance thresholds, following the effective date of
the Registration Statement without the prior written consent of the
Representative. The Company will cause the Transfer Agent, as defined below, to
mark an appropriate legend on the face of stock
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certificates representing all of such shares of Class A Common Stock and other
securities of the Company.
(z) Except as disclosed in the Prospectus, the Company has not
incurred any liability and there are no arrangements or understandings for
services in the nature of a finder's or origination fee with respect to the sale
of the Securities or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company or any of its officers,
directors, employees or affiliates that may adversely affect the Underwriters'
compensation, as determined by the NASD.
(aa) The Securities have been approved for quotation on the
Nasdaq SmallCap Market of the Nasdaq Stock Market, Inc., subject to official
notice of issuance.
(bb) Neither the Company nor to the Company's best knowledge
any of its respective officers, employees, agents or any other person acting on
behalf of the Company, has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or foreign) or other
person who was, is, or may be in a position to help or hinder the business of
the Company (or assist the Company in connection with any actual or proposed
transaction) which: (a) might subject the Company, or any other such person to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company;
or (c) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act 1977, as amended.
(cc) Except as set forth in the Prospectus, and to the best
knowledge of the Company, no officer, director or principal stockholder of the
Company, or any "affiliate" or "associate" (as these terms are defined in Rule
405 promulgated under the Rules and Regulations) of any such person or entity or
the Company, has or has had, either directly or indirectly, (i) an interest in
any person or entity which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the Company, or (B)
purchases from or sells or furnishes to the Company any goods or services,
except with respect to the beneficial ownership of not more than 1% of the
outstanding shares of capital stock of any publicly-held entity; or (ii) a
beneficial interest in any contract or agreement to which the Company is a party
or by which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Relationships and Related Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, or principal stockholder of the Company, or
any affiliate or associate of any such person or entity, which is required to be
disclosed pursuant to Rule 404 of Regulation S-B.
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(dd) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Underwriters' Counsel shall be deemed a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
(ee) The Company has entered into an employment agreements
with Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxx as described in the Prospectus. Unless
waived by the Representative, the Company shall use its reasonable efforts at
reasonable cost to obtain key-man life insurance policies in the amount of not
less than $1,000,000 on the life of Messrs. Xxxxxxxx and Xxxxxx, which policies
shall be owned by the Company and shall name the Company as the sole beneficiary
thereunder.
(ff) No securities of the Company have been sold by the
Company since its date of incorporation, except as disclosed in Part II of the
Registration Statement.
(gg) The minute books of the Company have been made available
to Underwriters' Counsel and contain a complete summary of all meetings and
actions of the Board of Directors and Shareholders of the Company since the date
of its incorporation.
1A. Representations and Warranties of the Selling Shareholders. The
Selling Shareholders represent and Warrant to each Underwriter that:
(a) The Selling Shareholders now have, and on any Option
Closing Date will have, valid and marketable title to the Shares to be sold by
such Selling Shareholders, free and clear of any lien, claim, security interest
or other encumbrance, including, without limitation, any restriction on
transfer.
(b) Such Selling Shareholders now have, and on any option
Closing Date will have, full legal right, power and authorization, and any
approval required by law, to sell, assign, transfer and deliver such Shares in
the manner provided in this Agreement, and upon delivery of and payment for such
Shares hereunder, the several Underwriters will acquire valid and marketable
title to such Shares free and clear of any lien, claim, security interest, or
other encumbrance.
(c) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Shareholders and is the valid and
binding agreement of such Selling Shareholders enforceable against the Selling
Shareholders in accordance with its terms, except to the extent enforceability
may be limited by laws relating to creditors' rights generally or by general
equitable principles, and except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws.
(d) Neither the execution and delivery of this Agreement by
or on behalf of the Selling Shareholders, nor the consummation of the
transaction s herein or therein contemplated by or on behalf of such Selling
Shareholders requires any consent, approval, authorization or order of, or
filing or registration with any court, regulatory body, administrative agency or
other governmental body, agency or official (except such as may be required
under the Act and the Exchange Act or such as may be required under state
securities or Blue Sky laws governing the purchase and distribution of the
Shares), or conflicts or will conflict with or constitutes or will constitute a
breach of, or default under, or violates or will violate, any agreement,
indenture or other instrument to
10
which such Selling Shareholders are a party or by which such Selling
Shareholders is or may be bound, or to which any of such Selling Shareholders'
property or assets is subject, or any statute, law, rule, regulation, ruling,
judgment, injunction, order or decree applicable to such Selling Shareholders or
to any property or assets of such Selling Shareholders.
(e) The Registration Statement and the Prospectus, insofar as
they relate to the Selling Shareholders, do not and will not contain an untrue
statement of a material fact or omit to any state any material fact required to
be stated therein or necessary to make the statements therein not misleading.
(f) The Selling Shareholders haven not taken, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Securities to
facilitate the sale or resale of the Securities.
2. Purchase, Sale and Delivery of the Securities, Additional Securities
and Agreement to Issue Underwriters' Warrant.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company and the Selling Shareholders agree to
sell to each Underwriters, and each Underwriter, severally but not jointly,
agrees to purchase from the Company and the Selling Shareholders at the price
per share and the price per warrant set forth below, that proportion of the
number of shares of Class A Common Stock and Redeemable Warrants set forth in
Schedule I opposite the name of such Underwriter that such number of shares of
Class A Common Stock and Redeemable Warrants bears to the total number of shares
of Class A Common Stock and Redeemable Warrants, respectively, subject to such
adjustments as the Underwriters in their discretion shall make to eliminate any
sales or purchases of fractional Securities, plus any additional numbers of
Securities which the Underwriters may become obligated to purchase pursuant to
the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company and the Selling Shareholders hereby
grant an option to the Underwriters, severally and not jointly, to purchase up
to an additional 375,000 Shares from the Company and 150,000 Redeemable Warrants
at the prices set forth below. The option granted hereby will expire 45 days
after the date of this Agreement, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Additional Securities
upon notice by the Representative to the Company and the Selling Shareholders
setting forth the number of Additional Securities as to which the Underwriters
is then exercising the option and the time and date of payment and delivery for
such Additional Securities. The Underwriter shall purchase the first 100,000
Shares from the Company, and thereafter any remaining Additional Securities
shall be purchased from the Selling Shareholders, provided, however, that the
Underwriter shall purchase all of the Additional Securities owned by Messrs.
Xxxxxxx and Xxxxxx before purchasing Additional Securities from any of the other
Selling Shareholders. Any such time and date of delivery shall be determined by
the Underwriters, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Date, as defined
in paragraph (c) below, unless otherwise agreed to between the
11
Representative, the Selling Shareholders and the Company. In the event such
option is exercised, each of the Underwriters shall purchase such number of
Additional Securities then being purchased which shall have been allocated to
the Representative, and which such Underwriters shall have agreed to
purchase. Nothing herein contained shall obligate the Underwriters to make
any over-allotments. No Additional Securities shall be delivered unless the
Firm Securities shall be simultaneously delivered or shall theretofore have
been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of counsel to
the Representative in Atlanta, Georgia, or at such other place as shall be
agreed upon by the Underwriters and the Company. Such delivery and payment shall
be made at 10:00 a.m. (New York City time) on ___________, 1998 or at such other
time and date as shall be designated by the Representative but not less than
three (3) nor more than five (5) business days after the effective date of the
Registration Statement (such time and date of payment and delivery being
hereafter called "Closing Date"). In addition, in the event that any or all of
the Additional Securities are purchased by the Underwriters, payment of the
purchase price for, and delivery of certificates for such Additional Securities
shall be made at the above-mentioned office or at such other place and at such
time (such time and date of payment and delivery being hereinafter called
"Option Closing Date") as shall be agreed upon by the Representative and the
Company on each Option Closing Date as specified in the notice from the
Representative to the Company. Delivery of the certificates for the Firm
Securities and the Additional Securities, if any, shall be made to the
Underwriters against payment by the Underwriters of the purchase price for the
Firm Securities and the Additional Securities, if any, to the order of the
Company as the case may be by certified check or, at the election of the
Representative, all or a portion of the funds may be paid by Bank wire transfer
of funds or by Representative's commercial check. Certificates for the Firm
Securities and the Additional Securities, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least two (2) business days prior to Closing Date or the relevant
Option Closing Date, as the case may be. The certificates or the Depository
Trust Corporation electronic notifications, as the case may be, for the
Securities and the Additional Securities, if any, shall be made available to the
Underwriters at the above-mentioned office or such other place as the
Underwriters may designate for inspection, checking and packaging no later than
9:30 a.m. on the last business day prior to Closing Date or the relevant Option
Closing Date, as the case may be.
The purchase price of the Class A Common Stock and Redeemable Warrants
to be paid by the Underwriters to the Company and the Selling Shareholders for
the Securities purchased under Clauses (a) and (b) above will be $________ per
Share and $________ per Redeemable Warrant (which price is net of the
Underwriters' discount and commissions). Neither the Company nor the Selling
Shareholders shall be obligated to sell any Securities hereunder unless all Firm
Securities to be sold by the Company and the Selling Shareholders are purchased
hereunder. The Company and the Selling Shareholders each agree to issue and sell
2,500,000 shares of the Class A Common Stock and the Company agrees to issue and
sell 1,000,000 Redeemable Warrants to the Underwriters in accordance herewith.
(d) On the Closing Date, the Company shall issue and sell to
the Underwriters the Underwriters' Warrant at a purchase price of $___________,
which warrant shall entitle the
12
holders thereof to purchase an aggregate of 250,000 Shares and 50,000 Warrants.
The Underwriters' Warrant shall be exercisable for a period of four years
commencing one year from the effective date of the Registration Statement at an
initial exercise price equal to one hundred twenty percent (120%) of the initial
public offering price of the Shares and Redeemable Warrants. The Underwriters'
Warrant shall be substantially in the form filed as an Exhibit to the
Registration Statement. Payment for the Underwriters' Warrant shall be made on
Closing Date. The Company has reserved and shall continue to reserve a
sufficient number of Shares for issuance upon exercise of the Underwriters'
Warrant.
3. Public Offering of the Securities. As soon after the Registration
Statement becomes effective and as the Representative deems advisable, but in no
event more than three (3) business days after such effective date, the
Underwriters shall make a public offering of the securities (other than to
residents of or in any jurisdiction in which qualification of the Securities is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Underwriters may allow such concessions and
discounts upon sales to other dealers as set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees with each
of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Exchange Act (i) before termination of the offering of the Securities
by the Underwriters, which the Underwriters shall not previously have been
advised and furnished with a copy, or [(ii) to which the Underwriters shall have
objected or] (iii) which is not in compliance with the Act, the Exchange Act or
the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Underwriters and confirm by notice in
writing: (i) when the Registration Statement, as amended, becomes effective, if
the provisions of Rule 430A promulgated under the Act will be relied upon, when
the Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the commission of any stop order or of the initiation, or the
threatening of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution or proceeding for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the qualification
of the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose; (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission or regulatory authority shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
13
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriters) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Underwriters pursuant to
Rule 424(b)(4)) not later than the Commission's close of business on the earlier
of (i) the second business day following the execution and delivery of this
Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Underwriters notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
will furnish the Underwriters with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, [and will not file any such prospectus to which the Underwriters or
Xxxxxx X. Xxxxxxxxx, Esq.("Underwriters' Counsel") shall reasonably object.]
(e) The Company shall cooperate in good faith with the
Underwriters, and Underwriters' Counsel, at or prior to the time the
Registration Statement becomes effective, in endeavoring to qualify the
Securities for offering and sale under the securities laws of such jurisdictions
as the Underwriters may reasonably designate, and shall cooperate with the
Underwriters and Underwriters' Counsel in the making of such applications, and
filing such documents and shall furnish such information as may be required for
such purpose; provided, however, the Company shall not be required to: (i)
qualify as a foreign corporation or file a general consent to service of process
in any such jurisdiction; or (ii) qualify or "blue sky" in any state which
requires a lock-up of inside securities for a period greater than five (5) years
(or such earlier date if the Representative has exercised the Underwriters'
Warrant). In each jurisdiction where such qualification shall be effected, the
Company will, unless the Underwriters agree that such action is not at the time
necessary or advisable, use all reasonable efforts to file and make such
statements or reports at such times as are or may reasonably be required by the
laws of such jurisdiction to continue such qualification.
(f) During the time when the Prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act, as now
and hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when the Prospectus
relating to the Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriters promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act,
14
each such amendment or supplement to be reasonably satisfactory to Underwriters'
Counsel, and the Company will furnish to the Underwriters a reasonable number of
copies of such amendment or supplement.
(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period commencing on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters, an earnings
statement which will be in such form and detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(h) During a period of five (5) years after the date hereof and
provided that the Company is required to file reports with the Commission under
Section 12 of the Exchange Act, the Company will provide the Underwriters'
director Designee or Attendee, as defined herein, copies of the below described
documents prior to release where applicable and will furnish to its stockholders
and to the Underwriters as soon as practicable, annual reports (including
financial statements audited by independent public accountants):
(i) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or any
securities exchange;
(iii) every press release and every material news item or
article of interest to the financial community in respect of the Company and any
future subsidiaries or their affairs which was released or prepared by the
Company;
(iv) any additional information of a public nature concerning
the Company and any future subsidiaries or their respective businesses which the
Underwriters may reasonably request;
(v) a copy of any Schedule 13D, 13G, 14D-1, 13E-3 or 13E-4
received or filed by the Company from time to time; and
(vi) such other information as may be requested with
reference to the property, business, stockholders and affairs of the Company .
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated, and will
be accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
15
(i) For as long as the Company is required to file reports with
the Commission under Section 12 of the Exchange Act, the Company will maintain a
Transfer Agent and a Warrant Agent, which may be the same entity, and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer and Warrant Agent) for its Class A
Common Stock and Redeemable Warrants.
(j) The Company will furnish to the Underwriters or pursuant to
the Underwriters' direction, without charge, at such place as the Underwriters
may designate, copies of each Preliminary Prospectus, the Registration Statement
and any pre-effective or post-effective amendments thereto (two of which copies
will be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriters may reasonably
request.
(k) Neither the Company, nor its officers or directors, nor
affiliates of any of them (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(1) The Company shall apply the net proceeds from the sale of the
Securities in substantially the manner, and subject to the provisions, set forth
under "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used directly or indirectly to acquire any securities issued by the Company.
(m) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(n) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available internally prepared financial statements
of the Company.
(o) For a period of five (5) years from the Closing Date (or such
earlier date if the Representative has exercised the Underwriters' Warrant), the
Company shall furnish to the Underwriters at the Company's sole expense, (i)
daily consolidated transfer sheets relating to the Securities upon the
Underwriters' reasonable request; (ii) a list of holders of Securities upon the
Underwriters' reasonable request; (iii) a list of, if any, the securities
positions of participants in the Depository Trust Company upon the Underwriters'
reasonable request.
(p) For a period of five (5) years after the effective date of the
Registration Statement (or such earlier date if the Underwriters have exercised
the Underwriters' Warrant), the Company shall use its best efforts to cause one
(1) individual (the "Designee") selected by the Underwriters to be elected to
the Board of Directors of the Company (the "Board"), if requested by the
Underwriters. Alternatively, the Underwriters shall be entitled to appoint an
individual who shall
16
be permitted to attend all meetings of the Board (the "Advisor") and to receive
all notices and other correspondence and communications sent by the Company to
members of the Board. Upon election to the Board, the Designee shall be entitled
to call special meetings of the Board and to serve on the Audit and Compensation
Committees. The Designee may be removed by the Board only for "justifiable
cause" as that term is defined in the Employment Contracts between the Company
and Xx. Xxxxxxxx and Xx. Xxxxxx. The Company shall reimburse the
Representative's Designee or Advisor for his or her out-of-pocket expenses
reasonably incurred and authorized in advance by the Company in connection with
his or her attendance of the Board meetings and a fee equal to the amount paid
to the other outside directors of the Company. The Designee or Advisor shall
also be entitled to participate in any Stock Option Plans of the Company for
non-employees. To the extent permitted by law, the Company agrees to indemnify
and hold the Designee (as a director or Advisor) and the Representative harmless
against any and all claims, actions, awards and judgements arising out of his or
her service as a director or Advisor and in the event the Company maintains a
liability insurance policy affording coverage for the action of its officer and
directors, to include such Designee and the Representative as an insured under
such policy.
(q) For a period equal to the lesser of (i) five (5) years from
the date hereof, or (ii) the sale to the public of the Warrant Shares, the
Company will use its best efforts not to take any action or actions which may
prevent or disqualify the Company's use of Forms S-1 or, if applicable, S-2 and
S-3 (or other appropriate form) for the registration under the Act of the
Warrant Shares.
(r) For a period of five (5) years from the date hereof, the
Company shall use its best efforts at its cost and expense to maintain the
listing of the Securities on the Nasdaq SmallCap Market or NASDAQ National
Market System if the Company meets all of the requirements and qualifications
promulgated by the NASD.
(s) On or before the effective date of the Registration Statement,
the Company shall retain or make arrangements to retain a financial public
relations firm and a publicist reasonably satisfactory to the Underwriters which
shall be continuously engaged from such engagement date to a date 24 months from
the effective date of the Registration Statement. Upon the expiration of such
two (2) year period, such engagement shall continue until the expiration of any
lock-up period provided for in the Lock-Up Agreement(s) with certain officers
and directors of the Company subject to the Company's right to terminate any
such firm with the consent of the Underwriters' director Designee. Further, the
Company shall engage for a period of two years at least three firms (one of
which shall be the Representative and one of which shall be Standard & Poor's
Stock Reports Professional Edition) which are reasonably acceptable to the
Underwriters to provide industry research and advice to the Company. Upon the
expiration of such two-year period, such engagement shall continue until the
expiration of any lock-up period provided hereunder, subject to the Company's
right to terminate any such firm with the consent of the Underwriters' director
designee.
(t) The Company shall (i) file a Form 8-A with the Commission
providing for the registration under the Exchange Act of the Securities and (ii)
promptly take all necessary and appropriate actions to be included in Standard
and Poor's Corporation Descriptions and/or Xxxxx'x OTC Manual and to continue
such inclusion for a period of not less than five (5) years, as soon as
17
practicable, but in no event more than five (5) business days' after the
effective date of the Registration Statement.
(u) Following the Effective Date of the Registration Statement and
for a period of five (5) years thereafter (or such earlier date if the
Underwriters has exercised the Underwriters' Warrant), the Company shall, at its
sole cost and expense, prepare and file such blue sky trading applications with
such jurisdictions as the Underwriters may reasonably request after consultation
with the Company, and on the Underwriters' request, furnish the Underwriters
with a secondary trading survey prepared by securities counsel to the Company.
(v) The Company shall not amend or alter any term of any written
employment agreement nor Lock-Up Agreement between the Company and any executive
officer, director or affiliate, during the term thereof, in a manner more
favorable to such employee or entity, without the express written consent of the
Representative until such time as the Underwriters' Warrant has been exercised
in full.
(w) Until the completion of the distribution of the Securities,
the Company shall not, without the prior written consent of the Representative
and Underwriters' Counsel, which consent shall not be unreasonably withheld,
issue, directly or indirectly, any press release or other communication or hold
any press conference with respect to the Company or its activities or the
offering contemplated hereby, other than trade releases issued in the ordinary
course of the Company's business consistent with past practices with respect to
the Company's operations.
(x) Commencing one (1) year from the date hereof, upon the
exercise of any Warrant, the exercise of which was solicited by the Underwriters
in accordance with the applicable rules and regulations of the NASD prevailing
at the time of such solicitation, the Company shall pay to the soliciting
Underwriter a fee of ___% of the aggregate exercise price of such Warrant (the
"Warrant Solicitation Fee") within five (5) business days of such exercise, so
long as the Underwriters provided bona fide services in exchange for the Warrant
Solicitation Fee and the Underwriters has been specifically designated in
writing by the holders of the Warrants as the broker. The Company further agrees
that it will not solicit the exercise of any Warrant other than through the
Underwriters, unless either: (i) the Underwriters cannot legally solicit the
exercise of the Warrants at the time of such solicitation; (ii) the
Representative declines, in writing, to solicit the exercise of the Warrants
within five (5) business days of such a written request by the Company; or (iii)
the Representative consents to the solicitation of the exercise of the Warrants
by the Company or another entity.
(y) The Company will use its best efforts to maintain its
registration under the Exchange Act in effect for a period of five (5) years
from the Closing Date.
(z) For a period of twenty-four (24) months commencing on the
Effective Date (or such earlier date if the Representative has exercised the
Underwriters' Warrant), except with the written consent of the Underwriters,
which consent shall not be unreasonably withheld, the Company will not issue or
sell, directly or indirectly, any shares of its capital stock, or sell or grant
options, or warrants or rights to purchase any shares of its capital stock,
except pursuant to (i) this Agreement, (ii) the Underwriters' Warrants, (iii)
warrants and options of the Company heretofore issued and
18
described in the Prospectus, and (iv) the grant of options and the issuance of
shares issued upon exercise of options issued or to be issued under a stock
option plan to be adopted in the future by the Company with terms that are
reasonable for a public entity the size of the Company which is described in the
Prospectus; except that, during such period, the Company may issue up to
__________ shares pursuant to certain employee stock options as is described in
the Prospectus, and issue securities in connection with an acquisition, merger
or similar transaction, provided that such securities are not publicly
registered or issued pursuant to Regulation S of the Act, and the acquirer of
the securities is not granted registration rights with respect thereto which are
effective prior to 24 months after the Effective Date and until the
Underwriters' Warrant is exercised, the Underwriter grants its consent.
Notwithstanding anything to the contrary set forth in the prior sentence, the
Company may not issue any class or series of Preferred Stock for a period of 24
months from the Effective Date without the unanimous vote or consent of all
members of the Board of Directors of the Company. Prior to the Effective Date,
the Company will not issue any options or warrants without the prior written
consent of the Underwriters.
(aa) The Company will not file any registration statement
relating to the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the 12 months following the Closing
Date without the Underwriters' prior written consent.
(bb) Subsequent to the dates as of which information is given
in the Registration Statement and Prospectus and prior to the Closing Dates,
except as disclosed in or contemplated by the Registration Statement and
Prospectus, (i) the Company will not have incurred any liabilities or
obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business; (ii) there shall not have been
any change in the capital stock, funded debt (other than regular repayments of
principal and interest on existing indebtedness) or other securities of the
Company, any adverse change in the condition (financial or other), business,
operations, income, net worth or properties, including any loss or damage to the
properties of the Company (whether or not such loss is insured against), which
could adversely affect the condition (financial or other), business, operations,
income, net worth or properties of the Company; and (iii) the Company shall not
pay or declare any dividend or other distribution on its Class A Common Stock or
its other securities or redeem or repurchase any of its Class A Common Stock or
other securities.
(cc) The Company, for a period of twenty-four (24) months
following the Effective Date (or such earlier date if the Representative has
exercised the Underwriters' Warrant), shall not redeem any of its securities,
except as disclosed in the Registration Statement, and shall not pay any
dividends or make any other cash distribution in respect of its securities in
excess of the amount of the Company's current or retained earnings derived after
the Effective Date without obtaining the Underwriters' prior written consent,
which consent shall not be unreasonably withheld. The Underwriter shall either
approve or disapprove such contemplated redemption of securities or dividend
payment or distribution within five (5) business days from the date the
Underwriter receives written notice of the Company's proposal with respect
thereto; a failure of the Underwriter to respond within the five (5) business
day period shall be deemed approval of the transaction.
(dd) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as
19
necessary in order to permit preparation of financial statements in accordance
with generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences, and (v) all quarterly reports filed on
Form 10-Q shall be reviewed by the Company's accountant in accordance with SAS
71.
(ee) The Company, for a period of twenty-four (24) months
following the Effective Date (or such earlier date if the Underwriter has
exercised the Underwriters' Warrant), shall implement the following procedures:
(i) Thirty days prior to fiscal year end, the President
will present to the Board of Directors a business plan to be adopted by the
Board of Directors at fiscal year end. The business plan will include the
following:
a) quarterly projections - including balance sheet,
profit/loss statement and cash flow statements with underlying assumptions
b) upon board approval, this document becomes the
annual budget
(ii) No later than the 20th day of each month, the
Company will provide the Board with comparative financial statements for the
previous month showing actual balance sheet, profit/loss and cash flow vs.
budget with written explanations for deviation in excess of $50,000 or 10% of
line item presented.
(iii) Monthly Board meetings (which may be by telephone)
by the 25th of each month to include discussion of the Monthly Report and
approval of any changes to the business plan based on change of circumstances.
(iv) Implementation of a compensation committee, which
will be headed by an outside director and include one of the Underwriters'
Designee Directors, to make recommendations to the Board for compensation for
all outside consultants, officers and outside directors.
(v) Implementation of an audit committee which will have
as its members the Underwriters' Designee Director and one outside Director.
If the Company fails to comply with or breaches any provisions of this
Section 4 of this Agreement, after 30 days written notice from the
Representative of such default or breach, the Underwriter may cause the Company
to retain one or more consultants, accountants or other professionals to assist
the Company in curing the breach or failure and the Company will reimburse such
third party directly for costs and expenses incurred.
(ff) Financial Advisory Agreement. On the Closing Date, the
Company shall execute a Financial Advisory Agreement with you for services,
which shall include without limitation (i) advising the Company in connection
with possible acquisitions (ii) facilitating
20
shareholder communications and relations, including the preparation of the
Company's annual report and (iii) advising and assisting the Company with
long-term financial planning, corporate reorganization, expansion and capital
structure and other financial matters. Such agreement shall have a term of
__________ years and provide for compensation of $______________ per month which
amount shall be prepaid in full on the Closing Date. The Financial Advisory
Agreement shall further provide that during the term of such agreement, in the
event that you (i) introduce, negotiate or arrange on the Company's behalf a
non-public equity financing or (ii) arrange on the Company's behalf a non-public
debt financing or (iii) arrange for the purchase or sale of assets, or for a
merger acquisition or joint venture for the Company, then the Company will
compensate you (based on the Transaction Value, as defined below) for such
services in an amount equal to:
5% on the first $1,000,000 of the Transaction Value;
4% on the amount from $1,000,001 to $2,000,000;
3% on the amount from $2,000,001 to $3,000,000;
2% on the amount from $3,000,001 to $4,000,000;
1% on the amount from $4,000,001 to $5,000,000;
1% on the amount in excess of $5,000,000.
"Transaction Value" shall mean the aggregate value of all
cash, securities and other property (i) paid to the Company, its affiliates or
their shareholders in connection with any transaction referred to above
involving any investment in or acquisition of the Company or any affiliates (or
the assets of either), (ii) paid by the Company or any affiliate in any such
transaction involving an investment in or acquisition of another party or its
equity holdings by the Company or any affiliate, or (iii) paid or contributed by
the Company or any affiliate and by the other party or parties in the event of
any such transaction involving a merger, consolidation, joint venture or similar
joint enterprise or undertaking. The value of any such securities (whether debt
or equity) or other property shall be the fair market value thereof as
determined by mutual agreement of the Company and the Underwriter or by an
independent appraiser jointly selected by the Company and the Underwriter.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date
and the Option Closing Date (to the extent not paid at the Closing Date) all
expenses and fees (other than fees of Underwriters' Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement, including, without limitation: (i) the fees and expenses
of accountants and counsel for the Company; (ii) all costs and expenses incurred
in connection with the preparation, duplication, printing, filing, delivery and
mailing (including the payment of postage with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the printing, mailing and delivery of this Agreement, the Selected
Dealer Agreements, Underwriter Questionnaires, Powers of Attorney and related
documents, including the cost of all copies thereof and of the Preliminary
Prospectuses and of the Prospectus and any amendments thereof or supplements
thereto supplied to the Underwriter in quantities as hereinabove stated; (iii)
the printing, engraving, issuance and delivery of the Securities including any
transfer or other taxes payable thereon; (iv) disbursements and fees of
Underwriters' Counsel in connection with the qualification of the Securities
under state or foreign securities or
21
"Blue Sky" laws and determination of the status of such securities under legal
investment laws, including the costs of printing and mailing the "Preliminary
Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal
Investments Survey," if any, which Underwriters' Counsel blue sky fees
(exclusive of filing fees and disbursements) shall be $1,000 for each state in
which application for registration or qualification is made up to an aggregate
of $15,000 for all states which Underwriters' Counsel files and inclusive of the
Blue Sky Memorandum described above; (v) fees and expenses of the transfer
agent; (vi) the fees payable to the NASD; (vii) the fees and expenses incurred
in connection with the listing of the Securities on the Nasdaq SmallCap Market
and any other fees for application and admission to a registered Stock Exchange
for which the Underwriter requires the Company to register its Securities;
(viii) fees and expenses for any tombstone advertisements reasonably requested
by the Representative; (ix) Closing Binders; and (x) Lucite cubes containing a
miniature definite Prospectus. All fees and expenses payable to the Underwriters
shall be payable at the Closing Date or Option Closing Date, as applicable.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 12, the
Company shall reimburse and indemnify the Underwriters for all of their
out-of-pocket expenses reasonably incurred in connection with the transactions
contemplated hereby.
(c) The Company and the Selling Shareholders further agree that,
in addition to the expenses payable pursuant to subsection (a) of this Section
5, it will pay to the Underwriter a non-accountable expense allowance equal to
____________ percent (____%) of the gross proceeds received by the Company and
the Selling Shareholders from the sale of the Securities, none of which has been
paid to date to the Underwriter. The Company and the Selling Shareholders will
pay the remainder of the non-accountable expense allowance on the Closing Date
by direct payment to third parties for fees and expenses including, but not
limited to, fees and expenses of Underwriters' Counsel and the balance by
deduction from the proceeds of the offering contemplated herein. In the event
the Underwriter elect to exercise the over-allotment option described in Section
2(b) hereof, the Company further agrees to pay to the Underwriter on the Option
Closing Date (by deduction from the proceeds of the offering) a non-accountable
expense allowance equal to ______________ (___%) of the gross proceeds received
by the Company from the sale of the Additional Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriter hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the Closing Date and
each Option Closing Date, if any, as if they had been made on and as of the
Closing Date or each Option Closing Date, as the case may be; the accuracy on
and as of the Closing Date or Option Closing Date, if any, of the statements of
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company on and as of the Closing Date and each Option Closing
Date, if any, of each of its covenants and obligations hereunder and to the
following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., New York City time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Underwriter, and,
at Closing Date and each Option Closing Date, if any, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated
22
by the Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Underwriter and Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Underwriter of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriters' opinion, is material or omits to state a
fact which, in the Underwriters' opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Underwriters' reasonable opinion, is material, or omits to
state a fact which, in the Underwriters' reasonable opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date and each Option Closing Date,
as the case may be, the Underwriter shall have received from Underwriters'
Counsel, such opinion or opinions with respect to the organization of the
Company the validity of the Securities, the Registration Statement, the
Prospectus and other related matters as the Underwriter reasonably may request
and such counsel shall have received such papers and information as they request
to enable them to pass upon such matters.
(d) At the Closing Date and the Option Closing Date the
Underwriter shall have received an opinion of Xxxxx, Xxxx & Xxxxx, L.L.P.,
counsel to the Company, dated the Closing Date, or Option Closing Date, as the
case may be, addressed to the Underwriter and in form and substance satisfactory
to Underwriters' Counsel, to the effect that:
(i) The Company: (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware 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) to the best knowledge of such counsel, the Company
is duly registered or qualified as a foreign corporation in all jurisdictions in
which by reason of maintaining an office in such jurisdiction or by owning or
leasing real property in such jurisdiction it is required to be so registered or
qualified except where failure to register or qualify does not have, singly or
in the aggregate, a Material Adverse Effect; and (C) to the best knowledge of
such counsel, the Company has not received any notice of proceedings relating to
the revocation or modification of any such registration or qualification.
(ii) The Registration Statement, each Preliminary Prospectus
that has been circulated and the Prospectus and any post-effective amendments or
supplements thereto (other
23
than the financial statements, schedules and other financial and statistical
data included therein, as to which no opinion need be rendered) comply as to
form in all material respects with the requirements of the Act and Regulations
and the conditions for use of a registration statement on Form SB-2 have been
satisfied by the Company. Such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants for the Company
and representatives of the Underwriter at which the contents of the Registration
Statement, the Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, on the basis of the foregoing, no facts
have come to the attention of such counsel which lead them to believe that
either the Registration Statement or any amendment thereto at the time such
Registration Statement or amendment became effective or the Prospectus as of the
date thereof contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or to make the statements
therein in light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no opinion with respect to
the financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus or with respect to
statements or omissions made therein in reliance upon information furnished in
writing to the Company on behalf of the Underwriter expressly for use in the
Registration Statement or the Prospectus).
(iii) To the best of such counsel's knowledge, the Company
has a duly authorized, issued and outstanding capitalization as set forth in the
Prospectus as of the date indicated therein, under "Capitalization." The Shares,
Redeemable Warrants, the Underwriters' Warrants, and the Warrant Shares conform
in all material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof, to counsel's best knowledge, are not
subject to personal liability by reason of being such holders, and none of such
securities were issued in violation of the preemptive rights of any holder of
any security of the Company.
(iv) The issuance of the Shares, Redeemable Warrants and the
Warrant Shares have been duly authorized and when issued and paid for in
accordance with this Agreement and the Warrant Agreement, respectively, will be
validly issued, fully paid and non-assessable securities of the Company. The
holders of the Securities when issued and paid for, will not be subject to
personal liability by reason of being such holders. To the best of such
counsel's knowledge, the Securities are not and will not be subject to the
preemptive or similar contractual rights of any shareholder of the Company. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. The certificates representing
the Shares and Redeemable Warrants are in due and proper form.
(v) Based solely on telephonic, verbal confirmation provided
to such counsel by the staff of the Commission, the Registration Statement and
all post-effective amendments, if any, have become effective under the Act, and,
if applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness of the Registration Statement has
been issued and to the best of such counsel's knowledge, no proceedings for that
purpose have been
24
instituted or are pending or threatened or contemplated under the Act; and any
required filing of the Prospectus pursuant to Rule 424(b) has been made.
(vi) To the best of such counsel's knowledge, (A) there are
no material contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the Registration Statement
and the Prospectus and filed as exhibits thereto, and (B) the descriptions in
the Registration Statement and the Prospectus and any supplement or amendment
thereto regarding such material contracts or other documents to which the
Company is a party or by which it is bound, are accurate in all material
respects and fairly represent the information required to be shown by Form SB-2
and the Rules and Regulations.
(vii) This Agreement, the Underwriters' Warrant, the Warrant
Agreement, and the Financial Advisory Agreement have each been duly and validly
authorized, executed and delivered by the Company, and assuming that it is a
valid and binding agreement of the Underwriter, so as the case may be,
constitutes a legal, valid and binding agreement of the Company enforceable as
against the Company in accordance with its respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to or
affecting enforcement of creditors rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law or pursuant to public policy).
(viii) Neither the execution or delivery by the Company of
this Agreement, the Underwriters' Warrant, and the Warrant Agreement, nor its
performance hereunder or thereunder, nor its consummation of the transactions
contemplated herein or therein, nor the conduct of its business as described in
the Registration Statement, the Prospectus, and any amendments or supplements
thereto, nor the issuance of the securities conflicts with or will conflict with
or results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a material default under, or
result in the creation or imposition of any material lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever upon any property or assets (tangible or intangible) of the
Company pursuant to the terms of (A) the Articles of Incorporation of the
Company, or (B) to the best knowledge of such counsel, and except to the extent
it would not have a Material Adverse Effect on the Company, any statute,
judgment, decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, having jurisdiction over the Company or any of its
respective activities or properties.
(ix) No consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other body, (other
than such as may be required under state securities laws, as to which no opinion
need be rendered) is required in connection with the issuance by the Company of
the Securities pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement, the Underwriters' Warrant, the Financial Advisory
Agreement and the Warrant Agreement by the Company, and the taking of any action
by the Company contemplated hereby or thereby, which has not been obtained.
25
(x) To the best of such counsel's knowledge, except as
described in the Prospectus, no person, corporation, trust, partnership,
association or other entity holding securities of the Company has the
contractual right to include and/or register any securities of the Company in
the Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration statement
for twelve months from the date hereof.
(xi) After the public offering, the Securities will be
eligible for listing on the Nasdaq SmallCap Market.
In rendering such opinion such counsel may rely, (A) as to matters
involving the application of corporate laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and in substance reasonably satisfactory to Underwriters'
Counsel) of other counsel reasonably acceptable to Underwriters' Counsel,
familiar with the applicable laws, and (B) as to matters of fact, to the extent
they deem proper, on certificates and written statements of responsible officers
of the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company; provided, that copies of
any such statements or certificates shall be delivered to Underwriters' Counsel
if requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
(e) At each Option Closing Date, if any, the Underwriter shall
have received the an opinion of counsel to the Company, each dated the Option
Closing Date, addressed to the Underwriter and in form and substance
satisfactory to Underwriters' Counsel confirming as of Option Closing Date the
statements made by such firm, in their opinion, delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the Option Closing
Date, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained.
(g) Prior to the Closing Date and each Option Closing Date, if
any: (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects or the business activities of the Company, whether or not in the
ordinary course of business, from the latest dates as of which such condition is
set forth in the Registration Statement and Prospectus; (ii) there shall have
been no transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) the Company shall not be in material default under
any provision of any instrument relating to any outstanding indebtedness; (iv)
no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
to its knowledge threatened against the Company, or affecting any of its
properties or
26
businesses before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; and (vi) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(h) At the Closing Date and each Option Closing Date, if any, the
Underwriter shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has complied with all
agreements and covenants and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied at or prior to such Closing
Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of each of such person's
knowledge, are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and neither the
Preliminary Prospectus nor any supplement thereto includes any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and except
as otherwise contemplated therein: (A) the Company has not incurred up to and
including the Closing Date or the Option Closing Date as the case may be, other
than in the ordinary course of its business, any material liabilities or
obligations, direct or contingent; (B) the Company has not paid or declared any
dividends or other distributions on its capital stock; (C) the Company has not
entered into any transactions not in the ordinary course of business; (D) there
has not been any change in the capital stock or any increase in long-term debt
or any increase in the short-term borrowings (other than any increase in the
short term borrowings in the ordinary course of business) of the Company; (E)
the Company has not sustained any material loss or damage to its property or
assets, whether or not insured; (F) there is no litigation which is pending or
threatened against the Company which is required to be set forth in an amended
or supplemented Prospectus which has not been set forth;
27
(v) Neither the Company nor any of its officers or affiliates
shall have taken, and the Company, its officers and affiliates will not take,
directly or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in the stabilization or manipulation of the price
of the Company's securities to facilitate the sale or resale of the Shares.
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the date of
such certificate.
(i) By the Closing Date, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Representative
shall have received a letter, dated such date, addressed to the Representative
in form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
to the Underwriter, from Price WaterhouseCoopers LLP, independent certified
public accountants:
(i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Act and the applicable
Rules and Regulations;
(ii) stating that it is their opinion that the consolidated
financial statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations
thereunder and that the Underwriter may rely upon the opinion of Price
WaterhouseCoopers, LLP, independent certified public accountants with respect to
the financial statements and supporting schedules included in the Registration
Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the date of the
latest available unaudited interim consolidated financial statements), a reading
of the latest available minutes of the stockholders and board of directors and
the various committees of the boards of directors of the Company, consultations
with officers and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A) the unaudited
consolidated financial statements of the Company included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
consolidated financial statements of the Company included in the Registration
Statement, or (B) at a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there has been any change in the
capital stock, or any increase in total borrowings of the Company, or any
decrease in the stockholders' equity or working capital of the Company as
compared with amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease, and (C) during the period from
28
____________, 1998 to a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there was any decrease in revenue,
net earnings or increase in net income or earnings per common share of the
Company, in each case as compared with the corresponding period of the prior
year other than as set forth in or contemplated by the Registration Statement,
or, if there was any such decrease, setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar amounts,
numbers of Securities, percentages of revenue and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures did not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement; and
(v) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonably request.
(k) At the Closing Date and each Option Closing Date, the
Underwriter shall have received from Price WaterhouseCoopers LLP, independent
certified public accountants, a letter, dated as of the Closing Date, or Option
Closing Date, as the case may be, to the effect that they reaffirm that
statements made in the letter furnished pursuant to Subsection (j) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to the Closing Date and, if the Company has elected to rely
on Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iii) of subsection (j) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Underwriter and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (iii).
(l) On each of the Closing Date and the Option Closing Date, if
any, there shall have been duly tendered to the Underwriter for the several
Underwriters' accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriter pursuant to subsection (e) of Section
4 hereof shall have been issued on either the Closing Date or the Option Closing
Date, if any, and no proceedings for that purpose shall have been instituted or
to its knowledge or that of the Company shall be contemplated.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
29
7. Indemnification.
(a) The Company (and the Selling Shareholders, but such indemnity
shall be limited to the proceeds received from the sale of his shares, if any,
as a portion of the Additional Securities) agrees to indemnify and hold harmless
each of the Underwriters, including specifically any person who may be
substituted for an Underwriter as provided in Section 11 hereof and each person,
if any, who controls any Underwriter ("controlling person") within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and
all losses, claims, damages, expenses or liabilities, joint or several (and
actions in respect thereof), whatsoever (including but not limited to any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever), as such are incurred, to which such Underwriter or such controlling
person may become subject under the Act, the Exchange Act or any other federal
or state statutory laws or regulations at common law or otherwise or under the
laws of foreign countries arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus (except that the indemnification contained in this paragraph with
respect to any preliminary prospectus shall not inure to the benefit of the
Underwriter or to the benefit of any person controlling the Underwriter on
account of any loss, claim, damage, liability or expense arising from the sale
of the Securities by the Underwriter to any person if a copy of the Prospectus,
as amended or supplemented, shall not have been delivered or sent to such person
within the time required by the Act, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus, as amended and
supplemented, and such correction would have eliminated the loss, claim, damage,
liability or expense), the Registration Statement or the Prospectus (as from
time to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Underwriters'
Warrant; or (iii) in any application or other document or written communication
(in this Section 8 collectively called "application") executed by the Company or
based upon written information furnished by the Company in any jurisdiction in
order to qualify the Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, Nasdaq Stock Market,
Inc. or any other securities exchange; or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), unless such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, in any
post-effective amendment, new registration statement or prospectus or in any
application, as the case may be, or (iv) any failure of the Company to comply
with any provision of this Underwriting Agreement resulting in a claim or loss
to the Underwriters.
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration
30
Statement, the Selling Shareholders and each other person, if any, who controls
the Company within the meaning of Section 20 of the Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
the Underwriters but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto in any post-effective amendment, new
registration statement or prospectus, or in any blue sky application or any
other such application made in reliance upon, and in strict conformity with,
written information furnished to the Company with respect to any Underwriter by
such Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any post-effective amendment, new registration statement or
prospectus, or in any such application, provided that such written information
or omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto, in any post-effective amendment, new registration statement or
prospectus or in any such application, provided, further, that the liability of
each Underwriter to the Company shall be limited to the amount of the net
proceeds of the Offering received by the Company. The Company acknowledges that
the statements with respect to the public offering of the Securities set forth
under the heading "Underwriting" and the stabilization legend and the last
paragraph of the cover page in the Prospectus have been furnished by the
Underwriters expressly for use therein and any information furnished by or on
behalf of the Underwriter filed in any jurisdiction in order to qualify the
Securities under State Securities laws or filed with the Commission, the NASD or
any securities exchange constitute the only information furnished in writing by
or on behalf of the Underwriter for inclusion in the Prospectus and the
Underwriter hereby confirms that such statements and information are true and
correct.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise avoided). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party or
parties of the commencement thereof, the indemnifying party or parties will be
entitled to participate therein, and to the extent 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 with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the foregoing
the indemnified party or parties shall have the right to employ its or their own
counsel in any such case but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnifying party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties),
31
in any of which events such fees and expenses of one additional counsel shall be
borne by the indemnifying parties. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party in lieu of indemnifying such
indemnified party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand from the offering of the Securities or (B) if the allocation provided
by clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (A)
above but also the relative fault of each of the contributing parties, on the
one hand, and the party to be indemnified on the other hand in connection with
the statements or omissions that resulted in such losses, claims, damages,
expenses or liabilities, as well as any other relevant equitable considerations.
In any case where the Company or the Selling Shareholders is the contributing
party and the Underwriters are the indemnified party the relative benefits
received by the Company or the Selling Shareholders on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses) bear to the total underwriting discounts and commissions received by
the Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company 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 amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d), the Underwriters shall not be required to contribute any amount
in excess of the amount of the net proceeds of the Offering received by the
Company. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person, if any, who controls the Company within the meaning of
the Act, each officer of the Company who has signed the Registration Statement,
and each director of the Company shall have the same rights to contribution as
the
32
Company, subject in each case to this subparagraph (d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in Section 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, or any controlling person, including the Selling Shareholders, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters.
9. Effective Date. This Agreement shall become effective: (i) upon the
execution and delivery hereof by the parties hereto; or (ii) if, at any time
this Agreement is executed and delivered, it is necessary for the Registration
Statement or a post-effective amendment thereto to be declared effective before
the offering of the Shares may commence, when notification of the effectiveness
of the Registration Statement or such post-effective amendment has been released
by the Commission and communicated to the Company and Representative. Until such
time as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company and the Selling Shareholders.
10. Termination.
(a) The Underwriters shall have the right to terminate this
Agreement (i) if any calamitous domestic or international event or act or
occurrence has materially disrupted, or in the Underwriters' opinion will in the
immediate future materially disrupt general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market, or in the over-the-counter market shall
have been suspended or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required on
the over-the-counter market by the NASD or by order of the Commission or any
other government authority having jurisdiction; or (iii) if the United States
shall have become involved in a war or major hostilities; or (iv) if a banking
moratorium has been declared by a New York State or federal authority; or (v) if
a moratorium in foreign exchange trading has been declared; or (vi) if the
Company shall have sustained a material adverse loss, whether or not insured, by
reason of fire, flood, accident or other calamity that materially impairs the
investment quality of the Securities; or (vii) if there shall have been such
material adverse change in the conditions or prospects of the Company, involving
a change not contemplated by the Registration Statement.
33
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 9 and 10 hereof), and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Underwriters shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Underwriters shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the total number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters; or
(b) if the number of Defaulted Securities exceeds 10% of the total
number of Firm Securities, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Underwriters 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.
12. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Underwriters option, by notice from the Underwriters to the Company,
terminate the Underwriters' several obligations to purchase Securities from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 5 and Section 7 hereof. No action taken
pursuant to this Section shall relieve the Company from liability, if any, in
respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be
34
directed to the Representative at Argent Securities, Inc., 0000 Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, with a copy to Xxxxxx X. Xxxxxxxxx, Esq., 000
Xxxxxxxxx Xxxxxx, XX, Xxxxx 0000, Xxxxxxx Xxxxxxx 00000. Notices to the Company
shall be directed to the Company at the address on the signature page.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, and their respective
heirs and legal representatives and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provisions herein contained. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
OUTLOOK SPORTS TECHNOLOGY, INC.
Suite 000
0000 Xxxxx Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
By:
----------------------------------
Xxx X. Xxxxxxx XX, President
Confirmed and accepted as of the date first above
written on behalf of themselves and the other
several underwriters named in Schedule I hereto:
Argent Securities, Inc., as
Representative of the Several Underwriters
By:
---------------------------------
Name: X. Xxxxxxxx Xxxxxx
Title: Chairman
35
SCHEDULE I
Underwriter Number of Securities
Argent Securities, Inc. __________Shares of Class A Common Stock
__________Redeemable Class A Common
Stock Purchase Warrants
36
SCHEDULE II
Warrant Agent: American Stock Transfer and Trust Company
37
SCHEDULE III
SELLING SHAREHOLDERS
Xxxx X. Xxxxxx
Xxx X. Xxxxxxx XX
Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxx
Xxxx X. Xxxxx
Xxxxx X. Xxxxx
Xxxxx X. Xxxxxx
38
