[Form of Underwriting Agreement - Subject to Additional Review]
2,000,000 Shares of Common Stock
URBAN COOL NETWORK, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
, 2000
SECURITY CAPITAL TRADING, INC.
As Representative of the
several Underwriters named
in Schedule A to Exhibit A
annexed hereto
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Urban Cool Network, Inc., a Delaware corporation (the "Company"), confirms
its agreement with Security Capital Trading, Inc. ("Security Capital") and each
of the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom Security Capital is acting as
Representative (in such capacity, Security Capital shall hereinafter be referred
to as "you" or the "Representative"), with respect to the sale by the Company
and the purchase by the Underwriters, acting severally and not jointly, of the
respective number of shares ("Shares") of the Company's common stock, $0.01 par
value per share ("Common Stock"). The aggregate 2,000,000 shares of Common Stock
are hereinafter referred to as the "Firm Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and not
jointly, up to an additional 300,000 shares of Common Stock for the purpose of
covering over-allotments, if any. Such 300,000 shares of Common Stock are
hereinafter collectively referred to as the "Option Securities." The Company
also proposes to issue and sell to you warrants (the "Representative's
Warrants") pursuant to the Representative's Warrant Agreement (the
"Representative's Warrant Agreement") for the purchase of an additional 200,000
shares of Common Stock. The shares of Common Stock issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the "Representative's
Securities." The Firm Securities, the Option Securities, the
Representative's Warrants and the Representative's Securities (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
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 (as hereinafter defined) and each Option
Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form S-1 (No. 333-_____), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Firm Securities, the Option Securities and the Representative's Securities under
the Securities Act of 1933, as amended (the "Act"), which registration statement
and amendment or amendments have been prepared by the Company in conformity with
the requirements of the Act, and the rules and regulations (the "Regulations")
of the Commission under the Act. The Company will promptly file a further
amendment to said registration statement in the form heretofore delivered to the
Underwriters and will not file any other amendment thereto to which the
Underwriters shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein (including, but not limited to those documents or
information incorporated by reference therein) and all information deemed to be
a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement", and the form
of prospectus in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Rules and Regulations" mean the rules and regulations adopted by the
Commission under either the Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as applicable.
(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 of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or threatened. Each of the Preliminary Prospectus, the Registration Statement
and Prospectus at the time of filing thereof conformed with the requirements of
the Act and the Rules and Regulations, and none of the Preliminary Prospectus,
the Registration Statement or Prospectus at the time of filing thereof contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made 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 or any amendment thereof or supplement thereto. The Company has filed
all reports, forms or other documents required to be filed under the Act or the
Exchange Act and the respective Rules and Regulations thereunder, and all such
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reports, forms or other documents, when so filed or as subsequently amended,
complied in all material respects with the Act and the Exchange Act and the
respective risks and regulations thereunder or any amendment thereof or
supplement thereto.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date (as defined herein) and each Option
Closing Date (as defined herein), if any, 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 statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and will conform to the requirements
of the Act and the Rules and Regulations; neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in strict conformity with information
furnished to the Company in writing by or on behalf of any Underwriter expressly
for use in the Preliminary Prospectus, Registration Statement or Prospectus or
any amendment thereof or supplement thereto.
(d) Each of the Company, a Delaware corporation, and the Company's
majority-owned subsidiary, e-commerce Solutions, Inc., a Delaware corporation
(such subsidiary is hereinafter referred to as the "Subsidiary"), has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its organization. Except as set forth in the
Prospectus, neither the Company nor the Subsidiary owns an interest in any
corporation, partnership, trust, joint venture or other business entity. Each of
the Company and the Subsidiary is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing. The Company owns, directly or indirectly, sixty six
and two-thirds percent (66 2/3%) of the outstanding capital stock or other
ownership interests of the Subsidiary, and all of such shares or other ownership
interests have been validly issued, are fully paid and non-assessable, were not
issued in violation of any preemptive rights and are owned free and clear of any
liens, charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever. Each of the Company and
the Subsidiary has all requisite power and authority (corporate and other), and
has obtained any and all necessary authorizations, 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; each of the Company and the
Subsidiary is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all applicable federal, state, local and foreign laws, rules and
regulations; and neither the Company nor the Subsidiary has 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, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company or the Subsidiary.
The disclosures in the Registration Statement concerning the effects of federal,
state, local and foreign laws, rules
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and regulations on the Company's and the Subsidiary's business as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading in light of the circumstances
under which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "CAPITALIZATION" and
"DESCRIPTION OF SECURITIES" and will have the adjusted capitalization set forth
therein on the Closing Date and each Option Closing Date, if any, based upon the
assumptions set forth therein, and neither the Company nor the Subsidiary is a
party to or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement, the Representative's Warrant Agreement
and as described in the Prospectus. The Securities and all other securities
issued or issuable by the Company conform or, when issued and paid for, will
conform, in all 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 Subsidiary have been duly authorized and validly issued
and are fully paid and non-assessable and 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 Subsidiary or similar contractual rights granted by the Company or
Subsidiary. The Securities 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, will be
validly issued, fully paid and non-assessable and will conform to the
description 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 has been
duly and validly taken; and the certificates representing the Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof and the Representative's Warrant Agreement of the Securities to be sold
by the Company hereunder, the Underwriters or the Representative, as the case
may be, 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 and the Subsidiary, together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present the
financial position, income, changes in cash flow, changes in stockholders'
equity and the results of operations of the Company and the Subsidiary at the
respective dates and for the respective periods to which they apply and the pro
forma and the as adjusted financial information included in the Registration
Statement and Prospectus presents fairly on a basis consistent with that of the
audited financial statements included therein, what the Company's pro forma and
as adjusted capitalization would have been for the respective periods and as of
the respective dates to which they apply after giving effect to the adjustments
described therein. Such financial statements have been prepared in conformity
with generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved and such financial
statements as are audited have been examined by Xxxxxxx X. Xxxxxx & Co., LLP,
who are independent certified public accountants within the meaning of the Act
and the Rules and Regulations, as indicated in their respective reports filed
therewith. There has been no adverse change or development involving a
prospective change in the
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condition, financial or otherwise, or in the earnings, position, prospects,
value, operation, properties, business, or results of operations of the Company
or the Subsidiary, whether or not arising in the ordinary course of business,
since the date of the financial statements included in the Registration
Statement and the Prospectus and the outstanding debt, the property, both
tangible and intangible, and the business of the Company and the Subsidiary,
conform in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information (including,
without limitation, any pro forma financial information) set forth in the
Prospectus under the headings "Summary Financial Data," "Selected Financial
Data," "Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Plan of Operation," fairly present, on the basis stated in the
Prospectus, the information set forth therein, and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus; and, in the case of pro forma financial information,
if any, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein. The amounts shown as accrued for current and
deferred income and other taxes in such financial statements are sufficient for
the payment of all accrued and unpaid domestic and foreign income taxes,
interest, penalties, assessments or deficiencies applicable to the Company and
the Subsidiary, whether disputed or not, for the applicable period then ended
and periods prior thereto; adequate allowance for doubtful accounts has been
provided for unindemnified losses due to the operations of the Company and the
Subsidiary; and the statements of income do not contain any items of special or
nonrecurring income not earned in the ordinary course of business, except as
specified in the notes thereto.
(g) Each of the Company and the Subsidiary (i) has paid all federal,
state, local and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and amounts payable under Chapter 21 through 24 of
the Internal Revenue Code of 1986, as amended (the "Code"), and has furnished
all information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or on
behalf of the Underwriters in connection with (i) the issuance by the Company of
the Securities, (ii) the purchase by the Underwriters of the Firm Securities and
the Option Securities from the Company and the purchase by the Representative of
the Representative's Warrants from the Company, (iii) the consummation by the
Company of any of its obligations under this Agreement or the Representative's
Warrant Agreement, or (iv) resales of the Firm Securities and the Option
Securities in connection with the distribution contemplated hereby.
(i) Each of the Company and the Subsidiary maintains insurance policies,
including, but not limited to, general liability, and property insurance, which
insures each of the Company, the Subsidiary and their respective employees,
against such losses and risks generally insured against by comparable
businesses. Neither the Company nor the Subsidiary (A) has failed to give notice
or present any insurance claim with respect to any matter, including but not
limited to the Company's or Subsidiary's business, property or employees, under
any insurance policy or surety bond in a due and timely manner, (B) has any
disputes or claims against any underwriter of such insurance policies or surety
bonds or has failed to pay any premiums due and payable thereunder, or (C) has
failed to comply with all conditions contained in such insurance
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policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company or the Subsidiary.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the Company
or the Subsidiary which (i) questions the validity of the capital stock of the
Company, this Agreement or the Representative's Warrant Agreement, or of any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representative's Warrant Agreement, (ii) 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 material respects), or (iii) might materially and adversely
affect the condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties, business or
results of operations of the Company or the Subsidiary.
(k) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Securities, enter into this Agreement and the
Representative's Warrant Agreement and to consummate the transactions provided
for in this Agreement and the Representative's Warrant Agreement; and this
Agreement and the Representative's Warrant Agreement have each been duly and
properly authorized, executed and delivered by the Company. Each of this
Agreement and the Representative's Warrant Agreement constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, and none of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Representative's
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or 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 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 or the Subsidiary pursuant to
the terms of (i) the Certificate of Incorporation or Bylaws of the Company or
the Certificate of Incorporation or Bylaws of the Subsidiary, (ii) any license,
contract, collective bargaining agreement, indenture, mortgage, deed of trust,
lease, voting trust agreement, stockholders agreement, note, loan or credit
agreement or other instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company or the Subsidiary is a
party or by which the Company or the Subsidiary is or may be bound or to which
any of its or their properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (iii) any statute, judgment, decree, order,
rule or regulation applicable to the Company or the Subsidiary 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 the Subsidiary or any of its or their
respective activities or properties.
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(l) No consent, approval, authorization or order of, and no filing with,
any arbitrator, court, regulatory body, administrative agency, government agency
or other body, domestic or foreign, is required for the issuance of the
Securities pursuant to the Prospectus and the Registration Statement, this
Agreement and the Representative's Warrant Agreement, the performance of this
Agreement and the Representative's Warrant Agreement and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Securities, except such as have been or may
be obtained under the Act or may be required under state securities or Blue Sky
laws and the rules of the National Association of Securities Dealers, Inc. (the
"NASD") in connection with the Underwriters' purchase and distribution of the
Firm Securities and the Option Securities, and the Representative's Warrants to
be sold by the Company hereunder.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company or the Subsidiary is a party or by
which it or they may be bound or to which its or their respective assets,
properties or business may be subject have been duly and validly authorized,
executed and delivered by the Company or the Subsidiary, as the case may be, and
constitute the legal, valid and binding agreements of the Company or the
Subsidiary, as the case may be, enforceable against it in accordance with its
terms. The descriptions in the Registration Statement of agreements, contracts
and other documents are accurate and fairly present the information required to
be shown with respect thereto by Form S-1, and there are no agreements,
contracts or other documents which are required by the Act 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, neither the Company nor the
Subsidiary has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into any
transaction other than in the ordinary course of business, or (iii) declared or
paid any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital stock, or
any change in the debt (long or short term) or liabilities or material adverse
change in or affecting the condition, financial or otherwise, earnings,
prospects, stockholders' equity, value, operations, properties, business or
results of operations of the Company or the Subsidiary.
(o) No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, collective bargaining agreement,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, partnership agreement, note, loan or
credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company or the Subsidiary is a party or by which the
Company or the Subsidiary may be bound or to which the property or assets
(tangible or intangible) of the Company or the Subsidiary is subject or
affected.
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(p) Each of the Company and the Subsidiary has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company or the Subsidiary by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal, state,
local or foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company or the Subsidiary or any lockout, strike,
picketing, boycott, dispute, slowdown or stoppage pending or threatened against
or involving the Company or the Subsidiary, or any predecessor entity, and none
has ever occurred. No representation question exists respecting the employees of
the Company or the Subsidiary, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or the
Subsidiary. No grievance or arbitration proceeding is pending under any expired
or existing collective bargaining agreements of the Company or the Subsidiary.
No labor dispute with the employees of the Company or the Subsidiary exists, or,
is imminent.
(q) Neither the Company nor the Subsidiary maintains, sponsors or
contributes to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan," or a "multiemployer plan" as such
terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). Neither the Company nor the Subsidiary maintains or contributes, now or
at any time previously, to a defined benefit plan, as defined in Section 3(35)
of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code, which could subject the Company or the Subsidiary to any tax
penalty on prohibited transactions and which has not adequately been corrected.
Neither the Company nor the Subsidiary has ever completely or partially
withdrawn from a "multiemployer plan."
(r) Neither the Company, the Subsidiary nor any of its or their respective
employees, directors, stockholders, partners, or affiliates (within the meaning
of the Rules and Regulations) of any of the foregoing has taken or will take,
directly or indirectly, any action designed to or which has constituted or which
might 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.
(s) Except as otherwise disclosed in the Prospectus, none of the patents,
patent applications, trademarks, service marks, trade names and copyrights, and
licenses and rights to the foregoing presently owned or held by the Company or
the Subsidiary, are in dispute or are in any conflict with the right of any
other person or entity. Each of the Company and the Subsidiary (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, patent applications, trademarks, service marks,
service names, 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) is not
obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or
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licensee of, or other claimant to, any patent, patent application, trademark,
service xxxx, service names, 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.
There is no action, suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental or other proceeding, domestic or foreign, pending or
threatened (or circumstances that may give rise to the same) which challenges
the exclusive rights of the Company or the Subsidiary with respect to any
trademarks, trade names, service marks, service names, copyrights, patents,
patent applications or licenses or rights to the foregoing used in the conduct
of its business, or which challenges the right of the Company or the Subsidiary
to use any technology presently used or contemplated to be used in the conduct
of business.
(t) Each of the Company and the Subsidiary owns and has the unrestricted
right to use all trade secrets, 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")
that are material to the development, manufacture, operation and sale of all
products and services sold or proposed to be sold by the Company or the
Subsidiary, free and clear of and without violating any right, lien, or claim of
others, including without limitation, former employers of its employees.
(u) Each of the Company and the Subsidiary has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be 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 not yet due and payable.
(v) Xxxxxxx X. Xxxxxx & Company, LLP., whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(w) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors, stockholders and holders of securities exchangeable or exercisable
for or convertible into shares of Common Stock has agreed not to, directly or
indirectly, issue, offer, offer to sell, sell, grant any option for the sale or
purchase of, assign, transfer, pledge, hypothecate or otherwise encumber or
dispose of any shares of Common Stock or securities convertible into,
exercisable or exchangeable for or evidencing any right to purchase or subscribe
for any shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for a
period of not less than thirteen (13) months following the effective date of the
Registration Statement (the "Lock-Up Period") without the prior written consent
of the Representative and the Company. During the thirteen (13) month period
commencing on the effective date of the Registration Statement, the Company
shall not, without the prior written consent of the Representative, sell,
contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any securities or any options,
rights or warrants with respect to any securities. The Company will cause the
Transfer Agent (as
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hereinafter defined) to xxxx an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers.
(x) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company, or any of its officers, directors, stockholders,
partners, employees or affiliates, that may affect the Underwriters'
compensation, as determined by the NASD.
(y) The Common Stock has been approved for listing on the American Stock
Exchange ("AMEX").
(z) Neither the Company, the Subsidiary nor any of its or their respective
officers, employees, agents or any other person acting on behalf of the Company
or the Subsidiary 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 the Subsidiary (or assist the Company or the Subsidiary in
connection with any actual or proposed transaction) which (a) might subject the
Company or the Subsidiary, 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 material adverse effect
on the assets, business or operations of the Company or the Subsidiary, or (c)
if not continued in the future, might adversely affect the assets, business,
condition, financial or otherwise, earnings, position, properties, value,
operations or prospects of the Company or the Subsidiary. The Company's internal
accounting controls are sufficient to cause the Company to comply with the
Foreign Corrupt Practices Act of 1977, as amended.
(aa) Except as set forth in the Prospectus, no officer, director,
stockholder or partner of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities 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 the Subsidiary, or (B) purchases from or sells or
furnishes to the Company or the Subsidiary any goods or services, or (ii) a
beneficial interest in any contract or agreement to which the Company or the
Subsidiary is a party or by which it may be bound or affected. Except as set
forth in the Prospectus under "Certain Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company or the Subsidiary, and any officer, director, or 5% or greater
securityholder of the Company, or any partner, affiliate or associate of any of
the foregoing persons or entities.
10
(bb) Any certificate signed by any officer of the Company, and delivered
to the Underwriters or to Underwriters' Counsel (as defined herein) shall be
deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
(cc) The minute books of each of the Company and the Subsidiary have been
made available to the Underwriters and contain a complete summary of all
meetings and actions of the directors (including committees thereof) and
stockholders of the Company and the Subsidiary, since the time of their
respective incorporation, and reflect all transactions referred to in such
minutes accurately in all material respects.
(dd) Except and to the extent described in the Prospectus, no holders of
any securities of the Company or of any options, warrants or other convertible
or exchangeable 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 or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ee) The Company has as of the effective date of the Registration
Statement entered into an employment agreement with each of Xxxxx X. Xxxxx, III,
Xxxxx Xxxxxx, Xxxxxxxx X. Xxxxx and Xxxxxxx Xxxxxxx in the form filed as
Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, to the Registration Statement.
(ff) The Company confirms as of the date hereof that it is in compliance
with all provisions of Section 1 of Laws of Florida, Chapter 92-198, An Act
Relating to Disclosure of Doing Business with Cuba, and the Company further
agrees that if it or any affiliate commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's,
or any affiliate's, business with Cuba or with any person or affiliate located
in Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to the
Department.
(gg) Neither the Company nor the Subsidiary is, and upon the issuance and
sale of the Securities as herein contemplated and the application of the net
proceeds therefrom as described in the Prospectus under the caption "Use of
Proceeds" will be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(hh) Each of the Company and the Subsidiary maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparations of financial statements in conformity 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
authorizations; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
11
(ii) The computer systems, technology, products and software owned or
licensed by each of the Company and the Subsidiary, and which each of the
Company and the Subsidiary proposes to acquire or license, in order to conduct
its business can accurately (i) process, record, store, calculate and present
calendrical data including, but not limited to, calculating, comparing and
sequencing from, into and between dates in the twentieth century (through the
year 1999), the year 2000 and the twenty-first century, including leap year
calculations, (ii) create, calculate, recognize, accept display, store,
retrieve, access, compare, sort, manipulate, or process any information
dependent on or relating to dates on or after December 31, 1999 or otherwise
provide use of dates or date dependent or date related data, including, but not
limited to, century recognition, day-of-the-week recognition, leap years, date
values and interfaces of date funtionalities, without loss of accuracy,
functionality, data integrity and performance and (iii) respond to two-digit
input in a way that resolves ambiguity as to century in a disclosed, defined and
pre-determined manner (collectively, "Year 2000 Compliant"). Each of the Company
and the Subsidiary has taken all reasonable steps to ensure that its products
and services will lose no funtionality with respect to the introduction of
records containing dates falling on or after January 1, 2000. Neither the
Company nor the Subsidiary has specific information that would cause it to
believe that any of its material vendors, suppliers, licensors or collaborators
is not similarly situated. The year disclosure in the Registration Statement is
accurate and complies in all material respects with the rules and regulations of
the Act.
2. Purchase, Sale and Delivery of the Securities.
(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 agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$_______ [93% of the initial public offering price per share of Common Stock]
per share of Common Stock, that number of Firm Securities set forth in Schedule
A opposite the name of such Underwriter, subject to such adjustment as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional number of Firm Securities
which such Underwriter 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 hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 300,000 shares of Common Stock at a price of $_________ per share of
Common Stock [93% of the initial public offering price per share of Common
Stock]. The option granted hereby will expire forty-five (45) days after (i) the
date the Registration Statement becomes effective, if the Company has elected
not to rely on Rule 430A under the Rules and Regulations, or (ii) the date of
this Agreement if the Company has elected to rely upon Rule 430A under the Rules
and Regulations, 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 Firm Securities upon notice by the
Representative to the Company setting forth the number of Option Securities as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for any such Option Securities. Any such time
and date of delivery (an "Option Closing Date") shall be determined
12
by the Representative, but shall not be later than three (3) full business days
after the exercise of said option, nor in any event prior to the Closing Date,
as hereinafter defined, unless otherwise agreed upon by the Representative and
the Company. Nothing herein contained shall obligate the Underwriters to make
any over-allotments. No Option 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 the Representative at 000
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place as
shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on ________, 2000 or at
such other time and date as shall be agreed upon by the Representative and the
Company, but not less than three (3) nor more than five (5) full business days
after the effective date of the Registration Statement (such time and date of
payment and delivery being herein called the "Closing Date"). In addition, in
the event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned office of the
Representative or at such other place 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 Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters, severally and not jointly, of
the purchase price for the Firm Securities and the Option Securities, if any, to
the order of the Company for the Firm Securities and the Option Securities, if
any, by New York Clearing House funds. In the event such option is exercised,
each of the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Securities then being purchased which
the number of Firm Securities set forth in Schedule A hereto opposite the name
of such Underwriter bears to the total number of Firm Securities, subject in
each case to such adjustments as the Representative in its discretion shall make
to eliminate any sales or purchases of fractional shares. Certificates for the
Firm Securities and the Option 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 the Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Firm
Securities and the Option Securities, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date or the relevant Option Closing Date,
as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative Representative's Warrants at a purchase price of $.0001 per
warrant, which Representative's Warrants shall entitle the holders thereof to
purchase an aggregate of 200,000 shares of Common Stock. The Representative's
Warrants shall be exercisable for a period of four (4) years commencing one (1)
year from the effective date of the Registration Statement at a price equaling
one hundred twenty percent (120%) of the respective initial public offering
price of the Shares. The Representative's Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit ___ to the
Registration Statement. Payment for the Representative's Warrants shall be made
on the Closing Date.
13
3. Public Offering of the Shares. As soon after the Registration Statement
becomes effective as the Representative deems advisable, the Underwriters shall
make a public offering of the Firm Securities and such Option Securities as the
Representative may determine (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 Representative may from time to time increase or decrease the public
offering price after distribution of the Securities has been completed to such
extent as the Representative, in its sole discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants and Agreements 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 Act or Exchange
Act before termination of the offering of the Securities by the Underwriters of
which the Representative shall not previously have been advised and furnished
with a copy, or to which the Representative shall have objected or 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 Representative and confirm the 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 of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any 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 shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) 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 Representative, 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.
14
(d) The Company will give the Representative 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),
and will furnish the Representative 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
Representative or Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP ("Underwriters' Counsel")
shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees 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 a 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 a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
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 Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
(g) As soon as practicable, but in any event not later than forty-five
(45) days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (ninety (90) days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the
15
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
Representative, an earnings statement which will be in the 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 twelve (12)
consecutive months after the effective date of the Registration Statement.
(h) During a period of five (5) years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in the
form furnished to the Company's stockholders and certified by the
Company's principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of independent certified
public accountants;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(iv) 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;
(v) every press release and every material news item or article of
interest to the financial community in respect of the Company, or its
affairs, which was released or prepared by or on behalf of the Company;
and
(vi) any additional information of a public nature concerning the
Company, its subsidiaries (and any future subsidiary) or its businesses
which the Representative may request.
During such seven-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiary(ies) are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent ("Transfer Agent") and, if
necessary under the jurisdiction of incorporation of the Company, a Registrar
(which may be the same entity as the Transfer Agent) for its Common Stock.
16
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative 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 Representative may request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Representative with true original copies of duly
executed, legally binding and enforceable agreements pursuant to which, for a
period of thirteen (13) months from the effective date of the Registration
Statement, each of the Company's officers, directors, stockholders and holders
of securities exchangeable or exercisable for or convertible into shares of
Common Stock agrees that it or he or she will not, directly or indirectly,
issue, offer to sell, sell, grant an option for the sale or purchase of, assign,
transfer, pledge, hypothecate or otherwise encumber or dispose of any shares of
Common Stock or securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior consent of the
Representatives (collectively, the "Lock-up Agreements"). During the 13 month
period commencing on the effective date of the Registration Statement, the
Company shall not, without the prior written consent of the Representative,
sell, contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any securities or any options,
rights or warrants with respect to any securities. On or before the Closing
Date, the Company shall deliver instructions to the Transfer Agent authorizing
it to place appropriate legends on the certificates representing the securities
subject to the Lock-up Agreements and to place appropriate stop transfer orders
on the Company's ledgers.
(l) Neither the Company, the Subsidiary, nor any of its or their
respective officers, directors, stockholders, nor any of its or their respective
affiliates (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.
(m) Each of the Company and the Subsidiary shall apply the net proceeds
from the sale of the Securities in the manner, and subject to the conditions,
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.
(n) Each of the Company and the Subsidiary shall timely file all such
reports, forms or other documents as may be required (including, but not limited
to, a Form SR as may be required pursuant to Rule 463 under the Act) 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.
17
(o) The Company shall furnish to the Representative 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 unaudited interim financial statements
of the Company and the Subsidiary (which in no event shall be as of a date more
than thirty (30) days prior to the date of the Registration Statement) which
have been read by the Company's independent public accountants, as stated in
their letters to be furnished pursuant to Sections 6(j) hereof.
(p) The Company shall cause the Common Stock to be quoted on AMEX and, for
a period of seven (7) years from the date hereof, use its best efforts to
maintain the AMEX quotation of the Common Stock to the extent outstanding.
(q) For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock, (ii) the list of
holders of all of the Company's securities and (iii) a Blue Sky "Trading Survey"
for secondary sales of the Company's securities prepared by counsel to the
Company.
(r) As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than thirty (30) days after
the effective date of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions and Xxxxx'x OTC Manual and to continue such inclusion for a period
of not less than five (5) years.
(s) The Company hereby agrees that it will not, for a period of twelve
(12) months from the effective date of the Registration Statement, adopt,
propose to adopt or otherwise permit to exist any employee, officer, director,
consultant or compensation plan or similar arrangement permitting (i) the grant,
issue, sale or entry into any agreement to grant, issue or sell any option,
warrant or other contract right (x) at an exercise price that is less than the
greater of the public offering price of the Shares set forth herein and the fair
market value on the date of grant or sale or (y) to any of its executive
officers or directors or to any holder of 5% or more the Common Stock; (ii) the
payment for such securities with any form of consideration other than cash; or
(iii) the existence of stock appreciation rights, phantom options or similar
arrangements.
(t) Until the completion of the distribution of the Securities, the
Company shall not, without the prior written consent of the Representative and
Underwriters' Counsel, 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.
(u) For a period of twenty-four (24) months after the effective date of
the Registration Statement, the Company shall not restate, amend or alter any
term of any written employment, consulting or similar agreement entered into
between the Company and any officer,
18
director or key employee as of the effective date of the Registration Statement
in a manner which is more favorable to such officer, director or key employee,
without the prior written consent of the Representative.
(v) For a period equal to the lesser of (i) five (5) years from the date
hereof, and (ii) the sale to the public of the Representative's Securities, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Form S-1 (or other appropriate form) for the registration under
the Act of the Representative's Securities.
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 and the Representative's Warrant 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 (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage, overnight
delivery or courier charges with respect thereto) of the Registration Statement
and the Prospectus and any amendments and supplements thereto and the printing,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Representative's Warrant Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, 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
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities including, but not limited to, (x) the purchase by the Underwriters
of the Firm Securities and the Option Securities and the purchase by the
Representative of the Representative's Warrants from the Company, (y) the
consummation by the Company of any of its obligations under this Agreement and
the Representative's Warrant Agreement, and (z) resale of the Firm Securities
and the Option Securities by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities under
state or foreign securities or "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, and disbursements and fees
of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show," information meetings and presentations, bound volumes, and prospectus
memorabilia and "tombstone" advertisement expenses, (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel or consultant retained, (vii) fees and expenses
of the Transfer Agent and registrar and all issue and transfer taxes, if any,
(viii) applications for assignment of a rating of the Securities by qualified
rating agencies, (ix) the fees payable to the Commission and the NASD, and (ix)
the fees and expenses incurred in connection with the quotation of the
Securities on ____ and any other exchange.
(b) If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6 or Section 12, the Company shall reimburse and
indemnify the
19
Underwriters for all of their actual out-of-pocket expenses, including the fees
and disbursements of Underwriters' Counsel, less any amounts already paid
pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to the Representative
on the Closing Date, by certified or bank cashier's check or, at the election of
the Representative, by deduction from the proceeds of the offering of the Firm
Securities, a non-accountable expense allowance equal to 3% of the gross
proceeds received by the Company from the sale of the Firm Securities. In the
event the Representative elects to exercise the overallotment option described
in Section 2(b) hereof, the Company agrees to pay the Representative on the
Option Closing Date, by certified or bank cashier's check or, at the election of
the Representative, by deduction from the proceeds of the Option Securities) a
non-accountable expense allowance equal to 3% of the gross proceeds received by
the Company from the sale of the Option Securities.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
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 the 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 its covenants and obligations hereunder and
to the following further conditions:
(a) The Registration Statement shall have become effective not later than
12:00 P.M., New York time, on the date of this Agreement or such later date and
time as shall be consented to in writing by the Representative, and, at the
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 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 Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Shares 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 Representative 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 Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's 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 Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is
20
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) On or prior to each of the Closing Date and each Option Closing Date,
if any, the Representative 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 Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At the Closing Date, the Underwriters shall have received the
favorable opinion of Silverman, Collura, & Xxxxxxx, P.C., counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel, to the effect that:
(i) each of the Company and the Subsidiary (A) has been duly
organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, (B) is duly qualified and
licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing, and
(C) has all requisite corporate power and authority, and has obtained any
and all necessary authorizations, 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; each of the Company and the Subsidiary is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits obtained by it from
governmental or regulatory officials and agencies, and all federal, state,
local and foreign laws, rules and regulations; and, neither the Company
nor the Subsidiary has 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, if the subject of an unfavorable decision, ruling or finding,
would materially adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operations
of the Company or the Subsidiary. The disclosures in the Registration
Statement concerning the effects of federal, state, local and foreign
laws, rules and regulations on each of the Company's and the Subsidiary's
business as currently conducted and as contemplated are correct in all
material respects and do not omit to state a fact required to be stated
therein or necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
(ii) the Company owns, directly or indirectly, sixty six and
two-thirds percent (66 2/3%) of the outstanding capital stock or other
ownership interests of the Subsidiary, and all such shares or other
ownership interests have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive rights and
are owned free and clear of any liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of
any kind whatsoever.
21
(iii) except as described in the Prospectus, none of the Company nor
the Subsidiary owns an interest in any other corporation, partnership,
joint venture, trust or other business entity;
(iv) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "CAPITALIZATION" and "DESCRIPTION OF SECURITIES"
and neither the Company nor the Subsidiary is a party to or bound by any
instrument, agreement or other arrangement providing for it to issue,
sell, transfer, purchase or redeem any capital stock, rights, warrants,
options or other securities, except for this Agreement and the
Representative's Warrant Agreement and as described in the Prospectus. The
Securities 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 Subsidiary 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 the Subsidiary or any similar
rights granted by the Company or the Subsidiary. The Securities to be sold
by the Company hereunder and under the Representative's Warrant Agreement
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 conform to the
description 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 has been duly and validly taken; and the certificates
representing the Securities are in due and proper form. The
Representative's Warrants constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement and the Representative's
Warrant Agreement of the Firm Securities and the Option Securities and the
Representative's Warrants to be sold by the Company, the Underwriters and
the Representative, respectively, will acquire good and marketable title
to the Firm Securities and the Option Securities and the Representative's
Warrants free and clear of any pledge, lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any
kind whatsoever. No transfer tax is payable by or on behalf of the
Underwriters in connection with (A) the issuance by the Company of the
Securities, (B) the purchase by the Underwriters of the Firm Securities
and the Option Securities from the Company, and the purchase by the
Representative of the Representative's Warrants from the Company (C) the
consummation by the Company of any of its obligations under this Agreement
or the Representative's Warrant Agreement, or (D) resales of the Firm
Securities and the Option Securities in connection with the distribution
contemplated hereby.
(v) the Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely made in the
appropriate form
22
under Rule 430A, and no stop order suspending the use of the Preliminary
Prospectus, the Registration Statement or Prospectus or any part of any
thereof or 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 such counsel's knowledge, threatened or
contemplated under the Act;
(vi) each of the Preliminary Prospectus, the Registration Statement,
and the Prospectus and any amendments or supplements thereto (other than
the financial statements 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 the Rules and
Regulations.
(vii) (A) there are no agreements, contracts or other documents
required by the Act to be described in the Registration Statement (or
required to be filed under the Exchange Act if upon such filing they would
be incorporated, in whole or in part, by reference therein) and the
Prospectus and filed as exhibits thereto, and the exhibits which have been
filed are correct copies of the documents of which they purport to be
copies; (B) the descriptions in the Registration Statement and the
Prospectus and any supplement or amendment thereto of contracts and other
documents to which the Company or the Subsidiary is a party or by which it
is bound, including any document to which the Company or the Subsidiary is
a party or by which it is bound, incorporated by reference into the
Prospectus and any supplement or amendment thereto, are accurate and
fairly represent the information required to be shown by Form S-1; (C)
there is not pending or threatened against the Company or the Subsidiary
any action, arbitration, suit, proceeding, inquiry, investigation,
litigation, governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties
or business of the Company or the Subsidiary which (x) 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), (y) questions the validity of the
capital stock of the Company or the Subsidiary or this Agreement or the
Representative's Warrant Agreement, or of any action taken or to be taken
by the Company or the Subsidiary pursuant to or in connection with any of
the foregoing; (D) no statute or regulation or legal or governmental
proceeding required to be described in the Prospectus is not described as
required; and (E) there is no action, suit or proceeding pending, or
threatened, against or affecting the Company or the Subsidiary before any
court or arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) in which there is a reasonable possibility
of a decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company or the Subsidiary, which could adversely affect
the present or prospective ability of the Company to perform its
obligations under this Agreement or the Representative's Warrant Agreement
or which in any manner draws into question the validity or enforceability
of this Agreement or the Representative's Warrant Agreement;
23
(viii) the Company has full legal right, power and authority to
enter into each of this Agreement and the Representative's Warrant
Agreement, and to consummate the transactions provided for herein and
therein; and each of this Agreement and the Representative's Warrant
Agreement has been duly authorized, executed and delivered by the Company.
Each of this Agreement and the Representative's Warrant Agreement,
assuming due authorization, execution and delivery by each other party
thereto constitutes a legal, valid and binding agreement of the Company
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), and
none of the Company's execution or delivery of this Agreement and the
Representative's Warrant Agreement, its performance hereunder or
thereunder, its consummation of the transactions contemplated herein or
therein, or 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 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 or
the Subsidiary pursuant to the terms of, (A) the Certificate of
Incorporation or Bylaws of the Company or the Certificate of Incorporation
or Bylaws of the Subsidiary, (B) any license, contract, collective
bargaining agreement, indenture, mortgage, deed of trust, lease, 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 or the
Subsidiary is a party or by which it is or they are or may be bound or to
which any of its or their respective properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, or (C) any statute,
judgment, decree, order, rule or regulation applicable to the Company or
the Subsidiary 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 the
Subsidiary or any of its or their respective activities or properties.
(ix) no consent, approval, authorization or order, and no filing
with, any arbitrator, court, regulatory body, administrative agency,
government agency or other body, domestic or foreign (other than such as
may be required under Blue Sky laws, as to which no opinion need be
rendered) is required in connection with the issuance of the Firm
Securities and the Option Securities pursuant to the Prospectus and the
Registration Statement, this Agreement, the Representative's Warrant
Agreement, or the issuance of the Representative's Warrants, the
performance of this Agreement and the Representative's Warrant Agreement,
and the transactions contemplated hereby and thereby;
(x) the properties and business of each of the Company and the
Subsidiary conform to the description thereof contained in the
Registration Statement and
24
the Prospectus; and each of the Company and the Subsidiary has good and
marketable title to, or valid and enforceable leasehold estates in, all
items of real and personal property stated in the Prospectus to be owned
or leased by it, in each case 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 not yet due and payable;
(xi) neither the Company nor the Subsidiary is in breach of, or in
default under, any term or provision of any license, contract, collective
bargaining agreement, indenture, mortgage, installment sale agreement,
deed of trust, lease, voting trust agreement, stockholders' agreement,
partnership 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 or the Subsidiary
is a party or by which the Company or the Subsidiary may be bound or to
which the properties or assets (tangible or intangible) of the Company or
the Subsidiary is or may be subject or affected; and neither the Company
nor the Subsidiary is in violation of any term or provision of its
Certificate of Incorporation or Bylaws with respect to the Company and the
Certificate of Incorporation or Bylaws with respect to the Subsidiary or
in violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation;
(xii) the statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES," "SELLING STOCKHOLDERS AND PLAN
OF DISTRIBUTION" and "SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed
by such counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
(xiii) the Securities have been accepted for quotation on AMEX;
(xiv) the persons listed under the caption "PRINCIPAL STOCKHOLDERS"
and "SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION" in the Prospectus are
the respective "beneficial owners" (as such phrase is defined in
regulation 13d-3 under the Exchange Act) of the securities set forth
opposite their respective names thereunder as and to the extent set forth
therein;
(xv) each of the Company and the Subsidiary owns or possesses, free
and clear of all liens or encumbrances and right thereto or therein by
third parties, the requisite licenses or other rights to use all
trademarks, service marks, copyrights, service names, tradenames, patents,
patent applications and licenses necessary to conduct its business
(including without limitation any such licenses or rights described in the
Prospectus as being owned or possessed by any of the Company or the
Subsidiary) and there is no claim or action by any person pertaining to,
or proceeding, pending or threatened, which challenges the exclusive
rights of any of the Company or the Subsidiary with respect to any
trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the
25
Company's and the Subsidiary's businesses (including, without limitation,
any such licenses or rights described in the Prospectus as being owned or
possessed by any of the Company or the Subsidiary);
(xvi) neither the Company nor the Subsidiary, nor any of their
respective officers, stockholders, employees or agents, nor any other
person acting on behalf of the Company or the Subsidiary 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 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 the Subsidiary (or assist it in connection with any actual or
proposed transaction) which (A) might subject any of the Company or the
Subsidiary or any 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 an adverse effect on the
assets, business or operations of the Company or the Subsidiary, as
reflected in any of the financial statements contained in the Registration
Statement, or (C) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company or the
Subsidiary;
(xvii) except as described in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the 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;
(xviii) except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in the
nature of a finder's or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangements or any other
arrangements, agreements, understandings, payments or issuances that may
affect the Underwriters' compensation, as determined by the NASD;
(xix) assuming due execution by the parties thereto other than the
Company, the Lock-up Agreements are legal, valid and binding obligations
of the parties thereto, enforceable against the party and any subsequent
holder of the securities subject thereto 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);
(xx) the minute books of the Company and the Subsidiary contain a
complete summary of all meetings and actions the directors and
stockholders of each of the Company and the Subsidiary since the time of
its incorporation and reflect all transactions referred to in such minutes
accurately in all material respects;
26
(xxi) except as described in the Prospectus, neither the Company nor
the Subsidiary (A) maintains, sponsors or contributes to any ERISA Plans,
(B) maintains or contributes, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C) has ever
completely or partially withdrawn from a "multiemployer plan";
(xxii) neither the Company, the Subsidiary or any of its or their
affiliates shall be subject to the requirements of or shall be deemed an
"Investment Company," pursuant to and as defined under, respectively, the
Investment Company Act.
Such counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company and the Subsidiary, and
representatives of the independent public accountants for the Company, at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters 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
Preliminary Prospectus, 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
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein 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 Preliminary
Prospectus, the Registration Statement or the Prospectus). Such counsel shall
further state that its opinions may be relied upon by Underwriters' Counsel in
rendering its opinion to the Underwriters.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the 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 substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of each of the Company and
Subsidiary 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 and the Subsidiary, 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 that the Representative, Underwriters' Counsel and they are
each justified in relying thereon. Any opinion of counsel for the Company and
the Subsidiary shall not state that it is to be governed or qualified by, or
that it is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991) or any comparable state accord.
27
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Silverman, Collura, & Xxxxxxx, P.C., counsel
to the Company, dated the relevant Option Closing Date, addressed to the
Underwriters, and in form and substance satisfactory to Underwriters' Counsel,
confirming as of the Option Closing Date, the statements made by Xxxxxxxxx,
Xxxxxxx & Xxxxxxx, P.C., in its opinion delivered on the Closing Date.
(f) On or prior to each of the Closing Date and each Option Closing Date,
if any, 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 of the
Company herein contained.
(g) Prior to each of 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,
earnings, position, value, properties, results of operations, prospects,
stockholders' equity or the business activities of the Company or the
Subsidiary, 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 or the Subsidiary, from the
latest date as of which the financial condition of the Company is set forth in
the Registration Statement and Prospectus; (iii) neither the Company nor the
Subsidiary shall be in default under any provision of any instrument relating to
any outstanding indebtedness; (iv) neither the Company nor the Subsidiary shall
have issued any securities (other than the Securities) or declared or paid any
dividend or made any distribution in respect of its or their capital stock of
any class and there has not been any change in the capital stock or debt (long
or short term) or liabilities or obligations of the Company or the Subsidiary
(contingent or otherwise); (v) no material amount of the assets of the Company
or the Subsidiary shall have been pledged or mortgaged, except as set forth in
the Registration Statement and Prospectus; (vi) no arbitration, inquiry, action,
suit or proceeding, at law or in equity, shall have been pending or threatened
(or circumstances giving rise to same) against the Company or the Subsidiary, or
affecting any of its or their respective properties or 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 adversely affect
the business, operations, earnings, position, value, properties, results of
operations, prospects or financial condition or income of the Company or the
Subsidiary; and (vii) 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 each of the Closing Date and each Option Closing Date, if any, the
Underwriters 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 each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and 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 each of the Company
and the Subsidiary have
28
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 or any part thereof 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, after due inquiry, 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 not misleading and neither the Preliminary Prospectus or any
supplement thereto included any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) neither the
Company nor the Subsidiary has 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) neither the Company nor the Subsidiary has paid
or declared any dividends or other distributions on its capital stock; (c)
neither the Company nor the Subsidiary has entered into any transactions
not in the ordinary course of business; (d) there has not been any change
in the capital stock of any of the Company or the Subsidiary or any
material change in the debt (long or short term) of any of the Company or
the Subsidiaries; (e) neither the Company nor the Subsidiary has sustained
any loss or damage to its properties or assets, whether or not insured;
(f) there is no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company or the Subsidiary
or any affiliated party which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (g) there has
occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been set forth.
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 Underwriters will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Underwriters and Underwriters' Counsel, from Xxxxxxx X. Xxxxxx & Co., LLP:
29
(i) confirming that they are independent certified public
accountants with respect to the Company and the Subsidiary within the
meaning of the Act and the applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial statements
and supporting schedules of the Company and the Subsidiary 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 Representative may rely upon the
opinion of Xxxxxxx X. Xxxxxx & Co., LLP 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 financial statements
of each of the Company and the Subsidiary, a reading of the latest
available minutes of the stockholders and board of directors and the
various committees of the board of directors of each of the Company and
the Subsidiary, consultations with officers and other employees of each of
the Company and the Subsidiary 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 pro forma
and as adjusted financial information contained in the Registration
Statement and Prospectus does not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Rules and Regulations or is not fairly presented in conformity with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of the Company
and the Subsidiary or the unaudited pro forma or as adjusted financial
information included in the Registration Statement, or (B) the unaudited
financial statements and supporting schedules of the Company and the
Subsidiary 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 financial
statements of the Company and the Subsidiaries included in the
Registration Statement, or (C) 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 long-term debt of any of the
Company or the Subsidiary, or any decrease in the stockholders' equity or
net current assets or net assets of the Company as compared with amounts
shown in the _____, 1999 balance sheet 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 ______,
1999 to a specified date not more than five (5) days prior to the
effective date of the Registration Statement, there was any decrease in
net revenues, net earnings or increase in net earnings per common share of
any of the Company or the Subsidiary, in each case as compared with the
corresponding period beginning _______, 1999, 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;
30
(iv) setting forth, at a date not later than five (5) days prior to
the date of the Registration Statement, the amount of liabilities of the
Company and the Subsidiary (including a break-down of commercial paper and
notes payable to banks);
(v) stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company and the Subsidiary 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 the
Subsidiary and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do
not constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be in
agreement;
(vi) statements as to such other matters incident to the transaction
contemplated hereby as the Representatives may request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Xxxxxxx X. Xxxxxx & Co., LLP a letter,
dated as of the Closing Date or the Option Closing Date, as the case may be, to
the effect that they reaffirm the 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 (5) days prior to the Closing
Date or the Option Closing Date, as the case may be, 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 (v) of subsection
(j) of this Section with respect to certain amounts, percentages and financial
information as specified by the Representative 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 (v).
(l) On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative 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 Representative 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 shall be
contemplated.
(n) On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed as Exhibit 4.2 to the Registration Statement, in
final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(o) On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for quotation on AMEX, subject to
official notice of issuance.
31
(p) On or before the Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements, in form and substance satisfactory
to Underwriters' Counsel.
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 Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in Section 11 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, suits and litigation in respect
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such claim, action, proceeding, investigation, inquiry, suit or litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such controlling person may become subject under the
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon (A) any untrue
statement or alleged untrue statement of a material fact contained (i) in any
Preliminary Prospectus, 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 Securities; or
(iii) in any application or other document or written communication (in this
Section 7 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, AMEX or any other
securities exchange; (B) 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), or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto, unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in strict 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, or in any application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
32
(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 Statement, and each other person, if
any, who controls the Company within the meaning of the 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 or in any 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 such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Firm Securities and the Option Securities set forth under the heading
"Underwriting" and the stabilization legend in the Prospectus have been
furnished by the Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any claim, action, suit, investigation, inquiry,
proceeding or litigation, 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). In case any such claim, action, suit, investigation, inquiry,
proceeding or litigation 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 thereof 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 thereof within a reasonable
time after notice of commencement thereof, or (iii) such indemnified 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 thereof on behalf of the indemnified
party or parties), 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 claim, action, suit,
investigation, inquiry, proceeding or litigation or separate but similar or
related claims, actions, suits, investigations, inquiries, proceedings or
litigation in the same jurisdiction
33
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, action, suit, investigation, inquiry,
proceeding or litigation effected without its written consent; provided,
however, that such consent was not unreasonably withheld. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle,
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit, investigation, inquiry, proceeding or
litigation in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim, action, suit, investigation, inquiry, proceeding or
litigation), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit, investigation, inquiry, proceeding or litigation
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(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 shall contribute to the amount paid 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 Firm Securities and
the Option 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 (i) 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 is the contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company 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 Firm Securities
and the Option Securities (before deducting expenses) bear to the total
underwriting discounts 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 subsection (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 subsection (d), the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Firm Securities and the Option Securities purchased by the Underwriters
hereunder. 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
34
not guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person, if any, who controls the Company or the Underwriter 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 Company or the Underwriter, as the case may be, subject in
each case to this subsection (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 subsection (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 subsection (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, any controlling person of any Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriters and the Representative, as the case may be.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such securities for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the Representative shall
have the right to terminate this Agreement, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in the Representative's
opinion will in the immediate future materially adversely disrupt, the financial
markets; or (ii) if any material adverse change in the financial markets shall
have occurred; or (iii) if trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the NASD, the Boston Stock Exchange, the
Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Commission or any governmental authority having
jurisdiction over such matters; or (iv) if trading of any of the securities of
the Company shall have been suspended, or any of the securities of the Company
35
shall have been delisted, on any exchange or in any over-the-counter market; (v)
if the United States shall have become involved in a war or major hostilities,
or if there shall have been an escalation in an existing war or major
hostilities or a national emergency shall have been declared in the United
States; or (vi) if a banking moratorium has been declared by a state or federal
authority; or (vii) if a moratorium in foreign exchange trading has been
declared; or (viii) if the Company or the Subsidiary shall have sustained a loss
material or substantial to the Company or the Subsidiary by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the offering, sale
and/or delivery of the Securities; or (ix) if there shall have occurred any
outbreak or escalation of hostilities or any calamity or crisis or if there
shall have been such a material adverse change in the conditions or prospects of
the Company or Subsidiary, or such material adverse change in the general
market, political or economic conditions, in the United States or elsewhere,
that, in each case, in the Representative's judgment, would make it inadvisable
to proceed with the offering, sale and/or delivery of the Securities or (xi) if
either Xxxxx X. Xxxxx, III or __________ shall no longer serve the Company in
their respective present capacities.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a) the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). Notwithstanding any
contrary provision contained in this Agreement, if this Agreement shall not be
carried out within the time specified herein, or any extension thereof granted
to the Representative, by reason of any failure on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement by it to be
performed or satisfied (including, without limitation, pursuant to Section 6 or
Section 12) then, the Company shall promptly reimburse and indemnify the
Representative for all of its actual out-of-pocket expenses, including the fees
and disbursements of counsel for the Underwriters (less amounts previously paid
pursuant to Section 5(c) above). In addition, the Company shall remain liable
for all Blue Sky counsel fees and disbursements, expenses and filing fees.
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement (including, without limitation,
pursuant to Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement
is otherwise carried out, the provisions of Section 5 and Section 7 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 Representative
shall have the right, within 24 hours thereafter, to make arrangement 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
Representative shall not have completed such arrangements within such 24-hour
period, then:
36
(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 (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 Representative's
option, by notice from the Representative to the Company, terminate the
Underwriters' obligation to purchase Option Securities from the Company on
such date).
No action taken pursuant to this Section 11 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 Representative shall have the right to postpone the Closing
Date for a period not exceeding seven (7) 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 at 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 Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section 12 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 directed to the
Representative at Security Capital Trading, Inc., 000 Xxxxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: ________, with a copy to Xxxxxx,
Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxxx X. Xxxxxx, Esq. Notices to the Company shall be directed to
the Company at Urban Cool Network, Inc., 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx 00000,
Attention: Xxxxx X. Xxxxx, III, with a copy to Silverman, Collura, & Xxxxxxx,
P.C., 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Attention: Xxxxxx X.
Xxxxx, Esq.
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 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
37
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 New York 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.
17. Entire Agreement; Amendments. This Agreement and the Representative's
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior written or oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may not be amended
except in a writing, signed by the Representative and the Company.
38
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,
URBAN COOL NETWORK, INC.
By:__________________________
Name:
Title:
Confirmed and accepted as of
the date first above written.
SECURITY CAPITAL TRADING, INC.
For itself and as Representative of the
several Underwriters named in
Schedule A hereto.
By:________________________
Name:
Title:
39
SCHEDULE A
----------
Number of Shares
Name of Underwriters to be Purchased
-------------------- ----------------
Security Capital Trading, Inc...............................
Total.......................................................
----------------
2,000,000
================
