EXHIBIT 1
___________ Shares of Common Stock (1)
($.01 par value)
KONA GRILL, INC.
UNDERWRITING AGREEMENT
-----------------
New York, New York
, 2005
XXXXXXXXXXX & CO. INC.
As Representative of the several
Underwriters named in Schedule A hereto
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Kona Grill, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Xxxxxxxxxxx & Co. Inc. ("Oppenheimer") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters"), for
whom Oppenheimer is acting as the representative (the "Representative"), with
respect to the sale by the Company, and the purchase by the Underwriters, acting
severally and not jointly, of shares of the Company's common stock, $.01
par value per share ("Common Stock"). Such shares of Common Stock are
hereinafter referred to as the "Firm Shares".
Upon your request, as provided in Section 2(c) hereof, the Company shall
also sell to the Underwriters, acting severally and not jointly, up to an
additional shares of Common Stock for the purpose of covering
over-allotments, if any (the "Option Shares"). The Firm Shares and the Option
Shares are hereinafter referred to as the "Securities". The Securities are more
fully described in the Registration Statement and the Prospectus referred to
below.
1. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, each of the
Underwriters, as of the date hereof, as of the Closing Date referred
to in Section 2(b) hereof, and as of each Option Closing Date (if
any) referred to in Section 2(d) hereof, as follows:
(i) 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
(File No. 333- ), including any related preliminary
prospectus or prospectuses, for the registration of the
Securities under the Securities Act of 1933, as amended (the
"1933 Act"), and the rules and regulations promulgated
thereunder
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1 Plus an option to purchase from the Company up to additional shares
to cover over-allotments.
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(the "1933 Act Regulations"). The Company will next file with
the Commission either (1) prior to the effective date of such
registration statement, a further amendment to such
registration statement (including the form of final
prospectus) or (2) after the effective date of such
registration statement, a final prospectus in accordance with
Rules 430A and 424(b). In the case of clause (2), the Company
has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A
information) required by the 1933 Act and the 1933 Act
Regulations to be included in such registration statement and
the Prospectus. The Company will furnish a copy of any
amendment to such Registration Statement, or any Registration
Statement filed pursuant to Rule 462(b) under the 1933 Act (a
"462(b) Registration Statement"), to the Representative at
least two business days before filing such Registration
Statement amendment, and will not file any other amendment
thereto or any Rule 462(b) Registration Statement to which the
Representative shall have objected in writing. Each prospectus
used before such Registration Statement became effective is
herein called a "Preliminary Prospectus." 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 and all information
deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A or 462(b) under the 1933 Act), is
hereinafter called the "Registration Statement", and the form
of prospectus in the form first filed with the Commission
pursuant to Rule 424(b) under the 1933 Act, is hereinafter
called the "Prospectus."
For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis
and Retrieval system ("XXXXX").
(ii) Neither the Commission nor any state regulatory authority has
issued any order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement
or any post-effective amendment thereto, and no proceedings
for a stop order suspending the effectiveness of the
Registration Statement have been instituted or are pending or
to the Company's knowledge, threatened.
(iii) At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective
amendments thereto became effective and at the Closing Date
(and, if any Option Shares are purchased, at the Option
Closing Date), the Registration Statement, the Rule 462(b)
Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with
the requirements of
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the 1933 Act and the 1933 Act Regulations and did not and will
not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or
supplement was issued and at the Closing Date (and, if any
Option Shares are purchased, at the Option Closing Date),
included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. The representations and warranties in this
subsection shall not apply to statements in or omissions from
the Registration Statement or Prospectus made in reliance upon
and in conformity with written information furnished to the
Company by any Underwriter through the Representative
expressly for use in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or
supplement thereto).
Each Preliminary Prospectus and the Prospectus filed as part
of the Registration Statement as originally filed or as part
of any amendment thereto complied when so filed in all
material respects with the 1933 Act Regulations and each
Preliminary Prospectus and the Prospectus delivered to the
Underwriters for use in connection with this offering was
identical to the electronically transmitted copies thereof
filed with the Commission pursuant to XXXXX, except to the
extent permitted by Regulation S-T and the 1933 Act
Regulations.
(iv) Each of the Company and its Subsidiaries (as hereinafter
defined) (i) has been duly organized and is validly existing
as a corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) other than as
disclosed in the Registration Statement, owns no interest in
any corporation, partnership, trust, joint venture or other
business entity, (iii) is duly qualified to do business, and
is 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, (iv) has all requisite corporate power and
authority, and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental or regulatory officials
and bodies, to own or lease its properties and conduct its
business as described in the Prospectus and (v) is and has
been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates,
permits and all federal, state and local laws, rules and
regulations, and has not received any notice of proceedings
relating to the revocation or modification of any such
authorization, approval, order, license, certificate or permit
which, if the subject of an unfavorable decision, ruling or
finding, would, in the aggregate, have a material adverse
effect on the condition (financial or otherwise), earnings,
business prospects, or properties of the Company and its
Subsidiaries, taken as a whole (a "Material Adverse Effect").
The
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disclosures in the Registration Statement concerning the
effects of federal, state and local laws, rules and
regulations on each of the Company's and the Subsidiaries'
business as currently conducted and as contemplated are
correct in all material respects and do not omit to state a
material fact necessary to make the statements contained
therein not misleading.
(v) The Company has a duly authorized equity capitalization as set
forth in the Prospectus under "Capitalization" and will have
the adjusted duly authorized equity capitalization set forth
therein on the Closing Date, based upon the assumptions set
forth therein. Neither the Company nor any of its Subsidiaries
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 or 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 have been
duly authorized and validly issued and are fully paid and
nonassessable, 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 any preemptive
rights of any holders of any security of the Company or
similar contractual rights granted by the Company. The
Securities (i) are not and will not be issued in violation of
any preemptive or other similar rights of any stockholder,
(ii) have been duly authorized for quotation on the Nasdaq
National Market, and (iii) when issued, paid for and delivered
in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and will conform in all material
respects to the description thereof contained in the
Prospectus. The holders of the Securities will not be subject
to any liability solely by reason of being such holders. All
corporate action required to be taken by the Company or any of
it Subsidiaries 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 according to the corporate law of Delaware. Upon
the issuance and delivery, pursuant to the terms hereof, of
the Securities to be sold by the Company hereunder, and
payment therefor the Underwriters will acquire good and
marketable title to such Securities, free and clear of any
lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever
except for any such lien, charge, claim, encumbrance, pledge,
security interest, defect, other restriction, or equity
created by the Underwriters or imposed upon the assets of the
Underwriters.
(vi) The subsidiaries of the Company listed on Annex A hereto
(each, a "Subsidiary", and together, the "Subsidiaries") are
the only subsidiaries of the Company as defined by Rule 1-02
of Regulation S-X. All the
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outstanding shares of capital stock of each Subsidiary have
been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise set forth in the
Prospectus, are owned by the Company free and clear of any
security interest, claim, lien or encumbrance.
(vii) The consolidated financial statements, including the related
notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus,
fairly present in all material respects the financial
position, income, changes in cash flow, changes in
stockholders' equity, and results of operations of the Company
and its Subsidiaries at the respective dates and for the
respective periods to which they apply. Such financial
statements have been prepared in conformity with generally
accepted accounting principles, consistently applied
throughout the periods involved. The outstanding debt, the
property, both tangible and intangible, and the business of
the Company and each of its Subsidiaries conform in all
material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. The other financial
information set forth in the Prospectus fairly present in all
material respects, 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.
(viii) Each of the Company and its Subsidiaries has filed all
Federal, state and local tax returns that are required to be
filed or has requested extensions thereof, whether or not
arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus or
where such failure singularly or in the aggregate would not
have a Material Adverse Effect, and has paid all taxes
required to be paid by it and any other assessment, fine or
penalty levied against it, to the extent that any of the
foregoing is due and payable, except for any such assessment,
fine or penalty that (i) is currently being contested in good
faith, whether or not arising from transactions in the
ordinary course of business, (ii) is set forth in the
Prospectus or (iii) would not, singularly or in the aggregate,
have a Material Adverse Effect.
(ix) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and
customary in the businesses in which they are engaged; all
policies of insurance insuring the Company or any of its
Subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and
effect; the Company and its Subsidiaries are in compliance
with the terms of such policies in all material respects; and
there are no claims by the Company or any of its Subsidiaries
under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation
of rights clause; neither the Company nor any such Subsidiary
has been refused any insurance
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coverage sought or applied for; and neither the Company nor
any such Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business
at an additional cost that would not have a Material Adverse
Effect.
(x) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding, domestic
or foreign, pending or, to the Company's knowledge, threatened
against (or, to the Company's knowledge, circumstances that
are reasonably likely give rise to the same), or involving the
properties or business of the Company or any of its
Subsidiaries which (i) questions the validity of its capital
stock, this Agreement or any action taken or to be taken by
the Company or its Subsidiaries pursuant to, or in connection
with, this Agreement, (ii) is required to be disclosed in the
Registration Statement which is not so disclosed or (iii)
except for matters disclosed in the Prospectus, might,
individually or in the aggregate, have a Material Adverse
Effect.
(xi) The Company and each of its Subsidiaries (i) are in compliance
with any and all applicable Federal, state and local laws and
regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to
conduct their respective businesses, (iii) are in compliance
with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, individually
or in the aggregate, have a Material Adverse Effect and (iv)
have no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating
expenditures required for cleanup, closure of properties or
compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and
any potential liabilities to third parties) which would,
individually or in the aggregate, have a Material Adverse
Effect.
(xii) The Company has the corporate power and authority to
authorize, issue, deliver and sell the Securities being sold
by it hereunder, enter into this Agreement and consummate the
transactions provided for in this Agreement; and this
Agreement has been duly and properly authorized, executed and
delivered by the Company.
(xiii) None of the Company's issuance or sale of the Securities or
the execution or delivery of this Agreement by the Company,
the Company's performance hereunder or the conduct of the
Company's or its
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Subsidiaries' business as described in the Registration
Statement, the Prospectus, and any amendments or supplements
thereto, (A) results in or will result in any breach or
violation of any of the terms or provisions of, (B)
constitutes or will constitute a default under, or (C) results
in or will result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect
or other restriction of any kind whatsoever, upon any property
or assets (tangible or intangible) of the Company or any of
its Subsidiaries pursuant to the terms of any of the
following: (i) the Certificate of Incorporation or By-laws of
the Company or its Subsidiaries, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, indebtedness, loan, lease, deed
of trust, credit agreement or any other agreement or
instrument to which the Company or its Subsidiaries is a party
or by which it is or may be bound or to which any of its
properties or assets (tangible or intangible) is or may be
subject, or (iii) any statute, judgment, decree, order, rule
or regulation, applicable to the Company or its Subsidiaries,
of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body, domestic or
foreign, having jurisdiction over the Company, its
Subsidiaries or any of their activities or properties except
in the case of clauses (ii) and (iii) for such breaches,
violations, defaults, liens or other restrictions that do not
or will not, singularly or in the aggregate, have a Material
Adverse Effect.
(xiv) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other
body, domestic or foreign, is required in connection with the
transactions contemplated herein or the performance of this
Agreement, except such as have been or may be obtained under
the 1933 Act, the Securities and Exchange Act of 1934 (the
"Exchange Act"), and the rules and regulations promulgated
under these acts, or may be required under state securities or
Blue Sky laws, the rules of the National Association of
Securities Dealers, Inc. ("NASD") or the Nasdaq National
Market in connection with the Underwriters' purchase and
distribution of the Securities, in the manner contemplated
herein and in the Prospectus.
(xv) 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 any of its Subsidiaries is a party or by which it
may be bound or to which any of its assets, properties or
business may be subject have been duly and validly authorized,
executed and delivered by it, and constitute the legal, valid
and binding agreements of the Company or such Subsidiary,
enforceable against it in accordance with their respective
terms. The descriptions in the Registration Statement of
agreements, contracts and other documents are accurate in all
material respects and fairly present the information required
to be shown with respect thereto on Form S-1. There are no
contracts or other documents which are required by the 1933
Act or the
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1933 Act Regulations to be described in the Registration
Statement or filed as exhibits to the Registration Statement
which are not described or filed as required, and the exhibits
which have been filed are in all material respects complete
and correct copies of the documents of which they purport to
be copies.
(xvi) Neither the Company nor any of its Subsidiaries is in
violation or default of (A) any provision of its Charter or
By-laws or (B) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument
to which it is a party or bound or to which its property is
subject except, in the case of clause (B), where such
violation or default, singularly or in the aggregate, would
not have a Material Adverse Effect.
(xvii) No labor problem or dispute with the employees of the Company
or any of its Subsidiaries exists or, to the knowledge of the
Company, is threatened or imminent, and the Company is not
aware of any existing or imminent labor disturbance by the
employees of any of its or its Subsidiaries' principal
suppliers, contractors or customers, that could have a
Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business.
(xviii) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations
thereunder ("ERISA"), or Section 4975 of the Internal Revenue
Code of 1986, as amended from time to time (the "Code")) or
"accumulated funding deficiency" (as defined in Section 302 of
ERISA) or any of the events set forth in Section 4043(b) of
ERISA (other than events with respect to which the 30-day
notice requirement under Section 4043 of ERISA has been
waived) has occurred with respect to any employee benefit plan
which could have a Material Adverse Effect; each employee
benefit plan is in compliance in all material respects with
applicable law, including ERISA and the Code; the Company has
not incurred and does not expect to incur liability under
Title IV of ERISA with respect to the termination of, or
withdrawal from, any "pension plan"; and each "pension plan"
(as defined in ERISA) for which the Company would have any
liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects
and nothing has occurred, whether by action or by failure to
act, which could reasonably be expected to cause the loss of
such qualification.
(xix) Neither the Company or its Subsidiaries nor any of its
employees, directors, stockholders, partners, or affiliates of
any of the foregoing has taken, directly or indirectly, any
action designed to or which has constituted or which could
reasonably be expected to cause or result in, under the
Exchange Act and the rules and regulations promulgated
8
thereunder, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of
the Securities or otherwise.
(xx) The Company and each of its Subsidiaries owns or has obtained
licenses for the trade and service marks, trade and service
xxxx registrations, trade names, copyrights, trade secrets,
technology, know-how and other intellectual property
referenced or described in the Prospectus as being owned by or
licensed to it (collectively, the "Intellectual Property"). To
the knowledge of the Company, there are no rights of third
parties to any such owned Intellectual Property; to the
knowledge of the Company there is no infringement by third
parties of any such owned Intellectual Property; to the
knowledge of the Company, there is no pending or threatened
action, suit, proceeding or claim by others challenging the
Company's or its Subsidiaries' rights in or to any such
Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; there
is no domestic or foreign, pending or, to the knowledge of the
Company, threatened, action, suit, proceeding or claim by
others challenging the validity or scope of any such
Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; and
there is no pending or, to the knowledge of the Company,
threatened, action, suit, proceeding or claim by others that
the Company infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary rights
of others, and the Company is unaware of facts which would
form a reasonable basis for any such claim. The Company owns,
possesses, licenses or has other rights to use all
Intellectual Property necessary for the conduct of the
Company's business as now conducted or as proposed in the
Prospectus to be conducted.
(xxi) The Company and each of its Subsidiaries 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 taxes, lessor's interests and liens for taxes
not yet due and payable.
(xxii) Ernst & Young LLP, which has certified certain financial
statements of the Company and delivered its report with
respect to the audited consolidated financial statements and
schedules included in the Prospectus, is an independent
certified public accountant as required by the 1933 Act and
the 1933 Act Regulations.
(xxiii) Except as described in the Prospectus under "Underwriting,"
there are no claims, payments, issuances, arrangements or
understandings, whether oral or written, of the Company for
services in the nature of a finder's or origination fee with
respect to the sale of the Securities by it hereunder or
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any other arrangements, agreements, understandings, payments
or issuances with respect to the Company or, to the Company's
knowledge, any of its respective officers, directors,
stockholders, partners, employees or affiliates that may
affect the Underwriters' compensation, as determined by the
NASD.
(xxiv) Neither the Company nor, to its knowledge, any of its
officers, employees, agents, or any other person acting on
behalf of the Company, has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than
legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person
who was, is or may be in a position to help or hinder the
business of the Company or any of its Subsidiaries (or assist
the Company in connection with any actual or proposed
transaction) which (i) might subject the Company, any of its
Subsidiaries, or any other such person, to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (ii) if not given in the
past, might have had a Material Adverse Effect, or (iii) if
not continued in the future, might have a Material Adverse
Effect.
(xxv) The Company and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance
with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation
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 authorization; and (iv)
the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xxvi) The minute books of the Company and each of its Subsidiaries
have been made available to the Underwriters and counsel for
the Underwriters, and such books (i) contain a complete
summary of all meetings and actions of the board of directors
(including each board committee) and stockholders of the
Company and each of its Subsidiaries since the time of its
respective incorporation through the date of the latest
meeting and action, and (ii) accurately reflect in all
material respects all transactions referred to in such
minutes.
(xxvii) No forward-looking statement (within the meaning of Section
27A of the 1933 Act and Section 21E of the Exchange Act)
contained in the Prospectus has been made or reaffirmed
without a reasonable basis or has been disclosed other than in
good faith.
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(xxviii) The Company is in compliance with all applicable provisions of
the Xxxxxxxx-Xxxxx Act of 2002 and all rules and regulations
promulgated thereunder or implementing the provisions thereof
(the "Xxxxxxxx-Xxxxx Act") that are currently applicable to
the Company and is actively taking steps to ensure that it
will be in compliance with other provisions of the
Xxxxxxxx-Xxxxx Act not currently applicable to the Company
upon and at all times after the applicability of such
provisions.
(xxix) The Company has taken all necessary actions to ensure that,
upon and at all times after the Nasdaq National Market
approved the Securities for quotation, it will be in
compliance with all applicable corporate governance
requirements set forth in the Nasdaq Marketplace Rules that
are then in effect and is actively taking steps to ensure that
it will be in compliance with other applicable corporate
governance requirements set forth in the Nasdaq Marketplace
Rules not currently in effect upon and all times after the
effectiveness of such requirements.
(xxx) Except as (i) set forth in the Prospectus or (ii) as need not
be described pursuant to Item 404(b) of Regulation S-K under
the 1933 Act, no officer, director or stockholder of the
Company, or any "affiliate" or "associate" (as these terms are
defined in Rule 405 under the 0000 Xxx) 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 any of its Subsidiaries, or (B) purchases from
or sells or furnishes to the Company or any of its
Subsidiaries any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company or
any of its Subsidiaries is a party or by which it may be bound
or affected. Except as set forth in the Prospectus under
"Certain Relationships and Related Party Transactions," there
are no existing agreements, arrangements, understandings or
transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the (x)
Company or any of its Subsidiaries and (y) Xxxxxx Xxxxx or any
officer or director of the Company or any of its Subsidiaries,
or any partner, affiliate or associate of any of the foregoing
persons.
(xxxi) There are no outstanding loans, advances (except normal
advances for business expense in the ordinary course of
business) or guarantees of indebtedness by the Company to or
for the benefit of any of the officers or directors of the
Company, except as disclosed in the Prospectus.
(xxxii) There are no transactions, arrangements or other relationships
between and/or among the Company, any of its affiliates (as
such term is defined in Rule 405 of the 0000 Xxx) and any
unconsolidated entity, including, but not limited to, any
structured finance, special purpose or limited purpose entity,
that could reasonably be expected to materially affect the
Company's liquidity or the availability of or requirements for
its capital
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resources required to be described in the Prospectus which
have not been described as required.
(xxxiii) Except as 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 1933 Act, other than those
holders who have waived such rights. Except as described in
the Prospectus, no holder of any securities of the Company or
any other person has the right, contractual or otherwise,
which has not been satisfied or effectively waived, to cause
the Company to sell or otherwise issue to them, or permit them
to underwrite the sale of, any of the Securities.
(xxxiv) Neither the Company nor any of its Subsidiaries is, nor upon
consummation of the transactions contemplated hereby will be,
an "investment company" within the meaning of such term under
the Investment Company Act of 1940 (the "Investment Company
Act"), and the rules and regulations of the Commission
promulgated thereunder.
(xxxv) No Subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from
making any other distribution on such Subsidiary's capital
stock, from repaying to the Company any loans or advances to
such Subsidiary from the Company or from transferring any of
such Subsidiary's property or assets to the Company or any
other Subsidiary of the Company, except as set forth in the
Registration Statement.
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 $ per share of Common Stock, that
number of Firm Shares set forth in Schedule A opposite the name of such
Underwriter.
(b) Payment of the purchase price and delivery of certificates for the Firm
Shares shall be made at the offices of O'Melveny & Xxxxx LLP, 000
Xxxxxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 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 , 2005, or at such other time and date as shall be
agreed upon by the Representative and the Company, but not more than
three business days after the foregoing date (such time and date of
payment and delivery being herein called the "Closing Date"). Delivery
of the Firm Shares shall be made to the Representative for the
respective
12
accounts of the several Underwriters against payment by the several
Underwriters through the Representative of the respective aggregate
purchase prices of the Firm Shares being sold by the Company to or upon
the order of the Company by wire transfer payable in same day funds to
the accounts specified by the Company. Delivery of the Firm Shares
shall be made through the facilities of The Depository Trust Company
unless the Representative shall otherwise instruct.
(c) 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 to purchase all or any part of Option Shares at
the same purchase price per share as the Underwriters shall pay for
the Firm Shares. Said option may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters.
Said option may be exercised from time to time on or before the 30th
day after the date of the Prospectus upon written or telegraphic
notice by the Representative to the Company setting forth the number
of Option Shares as to which the several Underwriters are exercising
the option and any Option Closing Date. The number of the Option
Shares to be purchased by each Underwriter shall be the same
percentage of the total number of the Option Shares to be purchased
by the several Underwriters as such Underwriter is purchasing of the
Firm Shares, subject to such adjustments as the Representative in
its absolute discretion shall make to eliminate any fractional
shares. The maximum number of Option Shares to be sold by the
Company is .
(d) If the option provided for in Section (c) hereof is exercised after
the third business day prior to the Closing Date, the Company will
deliver the Option Shares (at the expense of the Company) to the
Representative at [O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx Xxxxx,
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000], on the date specified by the
Representative which shall be three business days after notice of
exercise of said option (each such date and time of payment and
delivery being herein called an "Option Closing Date"), against
payment by the several Underwriters through the Representative
thereof to, or upon the order of, the Company by wire transfer
payable in same day funds to the accounts specified by the Company.
Delivery of the Option Shares shall be made through the facilities
of The Depository Trust Company unless the Representative shall
otherwise instruct. If settlement for the Option Shares occurs after
the Closing Date, the Company will deliver to the Representative on
any settlement date for the Option Shares, and the obligation of the
Underwriters to purchase the Option Shares shall be conditioned upon
receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters
delivered on the Closing Date pursuant to Section 6 hereof.
3. Public Offering of the Securities. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set
forth in the Prospectus.
13
4. Covenants and Agreements. The Company agrees with each of the several
Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the date and time that this Agreement
is executed and delivered by the parties hereto (the "Execution
Time"), and any amendment thereof, to become effective as promptly
as possible. Prior to the termination of the offering of the
Securities, the Company will not file any amendment of the
Registration Statement or supplement to the Prospectus or any Rule
462(b) Registration Statement unless the Company has furnished the
Representative a copy for their review prior to filing and will not
file any such proposed amendment or supplement to which the
Representative reasonably objects. Subject to the foregoing
sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be
filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed therein and will
provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when
the Registration Statement, if not effective at the Execution Time,
shall have become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b) or when any Rule 462(b)
Registration Statement shall have been filed with the Commission,
(iii) when, prior to termination of the offering of the Securities,
any amendment to the Registration Statement shall have been filed or
become effective, (iv) of any request by the Commission or its staff
for any amendment of the Registration Statement, or any Rule 462(b)
Registration Statement, or for any supplement to the Prospectus or
of any additional information, (v) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for
that purpose and (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company will use
its best efforts to prevent the issuance of any such stop order or
the suspension of any such qualification and, if issued, to obtain
as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the 1933 Act and the 1933 Act
Regulations promulgated thereunder, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it
shall be necessary to amend the Registration Statement or supplement
the Prospectus to comply with the 1933 Act and the 1933 Act
Regulations promulgated thereunder, the Company promptly will (A)
notify the Representative of any such event, (B) prepare and file
with the Commission, subject to the second sentence of Section
14
4(a)(i), an amendment or supplement which will correct such
statement or omission or effect such compliance and (C) supply any
supplemented Prospectus to each of the Underwriters in such
quantities as each such Underwriter may reasonably request.
(c) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the Effective Date, 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.
(d) As soon as practicable, but in any event not later than 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 occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner
specified in Rule 158 under the 1933 Act, 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
1933 Act and Rule 158 under the 1933 Act.
(e) During a period of two years from the date hereof, the Company will
furnish to its stockholders annual reports (including financial
statements audited by independent public accountants) and will
deliver to the Representative:
(1) concurrently with furnishing the above-mentioned 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;
(2) concurrently with furnishing the above-mentioned 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 report thereon of independent
certified public accountants; and
(3) as soon as they are available, copies of all reports (financial or
other) mailed to stockholders.
15
Delivery to the Representative will be deemed to have been
made to the extent the Company has filed or furnished the
above-referenced materials (including those in Section 4(d) above) with
the Commission.
(f) The Company will furnish to the Representative and
Underwriters' Counsel, without charge, at such place as the
Representative may designate, signed copies of the
Registration Statement (including exhibits thereto) and to
each other Underwriter a copy of the Registration Statement
(without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the
1933 Act and the 1933 Act Regulations promulgated thereunder,
as many copies of each Preliminary Prospectus and the
Prospectus and any supplement thereto as the Representative
may reasonably request.
(g) At the Execution Time, the Underwriter shall have received an
agreement substantially in the form of Exhibit A hereto signed
by the persons or entities listed on Schedule B hereto (the
"Lock-Up Agreements"). On or before the Closing Date, the
Company shall deliver instructions to Continental Stock
Transfer & Trust Company, the transfer agent for the
Securities, authorizing it to place appropriate stop transfer
orders on the Company's ledgers.
(h) The Company will not, for a period of 180 days following the
Execution Time (the Lock-Up Period"), without the prior
written consent of the Representative, offer, sell, contract
to sell, pledge or otherwise dispose of (or enter into any
transaction which is designed to, or could be expected to,
result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or
any person in privity with the Company or any affiliate of the
Company) directly or indirectly, including the filing (or
participation in the filing) of a registration statement with
the Commission in respect of, or establish or increase a put
equivalent position or liquidate or decrease a call equivalent
position within the meaning of the rules promulgated under
Section 16 of the Exchange Act with respect to, any other
shares of Common Stock or any securities convertible into, or
exchangeable for, shares of Common Stock, or publicly announce
an intention to effect any such transaction; provided,
however, that the Company may issue and sell Common Stock and
securities exercisable for Common Stock pursuant to any
employee stock option plan, stock ownership plan, stock
purchase plan or dividend reinvestment plan of the Company in
effect at the Execution Time and the Company may issue Common
Stock issuable upon the conversion of securities or the
exercise of warrants outstanding at the Execution Time. If (i)
the Company issues an earnings release or material news or a
material event relating to the Company is announced during the
last 17 days of the Lock-Up Period, or (ii) prior to the
expiration of the Lock-Up Period, the Company announces that
it will release earnings results during the 15-day period
beginning on the last day of the initial Lock-Up Period, the
restrictions imposed during the Lock-Up Period shall continue
to apply until the expiration of the 18-day period beginning
on the issuance of the earnings release or the announcement of
the material news or material event.
16
(i) Prior to the completion of the distribution of the Securities
by the Underwriters, neither the Company nor any of its
officers, directors or stockholders, nor any of their
respective affiliates (within the meaning of the Exchange Act)
will take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to, cause or
result in, under the Exchange Act and the rules and
regulations promulgated thereunder or otherwise, stabilization
or manipulation of the price of any securities of the Company
to facilitate the sale or resale of the Securities.
(j) The Company 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. Except as
described in the Prospectus, no portion of the net proceeds
will be used, directly or indirectly, to acquire any
securities issued by the Company.
(k) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the 1933
Act, the Exchange Act and the rules and regulations
promulgated thereunder and all such reports, forms and
documents filed will comply as to form and substance in all
material respects with the applicable requirements under the
1933 Act, the Exchange Act and the rules and regulations
promulgated thereunder.
(l) The Company shall use its best efforts to cause the Common
Stock to be quoted on the Nasdaq National Market, the NYSE or
another national securities exchange for a period of five
years from the date hereof, and shall use its best efforts to
maintain the Nasdaq National Market quotation, the NYSE
listing or national securities market or exchange quotation or
listing of the Common Stock to the extent outstanding.
5. Payment of Expenses. The Company agrees to pay the costs and expenses
in connection with its obligations pursuant to the proposed public
offering of the Securities, including, but not limited to the
following: fees and expenses of filing with the NASD and the
Commission, printing and duplicating costs, all postage and mailing
expenses with respect to the transmission of prospectuses, registrar,
warrant and transfer agent fees, "road show" travel related expenses
for Company personnel, its own counsel and accounting fees, costs of
independent due diligence investigations (not to exceed $5,000), bound
volumes, issue and transfer taxes, if any, Blue Sky filing fees, and
Blue Sky and NASD counsel fees and expenses. It is agreed that
Underwriters' Counsel shall perform the required blue sky legal
services, if necessary. The Representative is authorized upon
consummation of the proposed offering to place customary "tombstone"
advertisements in publications of its choice at its expense. In
addition, the Company agrees to pay the Representative a
non-accountable expense allowance equal to $100,000, which is payable
at, and only in the event of, the Closing. For purposes of this
paragraph, "Closing" means the date on which the Company delivers the
Firm Shares to the Representative and the Representative pays the
Company for the Firm Shares. Except as provided in this Section, the
Underwriters will pay all of their own costs and expenses, including
the fees of their counsel, "road show" travel related expenses for
Underwriter personnel, stock
17
transfer taxes on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to (A) the continuing accuracy
of the representations and warranties of the Company herein, as of the
date hereof and as of the Closing Date and any Option Closing Date, as
if such representations and warranties had been made on and as of the
Closing Date or Option Closing Date, as the case may be, (B) the
accuracy on and as of the Closing Date or any Option Closing Date, of
the statements of the officers of the Company made pursuant to the
provisions hereof, (C) the performance by the Company on and as of the
Closing Date and any Option Closing Date, of its covenants and
obligations hereunder, (D) the accuracy of the statements of the
Company made in any certificates pursuant to the provisions hereof, and
(E) the following further conditions:
(a) If the Registration Statement has not become effective prior
to the Execution Time, unless the Representative agrees in
writing to a later time, the Registration Statement will
become effective not later than (i) 6:00 PM New York City time
on the date of determination of the public offering price, if
such determination occurred at or prior to 3:00 PM New York
City time on such date or (ii) 9:30 AM New York City time on
the business day following the day on which the public
offering price was determined, if such determination occurred
after 3:00 PM New York City time on such date; if filing of
the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b), the Prospectus, and any such
supplement, shall be filed in the manner and within the time
period required by Rule 424(b); and 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 threatened.
(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 necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall have
received from Underwriters' Counsel, such opinions or
statements with respect to the organization of the Company,
the validity of the Securities, the compliance as to form of
the Registration Statement, and the Prospectus with the
requirements of the 1933 Act and the 1933 Act Regulations
promulgated thereunder, and other related matters as the
Representative requests. Underwriters' Counsel shall have
18
received such papers and information as it reasonably requests
to enable it to pass upon such matters.
(d) On the Closing Date, the Underwriters shall have received the
opinion of Xxxxxxxxx Xxxxxxx, LLP, counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in
substantially the form attached hereto as Exhibit B.
(e) At any Option Closing Date, the Underwriters shall have
received the opinion of Xxxxxxxxx Traurig, LLP, dated such
Option Closing Date, addressed to the Underwriters and in form
and substance satisfactory to Underwriters' Counsel,
confirming, as of such Option Closing Date, the statements
made by Xxxxxxxxx Xxxxxxx, LLP in its opinion delivered on the
Closing Date.
(f) Prior to each of the Closing Date and any Option Closing Date
and other than as set forth in the Registration Statement or
Prospectus, (i) there shall have been no material adverse
change in the condition (financial or otherwise), earnings,
business prospects, or properties of the Company and its
Subsidiaries taken as a whole, 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 any of its Subsidiaries, from the latest date as of which
the financial condition of the Company and its Subsidiaries,
taken as a whole, is set forth in the Registration Statement
and Prospectus which is adverse to the Company and its
Subsidiaries, taken as a whole; (iii) neither the Company nor
any of its Subsidiaries, shall be in material breach under any
provision of any instrument relating to any outstanding
indebtedness; (iv) neither the Company nor any of its
Subsidiaries shall have issued any securities (other than the
Securities); (v) neither the Company nor any of its
Subsidiaries shall have declared or paid any dividend or made
any distribution in respect of its capital stock of any class;
(vi) there shall have been no change in the capital stock of
the Company, or any change in the debt (long or short term) or
liabilities or obligations of the Company or any of its
Subsidiaries (contingent or otherwise); (vii) no amount of the
assets of the Company or any of its Subsidiaries shall have
been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (viii) no actions,
suits or proceedings, at law or in equity, shall have been
pending or, to the knowledge of the Company, threatened (or
circumstances giving rise to same) against the Company or any
of its Subsidiaries, or affecting any of its properties or
business, before or by any court or federal, state or foreign
commission, board or other administrative agency wherein
unfavorable decisions, rulings or findings could reasonably be
expected, singularly or in the aggregate, to have a Material
Adverse Effect; and (viii) no stop order shall have been
issued under the 1933 Act and no proceedings therefor shall
have been initiated or, to the best knowledge of the Company,
threatened or contemplated by the Commission.
(g) At each of the Closing Date and any Option Closing Date, the
Underwriters shall have received a certificate of the Company
signed by the principal executive
19
officer and by the chief financial officer of the Company,
dated the Closing Date or such Option Closing Date, as the
case may be, to the effect that each such person 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 in all respects
as if made on and as of such Closing Date or Option
Closing Date, as the case may be, and the Company has
complied with all agreements and covenants and
satisfied all conditions contained in this Agreement
on its part to be performed or satisfied at or prior
to such Closing Date or Option Closing Date, as the
case may be;
(ii) no stop order suspending the effectiveness of the
Registration Statement 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 or the Company's knowledge,
after due inquiry, are contemplated or threatened;
(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 neither the Registration
Statement 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 Prospectus nor
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) since the date of the most recent financial
statements included in the Prospectus (exclusive of
any supplement thereto), there has been no material
adverse change in the condition (financial or
otherwise), earnings, business prospects, or
properties of the Company and its Subsidiaries, taken
as a whole, whether or not arising from transactions
in the ordinary course of business.
(h) The Company shall have requested and caused Ernst & Young LLP
to have furnished to the Representative letters, at the
Execution Time and at the Closing Date, dated respectively as
of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the Representative, containing
statements and information of the type ordinarily included in
accountant's "comfort letters" with respect to the financial
statements and certain financial information contained in the
Registration Statement and the Prospectus.
20
(i) On each of the Closing Date and any Option Closing Date, there
shall have been duly tendered to the Representative for the
several Underwriters' accounts the appropriate number of
Securities.
(j) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to
subsection (c) of Section 4 hereof shall have been issued on
either the Closing Date or any Option Closing Date, and no
proceedings for that purpose shall have been instituted or
shall be contemplated.
(k) Prior to the Closing Date, any voting agreements or voting
trusts among shareholders of the Company of which the Company
has knowledge, will be amended to terminate upon the
consummation of an initial public offering by the Company of
its Common Stock.
(l) Prior to or at the Closing Date, the Company shall have
converted all of its Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock into shares of Common
Stock.
(m) Prior to the Closing Date, the Company shall have furnished to
the Representative such further information, certificates and
documents as the Representative may reasonably request.
If any of the conditions specified in this Section 6, if not
otherwise qualified as to materiality, shall not have been fulfilled in
all material respects, and if otherwise qualified as to materiality,
shall not have been fulfilled in all respects, when and as provided in
this Agreement, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement, if not otherwise qualified as to
materiality shall not be in all material respects, and if otherwise
qualified as to materiality shall not be, reasonably satisfactory in
form and substance to the Representative and Underwriters' Counsel,
this Agreement and all obligations of the Underwriters hereunder may be
canceled at, or at any time prior to, the Closing Date by the
Representative. Notice of such cancellation shall be given to the
Company in writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the offices of O'Melveny & Xxxxx LLP, 000 Xxxxxxx
Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, on the Closing Date.
7. Reimbursement of Underwriters' Expenses. If the sale of the Securities
provided for herein is not consummated (a) because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not
satisfied or (b) because of any refusal, inability or failure on the
part of the Company to perform any agreement herein or comply with any
provision hereof other than (i) by reason of a default by any of the
Underwriters or (ii) because of any termination pursuant to Section 11
hereof, the Company will reimburse the Underwriters severally through
the Representative on demand for all out-of-pocket expenses (including
reasonable fees and disbursements of
21
counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of
each Underwriter and each person who controls any Underwriter
within the meaning of either the 1933 Act or the Exchange Act
against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become
subject under the 1933 Act, the Exchange Act or other Federal
or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and
in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the
Representative specifically for inclusion therein. This
indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) Each Underwriter severally and not jointly agrees to indemnify
and hold harmless the Company, each of its directors, each of
its officers who signs the Registration Statement, and each
person who controls the Company within the meaning of either
the 1933 Act or the Exchange Act, to the same extent as the
foregoing indemnity to each Underwriter, but only with
reference to written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter
through the Representative specifically for inclusion in the
documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which
any Underwriter may otherwise have. The Company acknowledge
that the statements set forth under the heading "Underwriting"
in (i) the paragraph relating to discounts to brokers or
dealers, (ii) the last two sentences of the paragraph relating
to the shares reserved for sales to directors, officers,
employees, business associates, and related persons (iii) the
paragraph relating to short sales, stabilizing transactions
and purchases to cover positions created by short sales (iv)
the paragraph relating to penalty bids, (v) the paragraph
relating to the effect of purchases to cover a short position
and stabilizing transaction, (vi) the paragraph relating to
sales to discretionary accounts, and (vii) the paragraph
relating to the prospectus in electronic format in any
Prospectus or the Registration Statement constitute the only
information
22
furnished in writing by or on behalf of the several
Underwriters for inclusion in any Prospectus or the
Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8,
notify the indemnifying party in writing of the commencement
thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by the
indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent
the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel
if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there
may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of
the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit
or proceeding 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 or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party
from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 8 is unavailable to or insufficient to
hold harmless an indemnified party for any reason, the Company
and the Underwriters agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or
other expenses
23
reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company
and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits
received by the Company and by the Underwriters from the
offering of the Securities; provided, however, that in no case
shall any Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the
Securities) be responsible for any amount in excess of the
underwriting discount or commission applicable to the
Securities purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Underwriters
shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative
fault of the Company and of the Underwriters in connection
with the statements or omissions which resulted in such Losses
as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal
to the total net proceeds from the offering (before deducting
expenses) received by it, and benefits received by the
Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set
forth on the cover page of the Prospectus. Relative fault
shall be determined by reference to, among other things,
whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information provided by the Company
on the one hand or the Underwriters on the other, the intent
of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Underwriters agree
that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of
allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person
who controls an Underwriter within the meaning of either the
1933 Act or the Exchange Act and each director, officer,
employee and agent of an Underwriter shall have the same
rights to contribution as such Underwriter, and each person
who controls the Company within the meaning of either the 1933
Act or the Exchange Act, each officer of the Company who shall
have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. Representations and Indemnities to Survive Delivery. All
representations, warranties, agreements, indemnities and other
statements of the Company or its officers and of the Underwriters,
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 as of the Closing Date and
as of any Option Closing Date, as the case may be, and such
representations, warranties and agreements and the indemnity agreements
contained in Section 8 hereof, shall remain operative and in full force
and
24
effect regardless of any investigation made by or on behalf of any
Underwriter, the Company or any controlling person of any Underwriter
or the Company, and shall survive the termination of this Agreement or
the issuance, sale and delivery of the Securities to the Underwriters
and the Representative, as the case may be.
10. Effective Date. This Agreement shall become effective upon the later of
(i) when the Underwriters and the Company shall have received
notification of the effectiveness of the Registration Statement or (ii)
the execution of this Agreement. If either the initial public offering
price or the purchase price per Security has not been agreed upon prior
to 5:00 P.M., New York time, on the fifth full business day after the
Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Company or the
Underwriters except as herein expressly provided. Until this Agreement
becomes effective as aforesaid, it may be terminated by the Company by
notifying the Representative or by the Representative by notifying the
Company. Notwithstanding the foregoing, and regardless of any
investigation made by or on behalf of any Underwriter or the Company or
any of the directors, officers, employees or agents referred to in
Section 8 hereof, (i) the provisions of this Section 10 and of Sections
5 and 8 hereof shall at all times be in full force and effect and shall
survive the termination or cancellation of this Agreement, and (ii) the
provisions of Section 1 hereof shall survive the termination or
cancellation of this Agreement only if delivery and payment for the
Securities shall have occurred.
11. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representative, by notice given to the
Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall
have been suspended by the Commission or the Nasdaq National Market or
trading in securities generally on the New York Stock Exchange or the
Nasdaq National Market shall have been suspended or limited or minimum
prices shall have been established on either of New York Stock Exchange
or the Nasdaq National Market, (ii) the Company shall have sustained a
loss material or substantial to the Company or any of its restaurants
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 delivery of the Securities, (iii) a
banking moratorium shall have been declared either by Federal or New
York State authorities, (iv) 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, (v) any material adverse change in the financial
markets shall have occurred, or (vi) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States
of a national emergency or war, or other calamity or crisis the effect
of which on financial markets is such as to make it, in the sole
judgment of the Representative, impractical or inadvisable to proceed
with the offering or delivery of the Securities as contemplated by the
Prospectus.
12. Default by an Underwriter. If any one or more Underwriters shall fail
to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase
shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be
obligated severally to take up and pay for (in the respective
proportions which the amount of
25
Securities set forth opposite their names in Schedule I hereto bears to
the aggregate amount of Securities set forth opposite the names of all
the remaining Underwriters) the Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase; provided,
however, that in the event that the aggregate amount of Securities
which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set
forth in Schedule I hereto, the remaining Underwriters shall have the
right to purchase all, but shall not be under any obligation to
purchase any, of the Securities, and if such nondefaulting Underwriters
do not purchase all the Securities, this Agreement will terminate
without liability to any nondefaulting Underwriter or the Company. In
the event of a default by any Underwriter as set forth in this Section
12, the Closing Date shall be postponed for such period, not exceeding
five business days, as the Representative shall determine in order that
the required changes in the Registration Statement and the Prospectus
or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company and any nondefaulting Underwriter
for damages occasioned by its default hereunder.
13. Default by the Company. If the Company shall fail on the Closing Date
or on 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 Shares 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 Shares from the Company on
such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 5 and Section 8 hereof. No action
taken pursuant to this Section 13 shall relieve the Company from
liability, if any, in respect of such default.
14. Arm's-Length Transaction. The Company acknowledges and agrees that (i)
the purchase and sale of the Securities pursuant to this Agreement is
an arm's-length commercial transaction between the Company, on the one
hand, and the several Underwriters, on the other, (ii) in connection
therewith each Underwriter is acting as a principal and not the agent
or fiduciary of the Company, and (iii) no Underwriter has assumed an
advisory responsibility in favor of the Company with respect to the
offering contemplated hereby or the process leading thereto
(irrespective of whether such Underwriter has advised or is currently
advising the Company on other matters) or any other obligation to the
Company except the obligations expressly set forth in this Agreement.
15. 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 Xxxxxxxxxxx & Co. Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Xxxxx X. Xxxxxxxx, (Facsimile Number: (212)
425-2028), with a copy to O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxx X. Xxxxxx
(Facsimile Number: (000) 000-0000). Notices to the Company shall be
directed to the Company at Kona Grill, Inc., 0000 X. Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxx Xxxxxxx,
26
(Facsimile Number: (000) 000-0000), with a copy to Xxxxxxxxx Traurig,
LLP, 0000 X. Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000,
Attention: Xxxxx X. Xxxxxxxx (Facsimile Number: (000) 000-0000).
16. 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 8 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 purchaser of
Securities from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
17. Applicable Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed
by and construed in accordance with the laws of the State of New York.
Each of the parties irrevocably submits to the exclusive jurisdiction
of the state and federal courts of competent jurisdiction sitting in
New York City and waives any objection to venue in such courts.
18. 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
agreement.
19. Headings. The section headings used herein are for convenience only and
shall not affect the construction hereof.
20. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto and supersedes 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.
[Signature Page Follows]
27
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,
KONA GRILL, INC.
By: _______________________________________
C. Xxxxxx Xxxxxxx
President and Chief Executive Officer
28
Confirmed and accepted as of
the date first above written.
XXXXXXXXXXX & CO. INC.
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:____________________________
Name:
Title:
