EXHIBIT 1.1
850,000 Shares/1/
JAVELIN SYSTEMS, INC.
Common Stock
UNDERWRITING AGREEMENT
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October __, 1996
MERIDIAN CAPITAL GROUP, INC.
As Representative of the Underwriting Group
0000 XxxXxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
SECTION 1. Introductory. Javelin System, Inc., a Delaware
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corporation (the "Company"), proposes to issue and sell 850,000 shares of its
authorized but unissued Common Stock (the "Firm Common Shares") to Meridian
Capital Group, Inc. (the "Representative") and members of the Underwriting Group
(collectively the "Underwriting Group" or "you"). In addition, the Company and
certain Selling Stockholders named in Schedule A annexed hereto (the "Selling
Stockholders") propose to grant to the Underwriting Group an option (the
"Option") to purchase up to 111,250 and 16,250 additional shares of Common
Stock, respectively (collectively, the "Optional Common Shares"), as provided in
Section 5 hereof. The Firm Common Shares and, to the extent such option is
exercised, the Optional Common Shares are hereinafter collectively referred to
as the "Common Shares."
You have advised the Company and the Selling Stockholders that the
Underwriting Group proposes to make a public offering of the Common Shares on
the "effective date of the Registration Statement" (as defined in Rule 158(c) of
the Rules and Regulations)("Effective Date"), or as soon thereafter as in your
judgment is advisable.
The Company and each of the Selling Stockholders hereby confirm their
respective agreements with respect to the purchase of the Common Shares by the
Underwriting Group as follows:
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1
Plus an option to purchase up to 111,250 additional shares of Common
Stock from the Company and an additional 16,250 shares of Common Stock from the
Selling Stockholders to cover over-allotments, if any.
SECTION 2. Representations and Warranties of the Company. The
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Company hereby represents and warrants to the Underwriting Group that:
(a) A registration statement on Form SB-2 (File No. 333-11217) with
respect to the Common Shares has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The Company has prepared and has filed or proposes to file prior to
the Effective Date of such registration statement an amendment or amendments to
such registration statement, which amendment or amendments have been or will be
similarly prepared.
There have been delivered to you two signed copies of such
registration statement and amendments, together with two copies of each exhibit
filed therewith. Conformed copies of such registration statement and amendments
(but without exhibits) and of the related preliminary prospectus have been
delivered to you in such reasonable quantities as you have requested. The
Company will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment thereto,
including the form of final prospectus, (ii) a final prospectus in accordance
with Rules 430A and 424(b) of the Rules and Regulations or (iii) a term sheet
(the "Term Sheet") as described in and in accordance with Rules 434 and 424(b)
of the Rules and Regulations. As filed, such amendment and form of final
prospectus, or such final prospectus, or such Term Sheet, shall include all Rule
430A Information (as defined below) and, except to the extent that you shall
agree in writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the date and time that this Underwriting
Agreement (this "Agreement") was executed and delivered by the parties hereto,
or, to the extent not completed at such date and time, shall contain only such
specific additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company shall have previously advised you
in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall
mean such registration statement at the time such registration statement becomes
or became effective and, in the event any post-effective amendment thereto
becomes effective prior to the First Closing Date (as hereinafter defined),
shall also mean such registration statement as so amended; provided, however,
that such term shall also include all Rule 430A Information deemed to be
included in such registration statement at the time such registration statement
becomes or became effective as provided by Rule 430A of the Rules and
Regulations. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes or became
effective that omits Rule 430A Information. The term "Prospectus" as used in
this Agreement shall mean either (i) the prospectus relating to the Common
Shares in the form in which it is first filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations or, (ii) if a Term Sheet is not used
and no filing pursuant to Rule 424(b) of the Rules and Regulations is required,
shall mean the form of final prospectus included in the Registration Statement
at the time such registration statement becomes or became effective. The term
"Rule 430A Information" means information with respect to the Common Shares and
the offering thereof permitted to be omitted from the Registration Statement
when it becomes or became effective pursuant to Rule 430A of the Rules and
Regulations.
(b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus, and each Preliminary Prospectus has conformed
in all material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement becomes or
became effective, and at all times subsequent thereto up to and including each
Closing Date hereinafter mentioned, the Registration Statement and the
Prospectus, and any amendments or supplements thereto, will contain or contained
all material statements and information required to be included therein by the
Act and the Rules and Regulations and will in all material respects conform, or
did in such respects conform, to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, included or will include any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however, no
representation or warranty contained in this subsection 2(b) shall be applicable
to information contained in or omitted from any Preliminary Prospectus, the
Registration Statement, the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any member of the Underwriting Group, reciting in
writing that it is specifically for use in the preparation thereof.
(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity. The Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of Delaware, with full power and authority (corporate and other) to own and
lease its properties and conduct its business as described in the Prospectus;
the Company is in possession of and operating in compliance with all
authorizations, licenses, permits, consents, certificates and orders material to
the conduct of its business, all of which are valid and in full force and
effect; the Company is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the ownership or leasing of
properties or the conduct of its business requires such qualification, except
for jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company; and no proceeding has been instituted in any
such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit
or curtail such power and authority or qualification.
(d) The Company has authorized and outstanding capital stock as set forth
under the heading "Capitalization" in the Prospectus; the issued and outstanding
shares of Common Stock have been duly authorized and the outstanding shares of
Common Stock have been validly issued, are fully paid and nonassessable, and
have been duly approved for quotation on the Nasdaq SmallCap Market; the issued
and outstanding shares of Common Stock and the outstanding options and warrants
described in the Prospectus have been issued in compliance with all federal and
state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
conform to any description thereof contained in the Prospectus. No Preferred
Stock of the Company is issued and outstanding and the Company does not have
outstanding any options to purchase or other rights to subscribe for or issue
any Preferred Stock. Except as otherwise disclosed in the Prospectus and the
financial statements of the Company, and the related notes thereto, included in
the Prospectus, the
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations. The description of the Company's Stock Incentive Award Plan and
the options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately and fully presents the information required to be shown
with respect to such plans, arrangements, options and rights.
(e) The Common Shares to be sold by the Company have been duly authorized
and, when issued, delivered and paid for in the manner set forth in this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
Prospectus. The Common Shares to be sold by the Selling Stockholders have been
duly authorized, and are validly issued, fully paid and nonassessable, and
conform to the description thereof contained in the Prospectus. No preemptive
rights or other rights to subscribe for or purchase exist with respect to the
issuance and sale of the Common Shares pursuant to this Agreement. No holder of
any securities of the Company has any right that has not been waived or complied
with to require the Company to register the sale of any shares of Common Stock
or other securities of the Company owned by such holder under the Act in the
public offering contemplated by this Agreement. No further approval or
authority of the stockholders, the Board of Directors of the Company or any
other party will be required for the transfer and sale of the Firm Common Shares
or the Optional Common Shares to be sold as contemplated herein.
(f) The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws, or equitable
principles relating to or limiting creditor's rights generally and (ii) the
unenforceability under certain circumstances of provisions indemnifying a party
against liability for its own wrongful or negligent acts or where such
indemnification is against public policy. The making and performance of this
Agreement by the Company and the consummation of the transactions herein
contemplated will not violate any provisions of the certificate of incorporation
or bylaws, as amended or restated, or other organizational documents, of the
Company, and will not conflict with, result in the acceleration of any
indebtedness under or performance required by, result in any right of
termination of, increase any amounts payable under, decrease any amounts
receivable under, result in the breach or violation of, constitute, either by
itself or upon notice or the passage of time or both, a default under, or to the
Company's best knowledge adversely change any other rights pursuant to, any of
the terms or provisions of any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the Company
is a party or by which the Company or any of its properties may be bound or
affected, or any statute or any authorization, judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or other
governmental body, or arbitrator (domestic or foreign) applicable to the Company
or any of its properties. No consent, approval, authorization or other order of
any court, regulatory body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement or the consummation of
the transactions contemplated by this Agreement except for compliance with the
Act, the Blue Sky laws applicable to the public
offering of the Common Shares by the Underwriting Group and the clearance of
such offering with the National Association of Securities Dealers, Inc. (the
"NASD").
(g) Ernst & Young LLP, who have expressed their opinion with respect to
the financial statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus and in the Registration Statement, are
independent accountants as required by the Act and the Rules and Regulations.
(h) The financial statements of the Company, and the related notes
thereto, included in the Registration Statement and the Prospectus present
fairly the financial position of the Company as of the dates of such financial
statements, and the results of operations and cash flows of the Company, for the
respective periods covered thereby. Such statements, schedules and related notes
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis as certified by the independent accountants named
in subsection 2(g). No other financial statements, schedules or information are
required by the Act or the Rules and Regulations to be included in the
Registration Statement. The financial data set forth in the Prospectus under the
captions "Capitalization" and "Selected Financial Data" fairly present the
information set forth therein on the basis stated in the Registration Statement.
(i) Except as disclosed in the Prospectus, and except as to violations,
breaches, defaults and events of default that individually or in the aggregate
would not have a material adverse effect on the Company, (i) the Company is not
in violation or default of any provision of its certificate of incorporation or
bylaws, as amended or restated, or other organizational documents, nor is it in
breach of or default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, lease, franchise, license, indenture,
permit or other instrument to which the Company is a party or by which the
Company or any of its properties are bound; and (ii) there does not exist any
state of facts that constitutes an event of default on the part of the Company
as defined in such documents or which, with notice or lapse of time or both,
would constitute such an event of default.
(j) There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations that have not been
described or filed as required. The descriptions of the contracts in the
Prospectus are accurate and fairly present the information required by the Act
and/or the Rules and Regulations to be presented in Form SB-2; except as
disclosed in the Prospectus, the contracts so described in the Prospectus are in
full force and effect on the date hereof; and neither the Company nor, to the
best of the Company's knowledge, any other party is in breach of or default
under any of such contracts other than any such breach or default as would not,
individually or in the aggregate, prevent or adversely affect the transactions
contemplated by this Agreement or result in a material adverse change in the
condition (financial or other), properties, business, results of operations or
prospects of the Company.
(k) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company is or may be a party or of
which property owned or leased by the Company is or may be the subject or
related to environmental or discrimination matters, that might, individually or
in the aggregate, prevent or adversely affect the transactions contemplated by
this Agreement or result
in a material adverse change in the condition (financial or other), properties,
business, results of operations or prospects of the Company, and no labor
disturbance by the employees of the Company exists or is imminent that might be
expected to affect adversely such condition, properties, business, results of
operations or prospects. The Company is not a party or subject to the provisions
of any injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body that could be expected to
result in a material adverse change in the condition (financial or other),
properties, business, results of operations or prospects of the Company.
(l) The Company has good and marketable title to all the properties and
assets reflected as owned by it in the Prospectus and the financial statements
included in the Registration Statement, subject to no lien, mortgage, pledge,
charge or encumbrance of any kind except (i) those, if any, reflected in such
financial statements (or elsewhere in the Prospectus), or (ii) those which are
not material in amount and do not adversely affect the use made and proposed to
be made of such property by the Company. The Company holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of the Company. Except as
disclosed in the Prospectus, the Company owns or leases all such properties as
are necessary to its operations as now conducted or as proposed to be conducted.
(m) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company has not incurred
any material liabilities or obligations, indirect, direct or contingent, or
entered into any material verbal or written agreement or other transaction that
is not in the ordinary course of business or that could result in a material
reduction in the future earnings of the Company; (ii) the Company has not
sustained any loss or interference with its business or properties from fire,
flood, windstorm, accident or other calamity, whether or not covered by
insurance, that materially and adversely affects the condition (financial or
other), business, results of operations or prospects of the Company; (iii) the
Company has not paid or declared any dividends or other distributions with
respect to its capital stock and the Company is not in default in the payment of
principal of or interest on any outstanding debt obligations; (iv) there has not
been any change in the capital stock (other than upon the sale of the Common
Shares hereunder and upon the exercise of options, warrants, and other rights
described in the Registration Statement or otherwise as contemplated in the
Registration Statement and Prospectus) or increase in indebtedness material to
the Company (other than in the ordinary course of business); and (v) there has
not been any material adverse change in the condition (financial or other),
business, properties, results of operations or prospects of the Company.
(n) Except as disclosed in or specifically contemplated by the Prospectus,
the Company has sufficient trademarks, trade names, patent rights, mask works,
copyrights, licenses, approvals and governmental authorizations to conduct its
business as now conducted; the expiration of any trademarks, trade names, patent
rights, mask works, copyrights, licenses, approvals or governmental
authorizations would not have a material adverse effect on the condition
(financial or other), business, results of operations or prospects of the
Company; except as disclosed in or specifically contemplated by the Prospectus,
the Company has no knowledge of any material infringement by it, or its
customers, with respect to the use of the Company's
products, trademarks, trade name rights, patent rights, mask works, copyrights,
licenses, trade secrets or other similar rights of others, and there is no claim
being made against the Company, or its customers with respect to their use of
the Company's products, trademarks, trade names, patents, mask works,
copyrights, licenses, trade secrets or other infringement, which could have a
material adverse effect on the condition (financial or other), business, results
of operations or prospects of the Company.
(o) The Company is in compliance with all applicable laws, rules,
regulations, judgments, decrees, orders and statutes of the jurisdictions in
which it is conducting business, including without limitation, all applicable
local, state and federal environmental laws and regulations; except where
failure to be so in compliance would not materially adversely affect the
condition (financial or other), business, results of operations or prospects of
the Company.
(p) The Company has filed all necessary federal, state and foreign income
and franchise tax returns and has paid all taxes shown as due thereon; and the
Company has no knowledge of any tax deficiency which has been or might be
asserted or threatened against it which could materially and adversely affect
the business, operations or properties of the Company.
(q) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute prior to the
First Closing Date any offering material in connection with the offering and
sale of the Common Shares other than the Prospectus, the Registration Statement
and the other materials permitted by the Act.
(s) The Company maintains, with insurers of recognized financial
responsibility, insurance of the types and in the amounts as are prudent and
customary in the business in which it is engaged, including but not limited to,
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
(t) The Company has not at any time during the last five years (i) made
any unlawful contribution to any candidate for foreign or domestic office, or
failed to disclose fully any contribution in violation of law, or (ii) made any
payment to any foreign or federal or state governmental officer or official or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(u) The Company will not take, directly or indirectly, any action designed
to or that might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Common Shares.
(v) Other than the Representative acting in its capacity as such, no
person is or will be owed any finders fee or commission or similar payment in
connection with the transactions contemplated by this Agreement.
SECTION 3. Representations, Warranties and Covenants of the Selling
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Stockholders. Each of the Selling Stockholders severally represents and
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warrants to, and agrees with, the Underwriting Group and the Company that:
(a) Such Selling Stockholder has, and on the First Closing Date and the
Second Closing Date, hereinafter mentioned will have, good and valid title to
the Optional Common Shares proposed to be sold by such Selling Stockholder
hereunder on such Closing Date and full right, power and authority to enter into
this Agreement and to sell, assign, transfer and deliver such Common Shares
hereunder, free and clear of all voting trust arrangements, liens, encumbrances,
equities, security interests, restrictions and claims whatsoever, and upon
delivery of and payment for such Common Shares hereunder, the Underwriting Group
will acquire good and valid title thereto, free and clear of all liens,
encumbrances, equities, claims, restrictions, security interests, voting trusts
or other defects of title whatsoever.
(b) Such Selling Stockholder has executed and delivered a Transmittal
Letter and Custody Agreement and a Seller's Irrevocable Power of Attorney
(hereinafter collectively referred to as the "Stockholders Agreements") and in
connection herewith such Selling Stockholder further represents, warrants and
agrees that such Selling Stockholder has deposited in custody, under the
Stockholders Agreements, with the agents named therein (the "Agents") as
custodians, certificates in negotiable form for the Common Shares to be sold
hereunder by such Selling Stockholder, for the purpose of further delivery
pursuant to this Agreement. Such Selling Stockholder agrees that the Common
Shares to be sold by such Selling Stockholder on deposit with the Agents are
subject to the interests of the Company and the Underwriting Group, that the
arrangements made for such custody are to that extent irrevocable, and that the
obligations of such Selling Stockholder hereunder shall not be terminated,
except as provided in this Agreement or in the Stockholders Agreements, by any
act of such Selling Stockholder, by operation of law, by the death or incapacity
of such Selling Stockholder or by the occurrence of any other event if the
Selling Stockholder should die or become incapacitated, or if any other event
should occur, before the delivery of the Common Shares hereunder, the documents
evidencing Common Shares then on deposit with the Agents shall be delivered by
the Agents in accordance with the terms and conditions of this Agreement as if
such death, incapacity or other event had not occurred, regardless of whether or
not the Agents shall have received notice thereof. This Agreement and the
Stockholders Agreements have been duly executed and delivered by or on behalf of
such Selling Stockholder and the form of such Stockholders Agreements has been
delivered to you.
(c) The performance of this Agreement and the Stockholders Agreements and
the consummation of the transactions contemplated hereby and by the Stockholders
Agreements will not result in a breach or violation by such Selling Stockholder
of any of the terms or provisions of, or constitute a default by such Selling
Stockholder under, (i) any indenture, mortgage, deed of trust, trust
(constructive or other), loan agreement, lease, franchise, license or other
agreement or instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder or any of its properties is bound, (ii) any statute, or
any judgment, decree, order, rule or regulation of any court or governmental
agency or body applicable to such Selling Stockholder or any of its properties
or (iii) if such Selling Stockholder is other than a natural person, any
provisions of the charter, bylaws or other organizational documents of such
Selling Stockholder.
(d) Such Selling Stockholder has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Common Shares.
(e) Each Preliminary Prospectus and the Prospectus, insofar as it has
related to such Selling Stockholder, has conformed in all material respects to
the requirements of the Act and the Rules and Regulations and has not included
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made; and neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, as it relates to
such Selling Stockholder, included or will include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(f) Such Selling Stockholder is not aware that any of the representations
and warranties set forth in Section 2 above is untrue or inaccurate in any
material respect.
SECTION 4. Representations and Warranties of the Representative. The
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Representative represents and warrants to the Company and to the Selling
Stockholders that the information set forth (i) on the cover page of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of offering and (ii) under "Underwriting" in the Prospectus, was furnished
to the Company by the Representative for use in connection with the preparation
of the Registration Statement and the Prospectus, and is correct in all material
respects.
SECTION 5. Purchase, Sale and Delivery of Common Shares. (a) On the
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basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to members of the Underwriting Group named in Schedule I hereto
(for all of whom the Representative is acting), severally and not jointly, and
each member of the Underwriting Group, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees to purchase from the Company, severally and not jointly, the number of
Common Shares set forth opposite their respective names in Schedule I hereto at
a purchase price of $[price to be paid by the underwriters for shares purchased
which is the offering price to the public less the underwriting discount] per
share.
(b) The Company and the Selling Shareholders, severally and not jointly,
hereby grant to the Underwriting Group an option (the "Option") for a period of
45 days after Closing to purchase at a purchase price of $[price to be paid by
the underwriters for shares purchased which is the offering price to the public
less the underwriting discount] per share up to 111,250 and 16,250 additional
shares, respectively of Optional Common Shares in order to cover over-
allotments. The Optional Common Shares shall be purchased for the account of
each member of the Underwriting Group as nearly as practicable in the proportion
that the number of shares of Firm Common Shares set opposite the name of each
Underwriter in Schedule I hereto bears to 850,000. The Option may be exercised
at any time and from time to time within 45 days after the first date that any
of the Common Shares are released by you for sale to the public, upon notice by
you to the Company and the Selling Stockholders setting forth the aggregate
number of Optional Common Shares as to which the Representative is exercising
the Option, the names and denominations in which the certificates for such
shares are to be registered and the time and place at which such certificates
will be delivered. Such time of delivery (which may not be earlier than the
First Closing Date), being herein referred to as the "Second Closing Date,"
shall be
determined by you, but if at any time other than the First Closing Date
shall not be earlier than three nor later than four full business days after
delivery of such notice of exercise (or such other time and date not later than
ten business days after such date as may be agreed upon by the Company and the
Representative). Certificates for the Optional Common Shares will be made
available for checking and packaging on the business day preceding the Second
Closing Date at a location in Newport Beach, California, as may be designated by
you (or such other place as may be agreed upon by the Company and the
Representative). The manner of payment for and delivery of the Optional Common
Shares shall be the same as for the Firm Common Shares, as specified in sections
5(g) and (h) below. At any time before lapse of the Option, you may cancel the
Option by giving written notice of such cancellation to the Company and the
Selling Stockholders. If the Option is canceled or expires unexercised in whole
or in part the Company will deregister under the Act the number of Option Shares
as to which the Option has not been exercised.
(c) If any of the Underwriters shall fail to purchase the entire number of
Firm Common Shares set opposite its name in Schedule I hereto, and such failure
to purchase shall constitute a default by such Underwriter in the performance of
its obligations under this Agreement, the remaining Underwriters shall have the
right and shall be obligated to take up and pay for (in the respective
proportions which the number of Firm Common Shares set opposite the names of the
several remaining Underwriters bears to the aggregate number of Firm Common
Shares set opposite the names of all the remaining Underwriters) the entire
amount of Firm Common Shares which the defaulting Underwriter agreed but failed
to purchase.
(d) Nothing contained in this section 5 shall relieve any defaulting
Underwriter of its liability, if any, to the Company or to the remaining
Underwriters for damages occasioned by its default hereunder.
(e) If any of the Underwriters shall fail to purchase the entire number of
Firm Common Shares set opposite its name and such failure to purchase shall not
constitute a default by such Underwriter in the performance of its obligations
under this Agreement, the remaining Underwriters shall have the right, but shall
not be obligated, to take up and pay for (in such proportions as may be agreed
upon among them) the entire amount (but not less than all) of the Common Shares
which all withdrawing Underwriters agreed but failed to purchase.
(f) After the Commission notifies the Company that the Registration
Statement has become effective, the Underwriters propose to offer the Common
Shares to the public at a public offering price of $[offering price to the
public] per share as set forth in the Prospectus. The Underwriters may allow
such concessions and discounts upon sales to selected dealers as may be
determined from time to time by the Representative.
(g) Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriting Group and payment therefor shall be made at the offices of
Meridian Capital Group, Inc., 0000 XxxXxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000 (or such other place as may be agreed upon by the Company and
the Representative), at such time and date, not later than the fourth full
business day following the first date that any of the Common Shares are released
by you for sale to the public (or such other time and date not later than ten
business days after such date as may be agreed upon by the Company and the
Representative), as you shall
designate by at least 48 hours prior notice to the Company (the "First Closing
Date"); provided, however, that if the Prospectus is at any time prior to the
First Closing Date recirculated to the public, the First Closing Date shall
occur upon the later of the fourth full business day following the first date
that any of the Common Shares are released by you for sale to the public or the
date that is 48 hours after the date that the Prospectus has been so
recirculated (or such other time and date not later than ten business days after
such date as may be agreed upon by the Company and the Representative).
(h) Delivery of certificates for the Firm Common Shares shall be made by
or on behalf of the Company to you, for the account of the Underwriting Group
against payment by you, of the purchase price therefor by certified or official
bank checks payable in next day funds to the order of the Company. The
certificates for the Firm Common Shares shall be registered in such names and
denominations as you shall have requested at least two full business days prior
to the First Closing Date, and shall be made available for checking and
packaging on the business day preceding the First Closing Date at a location in
Newport Beach, California, as may be designated by you (or such other place as
may be agreed upon by the Company and the Representative). Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriting Group.
(i) Subject to the terms and conditions hereof, the Underwriter proposes
to make a public offering of the Common Shares as soon after the Effective Date
of the Registration Statement as in the judgment of the Representative is
advisable and at the public offering price set forth on the cover page of and on
the terms set forth in the Prospectus.
SECTION 6. Covenants of the Company. The Company covenants and
------------------------
agrees that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective. If the Registration Statement has become or becomes effective
pursuant to Rule 430A of the Rules and Regulations, or the filing of the
Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations,
the Company will file the Prospectus, properly completed, pursuant to the
applicable paragraph of Rule 424(b) of the Rules and Regulations within the time
period prescribed and will provide evidence satisfactory to you of such timely
filing. The Company will promptly after it receives notice thereof advise you
in writing (i) of the receipt of any comments of the Commission, (ii) of any
request of the Commission for amendment of or supplement to the Registration
Statement (either before or after it becomes effective), any Preliminary
Prospectus or the Prospectus or for additional information, (iii) when the
Registration Statement shall have become effective and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose. If the Commission shall enter any such stop order at any time, the
Company will use its best efforts to obtain the lifting of such order at the
earliest possible moment. The Company will not file any amendment or supplement
to the Registration Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus of which you have not been furnished
with a copy a reasonable time prior to such filing or to which you reasonably
object or which is not in compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly upon
your request, any amendments or supplements to the Registration Statement or the
Prospectus which in your judgment may be necessary or advisable to enable you to
continue the distribution of the Common Shares and will use its best efforts to
cause the same to become effective as promptly as possible. The Company will
fully and completely comply with the provisions of Rule 430A of the Rules and
Regulations with respect to information omitted from the Registration Statement
in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in Section
10(a)(3) of the Act during which a prospectus relating to the Common Shares is
required to be delivered under the Act any event occurs, as a result of which
the Prospectus, including any amendments or supplements, would include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, or if
it is necessary at any time to amend the Prospectus, including any amendments or
supplements, to comply with the Act or the Rules and Regulations, the Company
will promptly advise you thereof and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will correct
such statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become effective
as soon as possible; and, in case you are required under the Act to deliver a
prospectus after such nine-month period, the Company upon request, but at your
expense, will promptly prepare such amendment or amendments to the Registration
Statement and such Prospectus or Prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after the end of the
first quarter ending after one year following the Effective Date, the Company
will make generally available to its security holders an earnings statement
(which need not be audited) covering a period of 12 consecutive months beginning
after the Effective Date of the Registration Statement which will satisfy the
provisions of the last paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law or regulation to
be delivered in connection with sales by you or a dealer, the Company, at its
expense, but only for the nine-month period referred to in Section 10(a)(3) of
the Act (or as the Act may be amended), will furnish to you and the Selling
Stockholders or mail to your order copies of the Registration Statement, the
Prospectus, the Preliminary Prospectus and all amendments and supplements to any
such documents in each case as soon as available and in such quantities as you
and the Selling Stockholders may reasonably request, for the purposes
contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Common Shares for sale under (or obtain exemptions from
the application of) the Blue Sky laws of such jurisdictions as you designate,
will comply with such laws and will continue such qualifications, registrations
and exemptions in effect so long as reasonably required for the distribution of
the Common Shares. The Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise you promptly after
it receives notice thereof of the suspension of the qualification or
registration of (or any such exemption relating to) the Common Shares for
offering, sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company, with your
cooperation, will use its best efforts to obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company will furnish to
you: (i) as soon as practicable after the end of each fiscal year, copies of the
Annual Report of the Company containing the balance sheet of the Company as of
the close of such fiscal year and statements of income, stockholders' equity and
cash flows for the year then ended and the opinion thereon of the Company's
independent public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-KSB, Quarterly
Report on Form 10-QSB, Report on Form 8-K or other report filed by the Company
with the Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed generally
to holders of its Common Stock.
(h) During the period of one year after the first date that any of the
Common Shares are released by you for sale to the public, without the prior
written consent of the Representative (which consent may be withheld at the sole
discretion of the Representative), the Company will not (other than pursuant to
outstanding warrants or stock options disclosed in the Prospectus, pursuant to
the Company's Stock Incentive Award Plan as disclosed in the Prospectus, or
otherwise as contemplated in the Prospectus) issue, offer, sell, grant options
to purchase or otherwise dispose of any of the Company's equity securities or
any other securities convertible into or exchangeable for its Common Stock or
other equity security.
(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to remain qualified for quotation
on the Nasdaq SmallCap Market.
(k) The Company will deliver to you, prior to or simultaneously with the
execution of this Agreement, the undertaking of each officer, director, and each
other holder listed on the schedule attached hereto that such person shall not
directly or indirectly offer or sell any portion of the shares of Common Stock
owned prior to the Effective Date of this Agreement or hereafter acquired by
exercise of an option for a period of twelve months from the Effective Date,
provided that holders who are not officers or directors may sell the shares held
by them as permitted by the Lock Up Agreements executed by each of them.
(l) At all times prior to the Closing Date, the Company will cooperate with
you in such investigation as you may make or cause to be made of all the
properties, business and operations of the Company in connection with the
purchase and public offering of the Common Shares, and the Company will make
available to you in connection therewith such information in its possession as
you may reasonably request.
(m) The Company has appointed the U.S. Stock Transfer Corporation as
Transfer Agent for the Common Stock subject to the Closing. The Company will
not change or terminate
such appointment for a period of one year from the Effective Date without first
obtaining the written consent of the Representative, which consent shall not be
unreasonably withheld.
(n) The Company will use all reasonable efforts to comply or cause to be
complied with the conditions precedent to the several obligations of the
Underwriting Group in Section 8 hereof.
(o) The Company agrees to file with the Commission all required reports on
Form SR in accordance with the provisions of Rule 463 promulgated under the Act
and to provide a copy of such reports to you and your counsel.
(p) Concurrently with the Effective Date, the Company shall register the
class of equity securities which constitutes the Common Shares by filing with
the Securities and Exchange Commission a registration statement (and such copies
thereof as the Commission may require) with respect to such security, containing
such information and documents as the Commission may specify comparable to that
which is required in an application to register a security pursuant to
subsection (g) of Section 12 of the Securities Exchange Act of 1934, as amended.
(q) The Company shall, within 120 days after the Effective Date, apply for
listing in Xxxxx'x Over-The-Counter Manual and shall use its best efforts to
have the Company listed in such manual.
You may in your sole discretion, waive in writing the performance by
the Company of any one or more of the foregoing covenants or extend the time for
their performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company and each of the Selling Stockholders agree to pay all
costs, fees and expenses incurred in connection with the performance of the
Company's and the Selling Stockholders' obligations hereunder and in connection
with the transactions contemplated hereby, on such basis as shall be agreed
between or among them, including without limiting the generality of the
foregoing, (i) all expenses incident to the issuance and delivery of the Common
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agents of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Common Shares to the Underwriting Group, (iv) all fees and expenses of
the Company's and the Selling Stockholders' counsel and the Company's
independent accountants, (v) all costs and expenses incurred in connection with
the preparation, printing, filing, shipping and distribution of the Registration
Statement, each Preliminary Prospectus and the Prospectus (including all
exhibits and financial statements) and all amendments and supplements provided
for herein, this Agreement, the Selected Dealers Agreement, the Underwriter's
Questionnaire, the Underwriter's Custody Agreement and Power of Attorney and the
Blue Sky memorandum, as well as the shipping and distribution of the foregoing
documents in accordance with your reasonable requests, (vi) all filing fees,
attorneys' fees and expenses incurred by the Company or the Representative in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of), all or any part of the Common Shares for
offer and sale under the Blue Sky laws, (vii) the filing fee of the National
Association of Securities Dealers, Inc., (viii) a non-accountable expense
allowance equal to three percent (3%) of the aggregate offering price of
the Common Shares, including any Optional Common Shares sold hereunder, (ix) all
customary expenses relating to the announcement of the offering in the local
press and The Wall Street Journal, and (x) all other fees, costs and expenses
referred to in Item 25 of the Registration Statement. Except as provided in
this Section 7, Section 9 and Section 11 hereof, the Representative shall pay
all of its own expenses, including the fees and disbursements of its counsel
(excluding those relating to qualification, registration or exemption under the
Blue Sky laws and the Blue Sky memorandum referred to above). This Section 7
shall not affect any agreements relating to the payment of expenses between the
Company and the Selling Stockholders.
SECTION 8. Conditions of the Obligations of the Underwriting Group.
-------------------------------------------------------
The obligations of the Underwriting Group to purchase and pay for the Firm
Common Shares on the First Closing Date, and the Optional Common Shares on the
Second Closing Date, shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein set
forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of Company
officers and the Selling Stockholders made pursuant to the provisions hereof, to
the performance by the Company and the Selling Stockholders of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
5:00 P.M., Washington, D.C. time, on the date of this Agreement, or at such
later time as shall have been consented to by you; if the filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of
the Rules and Regulations, the Prospectus shall have been filed in the manner
and within the time period required by Rule 424(b) of the Rules and Regulations;
and prior to such Closing Date, 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, to the knowledge of
the Company, the Selling Stockholders or you, shall be contemplated by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement, or otherwise, shall have been
complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates as of which
information is given in the Registration Statement and Prospectus, (i) there
shall not have been any change in the capital stock (other than pursuant to the
exercise of outstanding warrants or options disclosed in the Prospectus, the
grant of options pursuant to the Company's existing Stock Incentive Award Plan,
or otherwise as contemplated in the Prospectus) of the Company or any material
increase in the consolidated indebtedness (other than in the ordinary course of
business or as contemplated in the Prospectus) of the Company, (ii) except as
set forth or contemplated by the Registration Statement or the Prospectus, no
material verbal or written agreement or other transaction shall have been
entered into by the Company which is not in the ordinary course of business or
which could result in a material reduction in the future earnings of the
Company, (iii) no loss or damage (whether or not insured) to the property of the
Company shall have been sustained which materially and adversely affects the
condition (financial or other), business, results of operations or prospects of
the Company, (iv) no legal or governmental action, suit or proceeding affecting
the Company which is material to the Company or which affects or may affect the
transactions contemplated by this Agreement shall have been instituted or
threatened and (v) there shall not have been any material change in the
condition (financial or other), business, management results
of operations or prospects of the Company which makes it impractical or
inadvisable in the reasonable judgment of the Representative to proceed with the
public offering or purchase the Common Shares as contemplated hereby.
(c) There shall have been furnished to you on each Closing Date, in form
and substance satisfactory to you, except as otherwise expressly provided below:
(i) An opinion of Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx LLP, counsel
for the Company and the Selling Stockholders, addressed to the
Representative and dated the First Closing Date, or the Second Closing
Date, as the case may be, to the effect that:
(1) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in
which it owns or leases any material properties or the conduct of its
business requires such qualification, except for jurisdictions in
which the failure to so qualify would not have a material adverse
effect on the Company. The Company has full corporate power and
corporate authority to own its properties and conduct its business as
described in the Prospectus. As of the date of such opinion, the
Company has no subsidiaries;
(2) The authorized, issued and outstanding capital stock of the
Company as of ___________, 1996, is as set forth under the caption
"Capitalization" in the Prospectus; all outstanding shares of Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase any
securities of the Company and conform to the description thereof
contained in the Prospectus under the captions "Capitalization" and
"Description of Capital Stock"; and the offer and sale of the
Promissory Notes and Warrants issued and outstanding from and after
August 1, 1996, were exempt from the registration requirements of
Section 5 of the Act and from the registration or qualification
requirements of all applicable state securities laws; without limiting
the foregoing, there are no preemptive or other rights to subscribe
for or purchase any of the Common Shares to be sold by the Company
hereunder;
(3) The certificates evidencing the Common Shares to be delivered
hereunder are in due and proper form under Delaware law, and when duly
countersigned by the Company's transfer agents and registrar, and
delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of this
Agreement, the Common Shares represented thereby will be duly
authorized and validly issued, fully paid and nonassessable, will not
have been issued in violation of or subject to any preemptive rights
or other rights to subscribe for or purchase securities and will
conform in all respects to the description thereof contained in the
Prospectus under the caption "Description of Capital Stock";
(4) To the knowledge of such counsel, no Preferred Stock of the
Company is issued and outstanding and no options to purchase Preferred
Stock or other rights to subscribe for Preferred Stock exist or are
outstanding. Except as disclosed in or specifically contemplated by
the Prospectus, to the knowledge of such counsel, there are no
outstanding options, warrants or other rights calling for the issuance
of, and no commitments or arrangements to issue, any shares of capital
stock of the Company or any security convertible into or exchangeable
for capital stock of the Company;
(5) At the time the Registration Statement became effective
under the Act, the statements contained therein under the captions
"Description of Capital Stock" and "Shares Eligible for Future Sale,"
fairly summarize, in all material respects, the matters described
therein insofar as such statements constitute a summary of documents
referred to therein or descriptions of statutes, regulations or legal
or governmental proceedings;
(6) (a) The Registration Statement has become effective under
the Act, and, to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement or preventing the use
of the Prospectus has been issued and no proceedings for that purpose
have been instituted by or are pending before or contemplated by the
Commission; any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424(b) of the Rules and Regulations has been
made in the manner and within the time period required by such Rule
424(b);
(b) The Registration Statement, the Prospectus and each
amendment or supplement thereto (except for the financial statements,
the notes thereto, financial statement schedules, if any, and other
financial and statistical data included therein as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the Rules and
Regulations;
(c) To such counsel's knowledge, there are no leases,
contracts, agreements or documents binding upon the Company or any of
its properties which are required to be disclosed in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement which are not disclosed or filed, as required under the Act
or the Rules and Regulations; and
(d) To such counsel's knowledge, there are no legal or
governmental actions, suits or proceedings pending or threatened
against the Company which are required under the Act or the Rules and
Regulations to be described in the Prospectus which are not described
as required;
(7) The Company has the requisite corporate power and corporate
authority to enter into this Agreement and to sell and deliver the
Common Shares to be sold by it to the Underwriting Group; this
Agreement has been duly and validly authorized by all necessary
corporate action by the Company and has been duly and validly executed
and delivered by and on behalf of the Company; this
Agreement has been duly and validly delivered by and on behalf of the
Selling Stockholders; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with any
court, regulatory, administrative or other governmental body is
required for the execution and delivery of this Agreement by the
Company or the consummation of the transactions contemplated by this
Agreement except such as have been obtained and are in full force and
effect under the Act and such as may be required under applicable
state securities or Blue Sky laws in connection with the purchase and
distribution of the Common Shares by the Underwriting Group and the
clearance of such offering with the NASD;
(8) To such counsel's knowledge, the execution and performance
of this Agreement and the consummation of the transactions herein
contemplated will not conflict with, result in the acceleration of any
indebtedness under or performance required by, result in any right of
termination of, increase any amounts payable under, result in the
breach of, or constitute, either by itself or upon notice or the
passage of time or both, a default under, any agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other
instrument which is filed as an Exhibit in Item 27 of the Registration
Statement (collectively "Material Agreements") to which the Company is
a party or by which the Company or any of its property may be bound or
affected which is material to the Company, or violate any of the
provisions of the certificate of incorporation or bylaws of the
Company or, to such counsel's knowledge, violate any statute,
judgment, decree, order, rule or regulation of any court or
governmental body having jurisdiction over the Company or any of its
property, which conflict, acceleration, right of termination, breach,
default or violation would, with respect to any of the foregoing, have
a material adverse effect on the condition (financial or other),
properties, business, results of operations or prospects of the
Company;
(9) As of the date of such opinion, the Company is not in
violation of its certificate of incorporation or bylaws, as amended or
restated.
(10) To the knowledge of such counsel, no holders of securities
of the Company have rights which have not been waived or complied with
to the registration of shares of Common Stock or other securities
because of the filing of the Registration Statement by the Company or
the offering contemplated hereby;
(11) This Agreement and the Stockholders Agreements have been
duly delivered by or on behalf of each of the Selling Stockholders; to
the knowledge of such counsel, the performance of this Agreement and
the Stockholders Agreements, and the consummation of the transactions
herein and therein contemplated by or on behalf of the Selling
Stockholders will not conflict with, result in the acceleration of any
indebtedness under or performance required by, result in any right of
termination of, result in a breach or violation of, or constitute,
either by itself or upon notice or the passage of time or both, a
default under, any indenture, mortgage, deed of trust, trust
(constructive or other), loan agreement, lease, franchise, license, or
other agreement or instrument to which any of the
Selling Stockholders is a party or by which any of the Selling
Stockholders or any of their properties may be bound, or to the
knowledge of such counsel violate any statute, judgment, decree,
order, rule or regulation of any court or governmental body having
jurisdiction over any of the Selling Stockholders or any of their
properties; and no approval, authorization, order or consent of any
court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Agreement and
the Stockholders Agreements or the consummation by the Selling
Stockholders of the transactions contemplated herein or therein except
such as have been obtained and are in full force and effect under the
Act and such as may be required under the rules of the NASD and
applicable state securities or Blue Sky laws;
(12) To the knowledge of such counsel, the Selling Stockholders
have full right, power and authority to enter into this Agreement and
the Stockholders Agreements and to sell, transfer and deliver the
Common Shares to be sold on such Closing Date by such Selling
Stockholders hereunder and good and valid title to such Common Shares
so sold, free and clear of all liens, encumbrances, security
interests, or any other adverse claim within the meaning of the
Uniform Commercial Code, has been transferred to the Underwriting
Group (whom counsel may assume to be a bona fide purchaser) who has
purchased such Common Shares hereunder in good faith and without
notice of any such lien, encumbrance, security interest or any other
adverse claim within the meaning of the Uniform Commercial Code.
In rendering such opinions, such counsel may rely as to matters of
local law, on opinions of local counsel and as to matters of fact, on
certificates of the Selling Stockholders and of officers of the Company and of
governmental officials, in which case their opinion is to state that they are so
doing and that the Underwriting Group is justified in relying on such opinions
or certificates and copies of said opinions or certificates are to be attached
to the opinion. In addition, in rendering such opinions, such counsel shall
state that the statements "to such counsel's knowledge," "known to such counsel"
and similar phrases with reference to matters of fact means that after an
examination of the Registration Statement and all amendments thereto, the
Company's Certificate of Incorporation and Bylaws, as amended to date, the
resolutions of the Company's Board of Directors and pricing committee
authorizing the offering contemplated hereby, this Agreement, specimen
certificates representing the Common Shares, the Custody Agreement and Power of
Attorney of each Selling Stockholder, certificates of the Selling Stockholders,
stock powers of each Selling Stockholder, the closing certificate of the
President and Chief Financial Officer, all documents filed as an Exhibit in Item
27 of the Registration Statement and considering the actual knowledge of those
attorneys in such counsel's firm who have given substantive attention to the
Registration Statement and matters related thereto, and, to the Selling
Stockholders' matters in connection with the Registration Statement, but not
including any constructive or imputed notice of any information, such counsel
finds no reason to believe that the opinions expressed are factually incorrect.
Beyond that, such counsel need make no independent factual investigation for the
purpose of rendering an opinion with respect to such matters. With respect to
matters of fact related to opinions on behalf of the Selling Stockholders, such
counsel may state that they are relying solely upon certificates from the
Selling Stockholders.
Further, such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company, the
Representative, Representative's counsel and the independent public accountants
of the Company, at which conferences the contents of the Registration Statement
and the Prospectus and related matters were discussed, and although they have
not verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which caused them to believe that, at the time the Registration
Statement became effective, the Registration Statement (except as to financial
statements, the notes thereto, financial data and supporting schedules and other
financial or statistical data contained therein, as to which such counsel need
make no statement) 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; or at the date of the opinion, the
Registration Statement or the Prospectus (except as aforesaid) contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which made, not misleading.
(ii) Such opinion or opinions of Radcliff, Frandsen, Tricker &
Dongell, counsel for the Representative, dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to the
sufficiency of all corporate proceedings and other legal matters relating
to this Agreement, the validity of the Common Shares, the Registration
Statement and the Prospectus and other related matters as you may
reasonably require, and the Company and the Selling Stockholders shall have
exhibited to such counsel such documents, such papers and records as they
may reasonably request for the purpose of enabling them to pass upon such
matters. In connection with such opinions, such counsel may rely, as to
matters of local law, on opinions of local counsel and as to matters of
fact on representations or certificates of officers of the Company and
governmental officials, in which case their opinion is to state that they
are so doing.
(iii) A certificate of the Company executed by the Chairman of
the Board or President and the Chief Financial Officer of Company, dated
the First Closing Date or the Second Closing Date, as the case may be, to
the effect that:
(1) The representations and warranties of the Company set forth
in Section 2 of this Agreement are true and correct as of the date of
this Agreement, and as if made at and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied in all material respects with all the agreements and
satisfied in all material respects all the conditions on its part to
be performed or satisfied on or prior to such Closing Date;
(2) The Registration Statement has become effective and the
Commission has not issued any order preventing or suspending the use
of the Prospectus or any Preliminary Prospectus filed as a part of the
Registration Statement or any amendment thereto; no stop order
suspending the effectiveness of the Registration Statement has been
issued; and to the best of the knowledge of the respective signers, no
proceedings for that purpose have been instituted or are pending under
the Act;
(3) Since the initial date on which the Registration
Statement was filed, no written or oral agreement, transaction or
event has occurred which should have been set forth in an amendment to
the Registration Statement or in a supplement to or amendment of any
prospectus which has not been disclosed in such a supplement or
amendment;
(4) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, there has not been any
material adverse change or a development involving a material adverse
change in the condition (financial or other), business, properties,
results of operations, management or prospects of the Company; and no
legal or governmental action, suit or proceeding is pending or, to the
best knowledge of such officers, threatened against the Company which
is material to the Company, whether or not arising from transactions
in the ordinary course of business, or which may adversely affect the
transactions contemplated by this Agreement; since such dates and
except as so disclosed, the Company has not entered into any verbal or
written agreement or other transaction which is not in the ordinary
course of business or which could result in a material reduction in
the future earnings of the Company or incurred any material liability
or obligation, direct, contingent or indirect, made any change in its
capital stock, made any material increase in its short-term debt or
funded debt or repurchased or otherwise acquired any of the Company's
capital stock; and the Company has not declared or paid any dividend,
or made any other distribution, upon its outstanding capital stock
payable to stockholders of record on a date prior to the First Closing
Date or Second Closing Date; and
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except as
disclosed in or contemplated by the Prospectus, the Company and its
subsidiaries have not sustained a material loss or damage by strike,
fire, flood, windstorm, accident or other calamity (whether or not
insured); and
(6) The respective signers have each carefully examined
the Registration Statement and Prospectus and any amendments and
supplements thereto, and to the best of their knowledge, the
Registration Statement and the Prospectus and any amendments and
supplements thereto contain all statements required to be stated
therein, and all statements contained therein are true and correct,
and neither the Registration Statement nor 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, since the Effective Date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or a supplemented Prospectus which has not been so set forth.
(iv) On the First Closing Date and the Second Closing Date, as the
case may be, a certificate, dated such Closing Date and addressed to you,
signed by or on behalf of
each of the Selling Stockholders to the effect that the representations and
warranties of such Selling Stockholder in this Agreement are true and correct,
as if made at and as of the First Closing Date or the Second Closing Date, as
the case may be, and such Selling Stockholder has complied in all material
respects with all the agreements and satisfied in all material respects all the
conditions on his part to be performed or satisfied prior to the First Closing
Date or the Second Closing Date, as the case may be.
(v) On a date before this Agreement is executed and also on the First
Closing Date and the Second Closing Date a letter addressed to you, from
Ernst & Young LLP, independent accountants, the first one to be dated the
day before the date of this Agreement, the second one to be dated the First
Closing Date and the third one (in the event of a Second Closing) to be
dated the Second Closing Date, in form and substance satisfactory to you,
stating that (1) with respect to the Company they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and the response to Item 509 of Regulation
SB-2 as reflected by the Registration Statement is correct insofar as it
relates to them; (2) in their opinion, the financial statements examined by
them of the Company at all dates and for all periods referred to in their
opinion and included in the Registration Statement and Prospectus, comply
in all material respects with the applicable accounting requirements of the
Act and the published Rules and Regulations thereunder with respect to
registration statements on Form SB-2; (3) on the basis of certain indicated
procedures (but not an examination in accordance with generally accepted
accounting principles), including examinations of the instruments of the
Company set forth under "Capitalization" in the Prospectus, a reading of
the latest available interim unaudited financial statements of the Company,
whether or not appearing in the Prospectus, inquiries of the officers of
the Company or other persons responsible for its financial and accounting
matters regarding the specific items for which representations are
requested below and a reading of the minute books of the Company, nothing
has come to their attention which would cause them to believe that during
the period from the last audited balance sheet included in the Registration
Statement to a specified date not more than five days prior to the date of
such letter (a) there has been any change in the capital stock or other
securities of the Company or any payment or declaration of any dividend or
other distribution in respect thereof or exchange therefor from that shown
on its audited balance sheets or in the debt of the Company from that shown
or contemplated under "Capitalization" in the Registration Statement or
Prospectus other than as set forth in or contemplated by the Registration
Statement or Prospectus; (b) there have been any material decreases in net
current assets or net assets as compared with amounts shown in the last
audited balance sheet included in the Prospectus so as to make said
financial statements misleading; and (c) on the basis of the indicated
procedures and discussions referred to in clause (3) above, nothing has
come to their attention which, in their judgment, would cause them to
believe or indicate that (i) the unaudited financial statements and
schedules set forth in the Registration Statement and Prospectus do not
present fairly the financial position and results of the Company, for the
periods indicated, in conformity with the generally accepted accounting
principles applied on a consistent basis with the audited financial
statements, and (ii) the dollar amounts, percentages and other financial
information set forth in the Registration Statement and Prospectus under
the captions "Prospectus Summary," "Risk Factors," "Dilution,"
"Capitalization," "Selected Financial Data", "Security Ownership of Certain
Beneficial Owners and
Management", and "Description of Capital Stock" are not in agreement with
the Company's general ledger, financial records or computations made by the
Company therefrom; (4) such other matters as you may reasonably request.
You shall be furnished without charge, in addition to the original
signed copies, such number of signed or photostatic or conformed copies of
such letters as the Representative shall reasonably request.
(vi) A warrant for the purchase of 85,000 shares of the Company's
Common Stock at an exercise price per share equal to 125% of the offering
price per share of the Common Shares, in the form attached hereto as
Exhibit A.
(d) You shall not have disclosed in writing to the Company that the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto contains an untrue statement of a fact which, in the opinion of your
counsel, is material, or omits to state a fact which, in the opinion of such
counsel, is material and is required to be stated therein, or is necessary to
make the statements therein not misleading.
(e) All of the Common Shares being offered by the Company and the
Warrants being purchased from the Company by you shall be tendered for delivery
in accordance with the terms and provisions of this Agreement.
(f) The Common Shares shall be qualified in such states as you may
reasonably request pursuant to paragraph 6(f), and each such qualification shall
be in effect and not subject to any stop order or other proceeding on the
Closing Date; provided, that the Company shall not be required to submit to the
general jurisdiction of any state or qualify as a foreign corporation in any
state where it is not presently qualified.
(g) All opinions, letters, certificates and evidence mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to your
counsel, whose approval shall not be unreasonably withheld. The suggested form
of such documents shall be provided to your counsel at least one business day
before the Closing Date. Your counsel will provide a written memorandum stating
such closing documents which he deems necessary for their review. Such
memorandum shall be delivered five business days before the Closing Date to
counsel for the Company.
(h) Any certificate signed by an officer of the Company and
delivered to you or to your counsel will be deemed a representation and warranty
by the Company to you as to the statements made therein.
If any condition to the Underwriting Group's obligations hereunder to
be satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you to the
Company and the Selling Stockholders without liability on the part of you, the
Company or the Selling Stockholders except for the expenses to be paid or
reimbursed by the Company and by the Selling Stockholders pursuant to Sections 7
and 9 hereof and except to the extent provided in Section 11 hereof.
SECTION 9. Reimbursement of Representative's Expenses.
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Notwithstanding any other provisions hereof, if this Agreement shall be
terminated by you pursuant to Section 8, or if the sale to the Underwriting
Group of the Common Shares at the First Closing is not consummated because of
any refusal, inability or failure on the part of the Company or the Selling
Stockholders to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse you upon demand for all out-of-pocket
expenses that shall have been reasonably incurred by you in connection with the
proposed purchase and the sale of the Common Shares, including but not limited
to fees and disbursements of counsel, printing expenses, travel expenses,
postage, telegraph charges and telephone charges relating directly to the
offering contemplated by the Prospectus, less the sum of $25,000 previously paid
to you. Any such termination shall be without liability of any party to any
other party except that the provisions of this Section, Section 7 and Section 11
shall at all times be effective and shall apply.
SECTION 10. Effectiveness of Registration Statement. You, the
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Company and the Selling Stockholders will use your, its and their best efforts
to cause the Registration Statement to become effective, to prevent the issuance
of any stop order suspending the effectiveness of the Registration Statement
and, if such stop order be issued, to obtain as soon as possible the lifting
thereof.
SECTION 11. Indemnification.
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(a) The Company agrees to indemnify and hold harmless the Underwriting
Group and each person, if any, who controls the Underwriting Group within the
meaning of the Act against any losses, claims, damages, liabilities or expenses,
joint or several to which the Underwriting Group or such controlling person may
become subject, under the Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations and
warranties of the Company contained herein or any failure of the Company to
perform its obligations hereunder or under law, and the Company will reimburse
the Underwriting Group and each such controlling person for any legal and other
expenses as such expenses are reasonably incurred by the Underwriting Group or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the Company will not be liable in any such case
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to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with the written information furnished to
the Company pursuant to Section 4 hereof; provided, further, that the indemnity
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agreement provided in this Section 11(a) with respect to any Preliminary
Prospectus shall not inure to the benefit of the Underwriting Group from whom
the person asserting any losses, claims, charges, liabilities or litigation
based upon any untrue statement or alleged untrue statement of any material fact
or omission or alleged omission to state therein a material fact purchased
Common Shares, if a copy of the Prospectus in which such untrue statement or
alleged untrue statement or omission or alleged omission was corrected has not
been sent or given to such person within the time required by the Act and the
Rules and Regulations thereunder, unless such failure is the result of
noncompliance by the Company with Section 6(e) hereof. In addition to its other
obligations under this Section 11(a), the Company agrees that as an interim
measure during the pendency of any claims, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, or any inaccuracy in the representations and
warranties of the Company herein or failure to perform its obligations
hereunder, all as described in this Section 11(a), it will reimburse the
Underwriting Group on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriting Group for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction.
(b) Each Selling Stockholder jointly and severally agrees to indemnify and
hold harmless the Underwriting Group and each person, if any, who controls the
Underwriting Group within the meaning of the Act against any losses, claims,
damages, liabilities or expenses, joint or several to which the Underwriting
Group or such controlling person may become subject, under the Act, the Exchange
Act, or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Selling Stockholder), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of such Selling Stockholder
contained herein or any failure of such Selling Stockholder to perform his, her
or its obligations hereunder or under law, or arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them not
misleading, in each case to the extent but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company or the Underwriting Group, directly or
through such Selling Stockholder's representatives, specifically for inclusion
therein; and will reimburse the Underwriting Group and each such control person
for any legal and other expenses as such expenses are reasonably incurred by the
Underwriting Group or such control person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. In addition to their other obligations under this
Section 11(a)(2), the Selling Stockholders agree that as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, or any inaccuracy in the representations and
warranties of
such Selling Stockholder herein or failure to perform their obligations
hereunder, all as described in this Section 11(a)(2), they will reimburse the
Underwriting Group on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Selling Stockholders' obligation to reimburse the Underwriting Group for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. Notwithstanding the foregoing,
the liability of each Selling Stockholder hereunder shall be limited to the
aggregate purchase price received by such Selling Stockholder from the
Underwriting Group for the Shares sold by such Selling Stockholder hereunder.
(c) The Underwriting Group will indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement, the Selling Stockholders and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act against any
losses, claims, damages, liabilities or expenses to which the Company, or any
such director, officer, Selling Stockholder or controlling person may become
subject, under the Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Representative), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment 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,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with the
information furnished to the Company pursuant to Section 4 hereof; and will
reimburse the Company, or any such director, officer, Selling Stockholder or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer, Selling Stockholder or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action.
(d) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability that it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
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indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that
there may be legal defenses available to it and/or other indemnified parties
that are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel approved
by the indemnified parties, representing the indemnified parties who are parties
to such action) or (ii) 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 commencement of the action, in
each of which cases the fees and expenses of counsel shall be at the expense of
the indemnifying party.
(e) If the indemnification provided for in this Section 11 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b),
(c) or (d) in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each applicable indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the Underwriting Group from the offering
of the Common Shares or (ii) if the allocation provided by clause (i) 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 the Company, the Selling Stockholders and the Underwriting
Group in connection with the statements or omissions or inaccuracies in the
representations and warranties herein that resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The respective relative benefits received by the Company, the
Selling Stockholders and the Underwriting Group shall be deemed to be in the
same proportion, in the case of the Company and the Selling Stockholders, as the
total price paid to the Company and to the Selling Stockholders, respectively,
for the Common Shares sold by them to the Underwriting Group (net of
underwriting discounts but before deducting expenses), and, in the case of the
Underwriting Group, as the underwriting discounts received by them bears to the
total of such amounts paid to the Company and to the Selling Stockholders and
received by the Underwriting Group as underwriting discounts. The relative
fault of the Company, the Selling Stockholders and the Underwriting Group 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 or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Company, the Selling
Stockholders or the Underwriting Group and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in subparagraph (d) of
this Section 11, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set
forth in subparagraph (d) of this Section 11 with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this subparagraph (e); provided, however, that no additional notice shall
be required with respect to any action for which notice has been given under
subparagraph (d) for purpose of indemnification. The Company, the Selling
Stockholders and the Underwriting Group agree that it would not be just and
equitable if contribution pursuant to this Section 11 were determined solely by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 11, the Underwriting Group shall
not be required to contribute any amount in excess of the amount of the total
underwriting discounts received in connection with the Common Shares
underwritten by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) The remedies provided for in this Section 11 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to any
indemnified party at law or in equity.
SECTION 12. This Section Intentionally Omitted.
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SECTION 13. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 7, 9, 11, 13, 14 and 15 and, as to all other
provisions, (i) if at the time of execution of this Agreement the Registration
Statement has not become effective, at 2:00 P.M., California time, on the first
full business day following the effectiveness of the Registration Statement, or
(ii) if at the time of execution of this Agreement the Registration Statement
has been declared effective, at 9:00 a.m. Eastern Time, on the first full
business day following the date of execution of this Agreement; but this
Agreement shall nevertheless become effective at such earlier time after the
Registration Statement becomes effective as you may determine on and by notice
to the Company or by release of any of the Common Shares for sale to the public.
For the purposes of this Section 13, the Common Shares shall be deemed to have
been so released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams offering
the Common Shares for sale to securities dealers, whichever may occur first.
SECTION 14. Termination. Without limiting the right to terminate
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this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you and
the Selling Stockholders or by you by notice to the Company and the Selling
Stockholders at any time prior to the time this Agreement shall become effective
as to all its provisions, and any such termination shall be without liability on
the part of the Company or the Selling Stockholders to the Underwriting Group
(except for the expenses to be paid or reimbursed by the Company, the Selling
Stockholders and the Underwriting Group pursuant to Sections 7 and 9 hereof and
except to the extent provided in Section 11 hereof) or of the Underwriting Group
to the Company or the Selling Stockholders (except to the extent provided in
Section 11 hereof).
(b) This Agreement may also be terminated by you prior to the First Closing
Date by notice to the Company (i) if additional material governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the over-the-counter market by the NASD, or
trading in securities generally shall have been suspended on either such
Exchange or in the over-the-counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or California
authorities, (ii) if an outbreak of major hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated or escalated
to such an extent as, in the judgment of the Representative, to affect adversely
the marketability of the Common Shares, (iii) if any adverse event shall have
occurred or shall exist that makes untrue or incorrect in any material respect
any statement or information contained in the Registration Statement or
Prospectus or that is not reflected in the Registration Statement or Prospectus
but should be reflected therein in order to make the statements or information
contained therein not misleading in any material respect, (iv) substantial and
material changes in the condition of the market (either generally or with
reference to the sale of the Common Shares to be offered hereby) beyond normal
fluctuations are such that it would be undesirable, impracticable or inadvisable
in the judgment of the Representative to proceed with this Agreement or with the
public offering, or (v) if there shall be any action, suit or proceeding pending
or threatened (except as disclosed in the Prospectus), or there shall have been
any development or prospective development involving particularly the business
or properties or securities of the Company or the transactions contemplated by
this Agreement, that in the judgment of the Representative, may materially and
adversely affect the Company's business or earnings and makes it impracticable
or inadvisable to offer or sell the Common Shares. Any termination pursuant to
this subsection (b) shall be without liability on the part of the Underwriting
Group to the Company or the Selling Stockholders or on the part of the Company
or the Selling Stockholders to the Underwriting Group except for expenses to be
paid or reimbursed by the Company, the Selling Stockholders and the Underwriting
Group pursuant to Sections 7 and 9 hereof and except to the extent provided in
Section 11 hereto.
(c) This Agreement may be terminated by you by notice to the Company in the
event that the Company shall have failed or been unable to comply with any of
the terms, conditions or provisions of this Agreement on the part of the Company
to be performed, complied with or fulfilled within the respective times herein
provided for, unless compliance, therewith or performance or satisfaction
thereof shall have been expressly waived by you in writing.
(d) Any termination of this Agreement pursuant to this Section shall be
without liability of any character (including, but not limited to, loss of
anticipated profits or consequential damages) on the part of any party thereto,
except that the Company, the Selling Stockholders, and the Underwriting Group
shall remain obligated to pay the costs and expenses provided to be paid by it
or them specified in this Agreement; and the Company, the Selling Stockholders,
and the Underwriting Group shall be obligated to pay all losses, claims,
damages, or liabilities, joint or several, required to be paid by it or them by
this Agreement.
SECTION 15. Representations and Indemnities to Survive Delivery.
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The respective indemnities, agreements, representations, warranties and other
statements of the
Company, of its officers, of the Selling Stockholders and of the Representative
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of the
Representative or the Company or any of its or their partners, officers or
directors or any controlling person, or the Selling Stockholders, as the case
may be, and will survive delivery of and payment for the Common Shares sold
hereunder and any termination of this Agreement.
SECTION 16 Notices. All communications hereunder shall be in writing
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and, if sent to the Representative shall be mailed, delivered or telegraphed and
confirmed to you at 0000 XxxXxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000, Attention: Xxx Xxxxxxxx, with a concurrent copy to Xxxxxxx X. Xxxxxxxx,
of Radcliff, Frandsen, Tricker & Dongell, 000 X. Xxxxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx 00000 and if sent to the Company or the Selling
Stockholders shall be mailed, delivered or telegraphed and confirmed to the
Company at 0000 X Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000 with a concurrent copy
to Xxxxxx X. Xxxxxx, Esq., Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx LLP, 00000 Xxx
Xxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000. The Company, the Selling
Stockholders or you may change the address for receipt of communications
hereunder by giving notice to the others.
SECTION 17. Successors. This Agreement will inure to the benefit of
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and be binding upon the parties hereto, and to the benefit of the officers and
directors and controlling persons referred to in Section 11, and in each case
their respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. No such assignment shall
relieve any party of its obligations hereunder. The term "successors" shall not
include any purchaser of the Common Shares as such from the Underwriting Group
merely by reason of such purchase.
SECTION 18. Partial Unenforceability. The invalidity or
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unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 19. Applicable Law. This Agreement shall be governed by and
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construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 20. General. This Agreement constitutes the entire agreement
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of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original and all of which shall
constitute one and the same document.
In this Agreement the masculine, feminine and neuter genders and the
singular and the plural include one another. The Section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This
Agreement may be amended or modified, and the observance of any term of this
Agreement may be waived, only by a writing signed by the Company, the Selling
Stockholders and you.
Any person executing and delivering this Agreement as Attorney-in-fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney that authorizes such Attorney-in-fact to take such
action. Any action taken under this Agreement by any of the Attorneys-in-fact
will be binding on all the Selling Stockholders.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company, the Selling Stockholders and
the Underwriting Group, all in accordance with its terms.
Very truly yours,
JAVELIN SYSTEMS, INC.
By:
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President
Selling Stockholders
By:
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(Attorney-in-fact)
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in Newport Beach, California, as
of the date first above written.
MERIDIAN CAPITAL GROUP, INC.
As Representative of the Underwriting Group
By: Meridian Capital Group, Inc.
By:
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Partner
SCHEDULE A
Number of Optional Common Shares
Name of Selling to be Sold by
Stockholders Selling Stockholders
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Xxxxxxx X. and Xxxxxx X. Xxxxxx, as joint 6,250
tenants by the entireties
Xxxxxx X. XxXxx 10,000
TOTALS
