UNDERWRITING AGREEMENT
between
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
and
GKN SECURITIES CORP.,
as Representative
Dated: June , 1997
TABLE OF CONTENTS
PAGE
----
INDEX OF DEFINITIONS........................................................ iv
1. Purchase and Sale of Securities.......................................... 1
1.1 Firm Securities................................................... 1
1.1.1 Purchase of Firm Securities................................. 1
1.1.2 Payment and Delivery........................................ 1
1.2 Over-Allotment Option............................................. 2
1.2.1 Option Securities........................................... 2
1.2.2 Exercise of Option.......................................... 2
1.2.3 Payment and Delivery........................................ 2
1.3 Representative's Purchase Option.................................. 2
1.3.1 Purchase Option............................................. 2
1.3.2 Payment and Delivery........................................ 3
2. Representations and Warranties of the Company............................ 3
2.1 Filing of Registration Statement.................................. 3
2.2 No Stop Orders, Etc............................................... 3
2.3 Disclosures in Registration Statement............................. 3
2.3.1 Securities Act and Exchange Act Representation.............. 3
2.3.2 Disclosure of Contracts..................................... 4
2.3.3 Prior Securities Transactions............................... 4
2.4 Changes After Dates in Registration Statement..................... 4
2.4.1 No Material Adverse Change ................................. 4
2.4.2 Recent Securities Transactions, Etc......................... 5
2.5 Independent Accountants........................................... 5
2.6 Financial Statements.............................................. 5
2.7 Authorized Capital; Options; Etc.................................. 5
2.8 Valid Issuance of Securities; Etc................................. 5
2.8.1 Outstanding Securities...................................... 5
2.8.2 Securities Sold Pursuant to this Agreement.................. 6
2.9 Registration Rights of Third Parties.............................. 6
2.10 Validity and Binding Effect of Agreements......................... 6
2.11 No Conflicts, Etc................................................. 6
2.12 No Defaults; Violations........................................... 7
2.13 Corporate Power; Licenses; Consents............................... 7
2.13.1 Conduct of Business...................................... 7
2.13.2 Transactions Contemplated Herein........................... 7
2.14 Title to Property; Insurance...................................... 8
2.15 Litigation; Governmental Proceedings.............................. 8
2.16 Good Standing..................................................... 8
2.17 Taxes............................................................. 8
2.18 Foreign Corrupt Practices Act..................................... 8
2.19 Nasdaq and The Boston Stock Exchange Eligibility.................. 9
2.20 Intangibles....................................................... 9
2.21 Relations With Employees.......................................... 9
i
PAGE
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2.21.1 Employee Matters........................................... 9
2.21.2 Employee Benefit Plans..................................... 9
2.22 Officers' Certificate............................................ 10
2.23 Subsidiaries..................................................... 10
3. Covenants of the Company................................................. 10
3.1 Amendments to Registration Statement............................. 10
3.2 Federal Securities Laws.......................................... 10
3.2.1 Compliance................................................. 10
3.2.2 Filing of Final Prospectus................................. 11
3.2.3 Exchange Act Registration.................................. 11
3.3 Blue Sky Filing.................................................. 11
3.4 Delivery to the Underwriters of Prospectuses..................... 11
3.5 Events Requiring Notice to the Representative.................... 11
3.6 Review of Financial Statements................................... 11
3.7 Reserved......................................................... 12
3.8 Secondary Market Trading and Standard & Poor's................... 12
3.9 Nasdaq and BSE Maintenance....................................... 12
3.10 Reserved......................................................... 12
3.11 Reserved......................................................... 12
3.12 Reports to the Representative and Others......................... 12
3.12.1 Periodic Reports, Etc..................................... 12
3.12.2 Transfer Sheets and Weekly Position Listings.............. 12
3.13 Representative's Purchase Option................................. 12
3.14 Reserved......................................................... 12
3.15 Payment of Expenses.............................................. 12
3.15.1 General Expenses.......................................... 12
3.15.2 Non-Accountable Expenses.................................. 13
3.16 Application of Net Proceeds...................................... 13
3.17 Delivery of Earnings Statements to Security Holders.............. 14
3.18 Key Person Life Insurance........................................ 14
3.19 Stabilization.................................................... 14
3.20 Internal Controls................................................ 14
3.21 Accountants and Lawyers.......................................... 14
3.22 Transfer Agent................................................... 14
4. Conditions of the Underwriters' Obligations............................. 14
4.1 Regulatory Matters............................................... 15
4.1.1 Effectiveness of Registration Statement.................... 15
4.1.2 NASD Clearance............................................. 15
4.1.3 No Blue Sky Stop Orders.................................... 15
4.2 Company Counsel Matters.......................................... 15
4.2.1 Effective Date Opinion of Counsel.......................... 15
4.2.2 Opinion of Trademark Counsel............................... 18
4.2.3 Opinion of FCC Counsel..................................... 19
4.2.4 Closing Date and Option Closing Date Opinions of Counsel... 19
4.2.5 Reliance................................................... 19
4.3 Cold Comfort Letter.............................................. 19
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4.4 Officers' Certificates........................................... 20
4.4.1 Officers' Certificate...................................... 20
4.4.2 Secretary's Certificate.................................... 20
4.5 No Material Changes.............................................. 21
4.6 Delivery of Representative's Purchase Option..................... 21
4.7 Opinion of Counsel to the Underwriters........................... 21
4.8 Unaudited Financials............................................. 22
5. Indemnification......................................................... 22
5.1 Indemnification of the Underwriters.............................. 22
5.1.1 General.................................................... 22
5.1.2 Procedure.................................................. 22
5.2 Indemnification of the........................................... 23
5.3 Contribution..................................................... 23
5.3.1 Contribution Rights........................................ 23
5.3.2 Contribution Procedure..................................... 24
6. Default by an Underwriter............................................... 24
6.1 Default Not Exceeding 10% of Firm Securities..................... 24
6.2 Default Exceeding 10% of Firm Securities......................... 24
6.3 Postponement of Closing Date..................................... 25
7. Additional Covenants.................................................... 25
7.1 Board Designee................................................... 25
7.2 Insider Sales.................................................... 25
7.3 Compensation and Other Arrangements.............................. 25
8. Representations and Agreements to Survive Delivery...................... 25
9. Effective Date of This Agreement and Termination Thereof................ 26
9.1 Effective Date................................................... 26
9.2 Termination...................................................... 26
9.3 Notice........................................................... 26
9.4 Expenses......................................................... 26
9.5 Indemnification.................................................. 26
10. Miscellaneous........................................................... 27
10.1 Notices......................................................... 27
10.2 Headings........................................................ 27
10.3 Amendment....................................................... 27
10.4 Entire Agreement................................................ 27
10.5 Binding Effect..................................................... 27
10.6 Governing Law, Jurisdiction........................................ 28
10.7 Execution in Counterparts.......................................... 28
10.8 Waiver, Etc........................................................ 28
iii
INDEX OF DEFINITIONS
TERM SECTION
---- -------
Act................................................................. 2.1
BSE................................................................. 2.19
Closing Date....................................................... 1.1.2
Code.............................................................. 2.21.2
Commission........................................................... 2.1
Common Stock....................................................... 1.1.1
Company........................................... Introductory Paragraph
Effective Date..................................................... 1.2.2
ERISA............................................................. 2.21.2
ERISA Plans....................................................... 2.21.2
Exchange Act....................................................... 3.2.1
Firm Securities..................................................... 1.1.1
Insiders............................................................. 7.2
Intangibles.......................................................... 2.20
NASD................................................................ 3.15
Nasdaq.............................................................. 2.19
Option Closing Date................................................ 1.2.2
Option Securities.................................................. 1.2.1
Over-allotment Option.............................................. 1.2.1
Preliminary Prospectus............................................... 2.1
Prospectus........................................................... 2.1
Public Securities.................................................. 1.2.1
Registration Statement............................................... 2.1
Regulations.......................................................... 2.1
Representative.................................... Introductory Paragraph
Representative's Purchase Option................................... 1.3.1
Representative's Securities........................................ 1.3.1
Representative's Shares............................................ 1.3.1
SAS.................................................................. 4.3
Securities......................................................... 1.3.1
Transfer Agent...................................................... 3.22
Unaudited Financials................................................. 4.8
Underwriters...................................... Introductory Paragraph
iv
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
2,500,000 Shares of Common Stock
UNDERWRITING AGREEMENT
----------------------
Xxx Xxxx, Xxx Xxxx
Xxxx , 0000
XXX Securities Corp.
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, Global Telecommunication Solutions, Inc., a Delaware
corporation ("Company"), hereby confirms its agreement with GKN Securities
Corp. (being referred to herein variously as the "Representative" or "you")
and the other underwriters named on Schedule I hereto (the Representative and
the other underwriters being collectively called the "Underwriters" or,
individually, an "Underwriter") as follows:
1. Purchase and Sale of Securities.
1.1 FIRM SECURITIES.
1.1.1 Purchase of Firm Securities. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell, severally
and not jointly, to the several Underwriters 2,500,000 shares of the
Company's Common Stock, par value $.01 per share ("Common Stock"), at a
purchase price, net of commissions, of $ per share (being referred to
herein as "Firm Securities"). The Underwriters, severally and not jointly,
agree to purchase from the Company the number of Firm Securities set forth
opposite their respective names on Schedule I attached hereto and made a part
hereof.
1.1.2 Payment and Delivery. Delivery and payment for the Firm
Securities shall be made at 10:00 A.M., New York time, on or before the third
business day following the date that the Firm Securities commence trading or
at such earlier time as the Representative shall determine, or at such other
time as shall be agreed upon by the Representative and the Company at the
offices of the Representative or at such other place as shall be agreed upon
by the Representative and the Company. The hour and date of delivery and
payment for the Firm Securities are called the "Closing Date." Payment for
the Firm Securities shall be made on the Closing Date at the Representative's
election by wire transfer or by certified or bank cashier's check(s) in New
York Clearing House funds, payable to the order of the Company, upon delivery
to you of certificates (in form and substance satisfactory to the
Representative) representing the Firm Securities for the account of the
respective accounts of the Underwriters. The Firm Securities shall be
registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two full business days prior
to the Closing Date. The Company will permit the Representative to examine
and package the Firm Securities
for delivery at least one full business day prior to the Closing Date. The
Company shall not be obligated to sell or deliver the Firm Securities except
upon tender of payment by the Underwriters for all the Firm Securities.
1.2 OVER-ALLOTMENT OPTION.
1.2.1 Option Securities. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm
Securities, the Underwriters are hereby granted an option ("Over-allotment
Option") to purchase up to an additional 375,000 shares of Common Stock from
the Company ("Option Securities"). The Firm Securities and the Option
Securities are hereinafter referred to collectively as the "Public
Securities." The purchase price to be paid for the Option Securities will be
the same price per Option Security as the price per Firm Security set forth
in Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Representative on
behalf of the Underwriters as to all or any part of the Option Securities at
any time, from time to time, but not more than twice, within forty-five days
after the effective date ("Effective Date") of the Registration Statement (as
hereinafter defined). The Underwriters will not be under any obligation to
purchase any Option Securities prior to the exercise of the Over-allotment
Option. The Over-allotment Option granted hereby may be exercised by the
giving of oral notice to the Company from the Representative, which must be
confirmed by a letter or telecopy setting forth the number of Option
Securities to be purchased, the date and time for delivery of and payment for
the Option Securities and stating that the Option Securities referred to
therein are to be used for the purpose of covering over-allotments in
connection with the distribution and sale of the Firm Securities. If such
notice is given at least two full business days prior to the Closing Date,
the date set forth therein for such delivery and payment will be the Closing
Date. If such notice is given thereafter, the date set forth therein for such
delivery and payment will not be earlier than three business days after the
date of the notice, unless we mutually agree to an earlier date. If such
delivery and payment for the Option Securities does not occur on the Closing
Date, the date and time of the closing for such Option Securities will be as
set forth in the notice (hereinafter "Option Closing Date"). Upon exercise of
the Over-allotment Option, the Company will become obligated to convey to the
Underwriters, and, subject to the terms and conditions set forth herein, the
Underwriters will become obligated to purchase, the number of Option
Securities specified insuch notice.
1.2.3 Payment and Delivery. Payment for the Option Securities will
be, at the Representative's election, by wire transfer or by certified or
bank cashier's check(s) in New York Clearing House funds, payable to the
order of the Company at the offices of the Representative or at such other
place as shall be agreed upon by the Representative and the Company, upon
delivery to the Representative of certificates representing such securities
for the respective accounts of the Underwriters. The certificates
representing the Option Securities to be delivered will be in such
denominations and registered in such names as the Representative requests not
less than two full business days prior to the Closing Date or the Option
Closing Date, as the case may be, and will be made available to the
Representative for inspection, checking and packaging at the aforesaid office
of the Company's transfer agent or correspondent not less than one full
business day prior to such Closing Date.
1.3 REPRESENTATIVE'S PURCHASE OPTION.
1.3.1 Purchase Option. The Company hereby agrees to issue and sell
to the Representative (and/or its designees) on the Closing Date, for an
aggregate purchase price of
2
$100, an option ("Representative's Purchase Option") exercisable, at any
time, in whole or in part, for a period of four years commencing one year
from the Effective Date, to purchase an aggregate of 200,000 shares of Common
Stock ("Representative's Shares") at an initial exercise price of % of the
initial offering price of a share of Common Stock (i.e., $ per share
of Common Stock). The Representative's Purchase Option and the
Representative's Shares are hereinafter referred to collectively as the
"Representative's Securities." The Public Securities and the Representative's
Securities are hereinafter referred to collectively as the "Securities."
1.3.2 Payment and Delivery. Delivery and payment for the
Representative's Purchase Option shall be made on the Closing Date. The
Company shall deliver to the Representative, upon payment therefor,
certificates for the Representative's Purchase Option in the name or names
and in such authorized denominations as the Representative may request.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Representative as follows:
2.1 FILING OF REGISTRATION STATEMENT. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement
and an amendment or amendments thereto, on Form SB-2 (No. 333-25389),
including any related preliminary prospectus ("Preliminary Prospectus"), for
the registration of the Securities under the Securities Act of 1933, as
amended ("Act"), which registration statement and amendment or amendments
have been prepared by the Company in conformity with the requirements of the
Act and the rules and regulations ("Regulations") of the Commission under the
Act. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part
thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430A of the
Regulations), is hereinafter called the "Registration Statement," and the
form of the final prospectus dated the Effective Date (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of
the Regulations), is hereinafter called the "Prospectus." The Registration
Statement has been declared effective by the Commission on the date hereof.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has
instituted or, to the best of the Company's knowledge, threatened to
institute any proceedings with respect to such an order.
2.3 DISCLOSURES IN REGISTRATION STATEMENT.
2.3.1 Securities Act and Exchange Act Representation. At the time
the Registration Statement became effective and at all times subsequent
thereto up to and including the Closing Date and the Option Closing Date, if
any, the Registration Statement and the Prospectus and any amendment or
supplement thereto contained and will contain all material statements which
are required to be stated therein in accordance with the Act and the
Regulations, and conformed and will conform in all material respects to the
requirements of the Act and the Regulations; neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, during
such time period and on such dates, contained or will contain any untrue
statement of a material fact or omitted or
will omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, nor did they or will they contain
any untrue statement of a material fact nor did they or will they omit to state
any material fact required to be stated therein or necessary to make the
statements
3
therein, in light of the circumstances under which they were made, not
misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such Preliminary Prospectus and
any amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the
Regulations and did not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The representation and warranty made in
this Section 2.3.1 does not apply to statements made or statements omitted in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by the Representative expressly for
use in the Registration Statement or Prospectus or any amendment thereof or
supplement thereto.
2.3.2 Disclosure of Contracts. The description in the Registration
Statement and the Prospectus of contracts and other documents is accurate in
all material respects and presents fairly the information required to be
disclosed and there are no contracts or other documents required to be
described in the Registration Statement or the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement which have not been
so described or filed. Each contract or other instrument (however
characterized or described) to which the Company is a party or by which its
property or business is or may be bound or affected and which is (i) referred
to in the Prospectus, or (ii) material to the Company's business, has been
duly and validly executed, is in full force and effect in all material
respects and is enforceable against the Company and, to the Company's
knowledge, the other parties thereto in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to the equitable defenses
and to the discretion of the court before which any proceeding therefor may
be brought. None of such contracts or instruments has been assigned by the
Company, and neither the Company nor, to the best of the Company's knowledge,
any other party, is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the lapse of time or the giving
of notice, or both, would constitute a default thereunder. To the best of the
Company's knowledge, none of the material provisions of such contracts or
instruments violates or will result in a violation of any existing applicable
law, rule, regulation, judgment, order or decree of any governmental agency
or court having jurisdiction over the Company or any of its assets or
businesses, including, without limitation, those relating to environmental
laws and regulations.
2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of,
any person or persons controlling, controlled by, or under common control
with the Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.
2.4 CHANGES AFTER DATES IN REGISTRATION STATEMENT.
2.4.1 No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no
material adverse change in the condition, financial or otherwise, or in the
results of operations, business or business prospects of the
4
Company, including, but not limited to, a material loss or interference with
its business from fire, storm, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, whether or not arising in the ordinary course of
business, and (ii) there have been no transactions entered into by the
Company, other than those in the ordinary course of business, which are
material with respect to the condition, financial or otherwise, or to the
results of operations, business or business prospects of the Company.
2.4.2 Recent Securities Transactions, Etc. Subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (i) issued any securities
or incurred any liability or obligation, direct or contingent, for borrowed
money; or (ii) declared or paid any dividend or made any other distribution
on or in respect to its capital stock.
2.5 INDEPENDENT ACCOUNTANTS. KPMG Peat Marwick LLP, whose report is filed
with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations.
2.6 FINANCIAL STATEMENTS. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
of the Company at the dates and for the periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved; and
the supporting schedules included in the Registration Statement present fairly
the information required to be stated therein.
2.7 AUTHORIZED CAPITAL; OPTIONS; ETC. The Company had at the date or dates
indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in "Capitalization" in the Registration Statement
and the Prospectus. Based on the assumptions and adjustments stated in the
Registration Statement and the Prospectus, the Company will have on the Closing
Date the adjusted stock capitalization set forth in "Capitalization." Except as
set forth in the Registration Statement and the Prospectus, on the Effective
Date and on the Closing Date there will be no options, warrants, or other rights
to purchase or otherwise acquire any authorized but unissued shares of Common
Stock of the Company, including any obligations to issue any shares pursuant to
anti-dilution provisions, or any security convertible into shares of Common
Stock of the Company, or any contracts or commitments to issue or sell shares of
Common Stock or any such options, warrants, rights or convertible securities.
2.8 VALID ISSUANCE OF SECURITIES; ETC.
2.8.1 Outstanding Securities. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The outstanding options and warrants
to purchase shares of Common Stock constitute the valid and binding obligations
of the Company, enforceable in accordance with their terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
5
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The authorized Common Stock and outstanding options and warrants
to purchase shares of Common Stock conform in all material respects to all
statements relating thereto contained in the Registration Statement and the
Prospectus. The offers and sales of the outstanding Common Stock, options and
warrants to purchase shares of Common Stock were at all relevant times either
registered or qualified under the Act and the applicable state securities or
Blue Sky Laws or exempt from such registration requirements.
2.8.2 Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for, will be validly
issued, fully paid and non-assessable; the holders thereof are not and will
not be subject to personal liability by reason of being such holders; the
Securities are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual rights granted
by the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Securities has been duly and validly
taken. When issued, the Representative's Purchase Option will constitute a
valid and binding obligation of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of securities of the
Company called for thereby and the Representative's Purchase Option will be
enforceable against the Company in accordance with its terms, except (i) as
such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, (ii) as enforceability
of any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.9 REGISTRATION RIGHTS OF THIRD PARTIES. Other than as set forth in the
Prospectus, no holders of any securities of the Company or of any options or
warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company, except for holders with
such rights whose securities have already been registered by the Company.
2.10 VALIDITY AND BINDING EFFECT OF AGREEMENTS. This Agreement and the
Representative's Purchase Option have been duly and validly authorized by the
Company, and constitute, or when executed and delivered, will constitute, the
valid and binding agreements of the Company, enforceable against the Company in
accordance with their respective terms, except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.11 No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement and the Representative's Purchase Option, the
consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and
thereof do not and will not, with or without the giving of notice or the
lapse of time or both, (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any
6
lien, charge or encumbrance upon any property or assets of the Company
pursuant to the terms of any indenture, mortgage, deed of trust, note, loan
or credit agreement or any other material agreement or instrument evidencing
an obligation for borrowed money, or any other agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
any of the property or assets of the Company is subject; (ii) result in any
violation of the provisions of the Certificate of Incorporation or the
By-Laws of the Company; (iii) violate any existing applicable law, rule,
regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or business; or (iv) have any material adverse effect on any
permit, license, certificate, registration, approval, consent, license or
franchise necessary for the Company to own or lease and operate any of its
properties or to conduct its business.
2.12 NO DEFAULTS; VIOLATIONS. Except as described in the Prospectus, no
default exists in the due performance and observance of any term, covenant or
condition of any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other material agreement or instrument
to which the Company is a party or by which the Company may be bound or to which
any of the properties or assets of the Company is subject, except where such
default, singly or in the aggregate, would not have a material adverse effect on
the financial position, prospects, value or the operation of the properties or
the business of the Company, taken as a whole. The Company is not in violation
of any term or provision of its Certificate of Incorporation or By-Laws or in
violation of any franchise, license, permit, applicable law, rule, regulation,
judgment or decree of any governmental agency or court, domestic or foreign,
having jurisdiction over the Company or any of its properties or business,
except as described in the Prospectus and except where such violation, singly or
in the aggregate, would not have a material adverse effect on the financial
position, prospects, value or the operation of the properties or the business of
the Company, taken as a whole.
2.13 CORPORATE POWER; LICENSES; CONSENTS.
2.13.1 Conduct of Business. The Company has all requisite corporate
power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies to own or lease its properties and conduct its business
as described in the Prospectus, except for those which, if not obtained,
would not, singly or in the aggregate, have a material adverse effect on the
Company. The Company is and has been doing business in compliance with all
such authorizations, approvals, orders, licenses, certificates and permits
and all federal, state and local rules and regulations, except where
non-compliance would not, singly or in the aggregate, have a material adverse
effect on the Company. The disclosures in the Registration Statement
concerning the effects of federal, state and local regulation on the
Company's business as currently contemplated are correct in all material
respects.
2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out
the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid issuance, sale and delivery,
of the Securities pursuant to this Agreement and the Representative's
Purchase Option, and as contemplated by the Prospectus, except with respect
to applicable federal and state securities laws.
7
2.14 TITLE TO PROPERTY; INSURANCE. The Company has good and defensible
title to, or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it, free and
clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable or arising by law.
The Company has insured its properties against loss or damage by fire or other
casualty and maintains such insurance in adequate amounts.
2.15 LITIGATION; GOVERNMENTAL PROCEEDINGS. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the best of
the Company's knowledge, threatened against, or involving the properties or
business of, the Company which is likely to materially and adversely affect the
financial position, prospects, value or the operation of the properties or the
business of the Company, or which questions the validity of the capital stock of
the Company or this Agreement or of any action taken or to be taken by the
Company pursuant to, or in connection with, this Agreement. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal, domestic or foreign, naming the Company and enjoining the
Company from taking, or requiring the Company to take, any action, or to which
the Company, its properties or business is bound or subject.
2.16 GOOD STANDING. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on its properties or business.
2.17 TAXES. Except as set forth on Schedule 2.17, the Company has filed
all returns (as hereinafter defined) required to be filed with taxing
authorities prior to the date hereof or has duly obtained extensions of time
for the filing thereof, and has paid all taxes (as hereinafter defined) shown
as due on such returns that were filed and has paid all taxes imposed on or
assessed against the Company. The provisions for taxes payable, if any, shown
on the financial statements filed with or as part of the Registration
Statement are sufficient for all accrued and unpaid taxes, whether or not
disputed, and for all periods to and including the dates of such consolidated
financial statements. Except as disclosed on Schedule 2.17, (i) no issues
have been raised (and are currently pending) by any taxing authority in
connection with any of the returns or taxes asserted as due from the Company,
and (ii) no waivers of statutes of limitation with respect to the returns or
collection of taxes have been given by or requested from the Company. The
term "taxes" mean all federal, state, local, foreign, and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments, or charges of any
kind whatever, together with any interest and any penalties, additions to
tax, or additional amounts with respect thereto. The term "returns" means all
returns, declarations, reports, statements, and other documents required to
be filed in respect to taxes.
2.18 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of its
officers, directors, employees or agents or any other person acting on behalf of
the Company has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency
8
or instrumentality of any government (domestic or foreign) or any political
party or candidate for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business of the Company (or
assist it in connection with any actual or proposed transaction) which (i) is
likely to subject the Company to any damage or penalty in any civil, criminal
or governmental litigation or proceeding, (ii) if not given in the past,
might have had a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the
Company. The internal accounting controls and procedures of the Company are
sufficient to cause the Company to comply with the Foreign Corrupt Practices
Act of 1977, as amended.
2.19 NASDAQ AND THE BOSTON STOCK EXCHANGE ELIGIBILITY. As of the Effective
Date, the Public Securities have been approved for trading on the Nasdaq
SmallCap Market ("Nasdaq") and for listing on the Boston Stock Exchange ("BSE").
2.20 INTANGIBLES. The Company owns or possesses the requisite licenses or
rights to use all trademarks, service marks, service names, trade names, patents
and patent applications, copyrights and other rights (collectively,
"Intangibles") described as being licensed to or owned by it in the Registration
Statement. The Company's Intangibles which have been registered in the United
States Patent and Trademark Office have been fully maintained and are in full
force and effect. There is no claim or action by any person pertaining to, or
proceeding pending or, to the best of the Company's knowledge, threatened and
the Company has not received any notice of conflict with, the asserted rights of
others which challenges the exclusive right of the Company with respect to any
Intangibles used in the conduct of the Company's business except as described in
the Prospectus. To the best of the Company's knowledge, the Intangibles and the
Company's current products, services and processes do not infringe on any
Intangibles held by any third party. To the best of the Company's knowledge, no
others have infringed upon the Intangibles of the Company.
2.21 RELATIONS WITH EMPLOYEES.
2.21.1 Employee Matters. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state and local laws
and regulations respecting the employment of its employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. To the best of the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state and local laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or, to the best of the Company's knowledge, threatened
against or involving the Company or any predecessor entity, and none has ever
occurred. To the best of the Company's knowledge, no question concerning
representation exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company. No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the
Company, if any.
2.21.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multi-employer plan" as such terms are defined in
Sections
9
3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does
not maintain or contribute to, and has at no time maintained or contributed
to, a defined benefit plan, as defined in Section 3(35) of ERISA. If the
Company does maintain or contribute to a defined benefit plan, any
termination of the plan on the date hereof would not give rise to liability
under Title IV of ERISA. No ERISA Plan (or any trust created thereunder) has
engaged in a "prohibited transaction" within the meaning of Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
("Code"), which could subject the Company to any tax penalty for prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is
in compliance with all material reporting, disclosure and other requirements
of the Code and ERISA as they relate to any such ERISA Plan. Determination
letters have been received from the Internal Revenue Service with respect to
each ERISA Plan which is intended to comply with Code Section 401(a), stating
that such ERISA Plan and the attendant trust are qualified thereunder. The
Company has never completely or partially withdrawn from a "multi-employer
plan."
2.22 OFFICERS' CERTIFICATE. Any certificate signed by an officer of the
Company and delivered to the Representative or its counsel shall be deemed a
representation and warranty by the Company to the Representative as to the
matters covered thereby.
2.23 SUBSIDIARIES. Except as set forth on Schedule 2.23, the Company does
not own an interest in any corporation, partnership, joint venture, trust or
other business entity. The Company has no subsidiaries other than Global
Telecommunication Solutions (Canada), Inc., GTS Marketing, Inc. and Global Link
Teleco Corporation, each a corporation duly organized and validly existing under
the laws of the jurisdiction of its incorporation (collectively, the
"Subsidiaries"). The Company owns all of the capital stock of each Subsidiary
free and clear of all liens, security interests and other encumbrances of any
nature whatsoever, except as set forth in the Prospectus. There are no options
or warrants for the purchase of, or other rights to purchase, or outstanding
voting securities convertible into or exchangeable for, any capital stock or
other securities of any Subsidiary. Unless the context otherwise requires, the
representations and warranties made by the Company in this Agreement shall also
apply and be true with respect to each Subsidiary, individually and taken as a
whole with the Company and all other Subsidiaries, as if each representation and
warranty contained herein made specific reference to the Subsidiary each time
the term "Company" was used.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1 AMENDMENTS TO REGISTRATION STATEMENT. The Company will deliver to the
Representative, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which the Representative shall
reasonably object.
3.2 FEDERAL SECURITIES LAWS. 3.2.1 Compliance. During the time when a
Prospectus is required to be delivered under the Act, the Company will use all
reasonable efforts to comply with all requirements imposed upon it by the Act,
the Regulations and the Securities Exchange Act of 1934, as amended ("Exchange
Act") and by the regulations under the Exchange Act, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus. If
at any time when a Prospectus relating to the Securities is required to be
delivered under the Act any event shall have occurred as a result of which, in
the opinion of counsel for the Company or counsel for the Representative,
10
the Prospectus, as then amended or supplemented, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to the Representative) with
the Commission pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange Act Registration. For a period of five years from the
Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock under the provisions of Section 12 of the
Exchange Act.
3.3 BLUE SKY FILING. The Company will endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as the Representative may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
3.4 DELIVERY TO THE UNDERWRITERS OF PROSPECTUSES. The Company will deliver
to each of the several Underwriters, without charge, from time to time during
the period when the Prospectus is required to be delivered under the Act or the
Exchange Act, such number of copies of each Preliminary Prospectus and the
Prospectus as such Underwriter may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to you two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 EVENTS REQUIRING NOTICE TO THE REPRESENTATIVE. The Company will
notify the Representative immediately and confirm the notice in writing (i)
of the effectiveness of the Registration Statement and any amendment thereto,
(ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding for that purpose, (iii) of
the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing
of any amendment or supplement to the Registration Statement or Prospectus,
(v) of the receipt of any comments or request for any additional information
from the Commission, and (vi) of the happening of any event during the period
described in Section 3.4 hereof which, in the judgment of the Company, makes
any statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If the Commission or any
11
state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.
3.6 REVIEW OF FINANCIAL STATEMENTS. For a period of five years from the
Effective Date, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to participate in the preparation and
presentation (but not audit) of the Company's financial statements for each of
the first three fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's Form 10-QSB quarterly reports and the
mailing of quarterly financial information to stockholders.
3.7 RESERVED.
3.8 Secondary Market Trading and Standard & Poor's. The Company will
take all necessary and appropriate actions to maintain publication in
Standard and Poor's Corporation Records Corporate Descriptions with updated
quarterly information for a period of five years from the Effective Date,
including the payment of any necessary fees and expenses. The Company shall
take such action as may be reasonably requested by the Representative to
obtain a secondary market trading exemption in such states as may be
requested by the Representative, including the payment of any necessary fees
and expenses and the filing of a Form (e.g. 25101(b)) for secondary market
trading in the State of California on the Effective Date or as soon
thereafter as is permissible.
3.9 NASDAQ AND BSE MAINTENANCE. For a period of five years from the date
hereof, the Company will use its best efforts to maintain the quotation on
Nasdaq and the listing on the BSE of the Common Stock and, if the Company
satisfies the inclusion standards of the Nasdaq National Market System, apply
for and maintain quotations on the Nasdaq National Market System of the Common
Stock during such period.
3.10 RESERVED.
3.11 RESERVED.
3.12 REPORTS TO THE REPRESENTATIVE AND OTHERS.
3.12.1 Periodic Reports, Etc. For a period of five years from the
Effective Date, the Company will promptly furnish to the Representative, and
to each other Underwriter who may so request, copies of such financial
statements and other periodic and special reports as the Company from time to
time files with any governmental authority or furnishes generally to holders
of any class of its securities, and promptly furnish to the Representative
(i) a copy of each periodic report the Company shall be required to file with
the Commission, (ii) a copy of every press release with respect to the
Company or its affairs which was released by the Company, or (iii) a copy of
each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by
the Company.
3.12.2 Transfer Sheets and Weekly Position Listings. For a period of
five years from the Closing Date, the Company will furnish to the
Representative at the Company's sole expense such transfer sheets and
position listings of the Company's securities as the Representative may
reasonably request, including the daily, weekly and monthly consolidated
transfer sheets of the transfer agent of the Company and the weekly position
listings of the Depository Trust Company.
12
3.13 REPRESENTATIVE'S PURCHASE OPTION. On the Closing Date, the Company
will execute and deliver the Representative's Purchase Option to the
Representative substantially in the form filed as an exhibit to the Registration
Statement.
3.14 RESERVED.
3.15 PAYMENT OF EXPENSES.
3.15.1 General Expenses. The Company hereby
agrees to pay on each of the Closing Date and, to the extent not paid at Closing
Date, the Option Closing Date, if any, all expenses incident to the performance
of the obligations of the Company under this Agreement, including but not
limited to (i) the preparation, printing, filing, delivery and mailing
(including the payment of postage with respect to such mailing) of the
Registration Statement, the Prospectus and the Preliminary Prospectuses and the
printing and mailing of this Agreement and related documents, including the cost
of all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriters in quantities as may be reasonably required by the
Underwriters, (ii) the printing, engraving, issuance and delivery of the shares
of Common Stock and the Representative's Purchase Option, including any transfer
or other taxes payable thereon, (iii) the qualification of the Securities under
state or foreign securities or Blue Sky laws, including the filing fees under
such Blue Sky laws and disbursements of the Representative's counsel, (iv) costs
associated with applications for assignments of a rating of the Securities by
qualified rating agencies, (v) filing fees incurred in registering the offering
with the National Association of Securities Dealers, Inc. ("NASD"), (vi) costs
of placing "tombstone" advertisements in The Wall Street Journal, The New York
Times and a third publication to be mutually selected by the Representative and
the Company, (vii) fees and disbursements of the transfer agent, (viii) the
Company's expenses associated with "due diligence" meetings arranged by the
Representative; (ix) the preparation, binding and delivery of transaction
"bibles" and lucite cubes or similar commemorative items in a style and quantity
as reasonably requested by the Representative, (x) any listing of the Securities
on the Nasdaq SmallCap Market, and any securities exchange or any listing in
Standard & Poor's, and (xi) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 3.15.1. The Representative may deduct from the net
proceeds of the offering payable to the Company on the Closing Date, or the
Option Closing Date, if any, the expenses set forth herein to be paid by the
Company to the Representative and/or to third parties.
3.15.2 Non-Accountable Expenses. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.15.1, it will pay
to the Representative a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of
the Securities, of which $50,000 has been paid to date, and the Company will
pay the balance on the Closing Date and any additional monies owed
attributable to the Option Securities or otherwise on the Option Closing Date
by certified or bank cashier's check or, at the election of the
Representative, by deduction from the proceeds of the offering contemplated
herein. If the offering contemplated by this Agreement is not consummated for
any reason whatsoever other than a breach by the Representative of this
Agreement, then the following provisions shall apply: The Company's liability
for payment to the Representative of the non-accountable expense allowance
shall be equal to the sum of the Representative's actual out-of-pocket
expenses (including, but not limited to, counsel fees, "road-show" and due
diligence expenses). The Representative shall retain such part of the
non-accountable expense allowance previously paid as shall equal such actual
out-of-pocket expenses. If the amount previously paid is insufficient to
cover such actual out-of-pocket expenses, the Company shall remain liable for
and promptly pay any other actual out-of-pocket expenses. If the amount
previously paid
13
exceeds the amount of actual out-of-pocket expenses, the Representative shall
promptly remit to the Company any such excess.
3.16 APPLICATION OF NET PROCEEDS. The Company will apply the net proceeds
from the offering received by it in a manner consistent in all material respects
with the application described under the caption "USE OF PROCEEDS" in the
Prospectus.
3.17 DELIVERY OF EARNINGS STATEMENTS TO SECURITY HOLDERS. The Company will
make generally available to its security holders as soon as practicable, but not
later than the first day of the fifteenth full calendar month following the
Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.18 KEY PERSON LIFE INSURANCE. The Company will maintain key person life
insurance in an amount not less than $1,000,000 on the life of Xxxx X. Xxxxxxxxx
and pay the annual premiums therefor naming the Company as the sole beneficiary
thereof for at least three years following the Effective Date.
3.19 STABILIZATION. Neither the Company, nor, to its knowledge, any of its
employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
3.20 INTERNAL CONTROLS. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
3.21 ACCOUNTANTS AND LAWYERS. For a period of five years from the
Effective Date, the Company shall retain independent public accountants and
securities lawyers acceptable to the Representative. Accountants KPMG Peat
Marwick LLP, and lawyers Xxxxxxxx Mollen & Xxxxxx, are acceptable to the
Representative.
3.22 TRANSFER AGENT. For a period of five years from the Effective Date,
the Company shall retain a transfer agent for the Common Stock acceptable to the
Representative. Continental Stock Transfer & Trust Company ("Transfer Agent") is
acceptable to the Representative.
4. Conditions of the Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy of the representations and
warranties of the Company as of the date hereof and as of each of the Closing
Date and the Option Closing Date, if any, to the accuracy of the statements of
officers of the Company made pursuant to the provisions hereof and to the
performance by the Company of its obligations hereunder and to the following
conditions:
14
4.1 REGULATORY MATTERS. 4.1.1 Effectiveness of Registration Statement. The
Registration Statement has been declared effective on the date of this Agreement
and, at each of the Closing Date and the Option Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for such purpose shall have been instituted or shall
be pending or, to the best knowledge of the Company, contemplated by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Xxxxxxxx Brog Leinwand Xxxxxx Xxxxxxxx & Xxxxx, P.C., counsel to the
Underwriters.
4.1.2 NASD Clearance. By the Effective Date, the Representative
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriters as described in the Registration
Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending the sale of the
Securities in any jurisdiction designated by the Representative pursuant to
Section 3.3 hereof shall have been issued on either on the Closing Date or
the Option Closing Date, and no proceedings for that purpose shall have been
instituted or, to the best knowledge of the Company, shall be contemplated.
4.2 COMPANY COUNSEL MATTERS.
4.2.1 Effective Date Opinion of Counsel. On
the Effective Date, the Representative shall have received the opinion of
Xxxxxxxx Mollen & Xxxxxx, counsel to the Company (which shall not cover any FCC
or intellectual property matters), dated the Effective Date, addressed to the
Representative and in form and substance reasonably satisfactory to Xxxxxxxx
Brog Leinwand Xxxxxx Xxxxxxxx & Xxxxx, P.C., counsel to the Underwriters, to the
effect that:
(i) The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the State
of Delaware, with full corporate power and authority to own or lease and
operate its properties and to conduct its business as described in the
Prospectus. Each of the Subsidiaries is a corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation,
with full corporate power and authority to own or lease and operate its
properties and to conduct its business as described in the Prospectus. Based
solely on our review of the stock records of the Subsidiaries, the Company
owns all of the outstanding capital stock of the Subsidiaries, except as set
forth in the Prospectus. Unless the context otherwise requires, all
references to the "Company" in this opinion shall also include the
Subsidiaries.
(ii) The Company has all requisite corporate power and
authority, and, to the best of such counsel's knowledge, has all necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental or regulatory officials and bodies to own or lease its
properties and conduct its business as described in the Prospectus, and, to
the best of such counsel's knowledge, the Company is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates and permits, except where the failure to obtain or to
comply would not have a material adverse effect on the Company. The Company
has all corporate power and authority to enter into this Agreement and the
Representative's Purchase Option and to carry out the provisions and
conditions hereof, and all consents, authorizations, approvals and orders
required in connection therewith have been
15
obtained, except where the failure to obtain such consents, authorizations,
approvals and orders would not have a material adverse effect on the Company.
No consents, approvals, authorizations or orders of, and no filing with, any
court or governmental agency or body is required for the valid offer,
authorization, issuance, sale and delivery of the Securities, and the
consummation of the transactions and agreements contemplated by this
Agreement and the Representative's Purchase Option, and as contemplated by
the Prospectus or if so required, all such authorizations, approvals,
consents, orders, registrations, licenses and permits have been duly obtained
and are in full force and effect.
(iii) All issued and outstanding securities of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of statutory preemptive rights of any holders of any security of
the Company or, to the best of such counsel's knowledge, similar contractual
rights granted by the Company. The outstanding options and warrants to
purchase shares of Common Stock known to such counsel to be outstanding
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms, except (a) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification
provision may be limited under the federal and state securities laws and
public policy, and (c) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to the equitable defenses
and to the discretion of the court before which any proceeding therefor may
be brought. The authorized and, to such counsel's knowledge, outstanding
capital stock of the Company is as set forth under the caption
"Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized and, when
issued and paid for, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal liability by
reason of being such holders. The Securities are not and will not be subject
to the statutory preemptive rights of any holders of any security of the
Company or, to the best of such counsel's knowledge, similar contractual
rights granted by the Company. All corporate action required to be taken for
the authorization, issuance and sale of the Securities has been duly and
validly taken. When issued, the Representative's Purchase Option will
constitute a valid and binding obligation of the Company to issue and sell,
upon exercise thereof and payment therefor as provided therein, the number
and type of securities of the Company called for thereby and the
Representative's Purchase Option, when issued, will be enforceable against
the Company in accordance with its terms, except (a) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, (b) as enforceability of any
indemnification and contribution provisions may be limited under the federal
and state securities laws and public policy, and (c) that the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The forms of
certificates representing the Securities are in due and proper form under
Delaware corporate law.
(v) To the best of such counsel's knowledge, other than as
set forth in the Prospectus, no holders of any securities of the Company or
of any options, warrants or securities of the Company exercisable for or
convertible or exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company under the
Act or to include any such securities in a registration statement to be filed
by the Company, except for holders with such rights whose securities have
already been registered by the Company.
16
(vi) This Agreement has been duly and validly authorized and,
assuming the due and valid authorization, execution and delivery of such
agreement by the Representative, will constitute the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except (a) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (b) as enforceability of any indemnification and contribution
provisions may be limited under the federal and state securities laws and
public policy, and (c) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to the equitable defenses
and to the discretion of the court before which any proceeding therefor may
be brought.
(vii) The execution, delivery and performance by the Company
of this Agreement and the Representative's Purchase Option, the issuance and
sale of the Securities, the consummation of the transactions contemplated
hereby and thereby and the compliance by the Company with the terms and
provisions hereof and thereof, do not and will not, with or without the
giving of notice or the lapse of time, or both, (a) conflict with, or result
in a breach of, any of the terms or provisions of, or constitute a default
under, or result in the creation or modification of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to the terms of, any material mortgage, deed of trust, note,
indenture, loan, contract, commitment or other material agreement or
instrument to which the Company is a party or by which the Company or any of
its properties or assets is bound, except where such breaches, defaults,
liens, security interests, charges or encumbrances, singly or in the
aggregate, would not have a material adverse effect on the Company, (b)
result in any violation of the provisions of the Certificate of Incorporation
or the By-Laws of the Company, (c) violate any judgment, order or decree of
which such counsel has knowledge, statute, rule or regulation applicable to
the Company of any court, domestic or foreign, or of any federal, state or
other regulatory authority or other governmental body having jurisdiction
over the Company, its properties or assets except where such violations,
singly or in the aggregate, would not have a material adverse effect on the
Company, or (d) have a material adverse effect on any permit, certification,
registration, approval, consent, license or franchise of the Company.
(viii) The Registration Statement and the Prospectus (other
than the financial statements and other financial data included therein, as
to which no opinion need be rendered) comply as to form in all material
respects with the requirements of the Act and Regulations. The Securities and
all other securities issued or issuable by the Company conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus. The statements in the Prospectus under "Risk
Factors," "Business," "Management," "Certain Transactions," "Principal
Stockholders," "Description of Securities" and "Shares Eligible for Future
Sale" have been reviewed by such counsel, and insofar as they contain
descriptions of law, statutes, licenses, rules or regulations are correct in
all material respects. No statute or regulation or legal or governmental
proceeding required to be described in the Prospectus is not described as
required, nor are any contracts or documents of which such counsel has
knowledge of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement not so described or filed as required.
(ix) The Registration Statement is effective under the Act,
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Act or applicable state securities laws.
(x) Except as described in the Prospectus, to the best of
such counsel's knowledge, no default exists in the due performance and
observance of any term, covenant or
17
condition of any material license, contract, indenture, mortgage, deed of
trust, note, loan or credit agreement, commitment, or any other material
agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of its properties or assets is subject,
except for such defaults which, singly or in the aggregate, would not have a
material adverse effect on the Company. The Company is not in violation of
any term or provision of its Certificate of Incorporation or, to the best of
such counsel's knowledge, its By-Laws. To the best of such counsel's
knowledge, the Company is not in violation of any judgment, order or decree
of which such counsel has knowledge, franchise, license, permit, law, rule or
regulation applicable to the Company, of any governmental agency or
court,domestic or foreign, having jurisdiction over the Company or any of its
properties or business, except where such violations, singly or in the
aggregate, would not have a material adverse effect on the Company.
(xi) To the best of such counsel's knowledge, except as
described in Schedule 2.23 to the Underwriting Agreement, the Company does
not own an interest in any corporation, partnership, joint venture, trust or
other business entity.
(xii) To the best of such counsel's knowledge, except as set
forth in the Prospectus, there is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now pending or
threatened against the Company, which would reasonably be expected to have a
material adverse effect on the business, properties or financial condition of
the Company.
Counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company and representatives of the Underwriters at which
the contents of the Registration Statement, the Prospectus and related
matters were discussed and although such counsel is not passing upon, and
does not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except as otherwise set forth in counsel's opinion), no facts
have come to the attention of such counsel which lead them to believe that
either the Registration Statement or the Prospectus or any amendment or
supplement thereto contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and other financial and statistical
data contained in or omitted from the Registration Statement or Prospectus).
The opinion of counsel for the Company shall include a statement to
the effect that it may be relied upon by counsel for the Underwriters in its
opinion delivered to the Representative.
4.2.2 Opinion of Trademark Counsel.
On the Effective Date, the Representative also shall have received the
opinion of , trademark counsel to the Company, addressed to the
Representative and in the form attached hereto as Exhibit A.
4.2.3 Opinion of FCC Counsel. On the Effective Date, the
Representative also shall have received the opinion of Xxxxxx & Xxxxxxx, FCC
counsel to the Company, addressed to the Representative and in the form
attached hereto as Exhibit B.
4.2.4 Closing Date and Option Closing Date Opinions of Counsel. On
each of the Closing Date and the Option Closing Date, if any, the
Representative shall have received the opinions of Xxxxxxxx Mollen & Xxxxxx,
counsel to the Company, ,
18
trademark counsel to the Company, and Xxxxxx & Xxxxxxx, FCC counsel to the
Company, dated the Closing Date or the Option Closing Date, as the case may
be, addressed to the Representative and in form and substance satisfactory to
Xxxxxxxx Brog Leinwand Green Xxxxxxxx & Xxxxx, P.C., counsel to the
Underwriters, confirming as of the Closing Date and, if applicable, the
Option Closing Date, the statements made by Xxxxxxxx Mollen & Xxxxxx,
, and Xxxxxx & Xxxxxxx in their respective opinions delivered
on the Effective Date.
4.2.5 Reliance. In rendering such opinions, such counsel may
rely (i) as to matters involving the application of laws other than the laws
of the United States and jurisdictions in which they are admitted, to the
extent such counsel deems proper and to the extent specified in such
opinions, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Representative's counsel) of other counsel
reasonably acceptable to Representative's counsel, familiar with the
applicable laws, and (ii) as to matters of fact, to the extent they deem
proper, on certificates or other written statements of officers of the
Company and, respecting the corporate existence or good standing of the
Company, of officers of departments of various jurisdictions having custody
of documents, provided that copies of any such statements or certificates
shall be delivered to counsel to the Underwriters if requested. Any opinion
relied upon by counsel for the Company shall include a statement to the
effect that it may be relied upon by counsel for the Representative in its
opinion delivered to the Representative.
4.3 COLD COMFORT LETTER. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Representative and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Xxxxxxxx
Xxxx Xxxxxxxx Xxxxxx Xxxxxxxx & Xxxxx, P.C., counsel to the Underwriters, from
KPMG Peat Marwick LLP, dated, respectively, as of the date of this Agreement and
as of the Closing Date and the Option Closing Date, if any:
(i) confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations;
(ii) stating that in their opinion the financial statements
of the Company included in the Registration Statement and Prospectus comply
as to form in all material respects with the applicable accounting
requirements of the Act and the published Regulations thereunder;
(iii) stating that, based on the performance of procedures
specified by the American Institute of Certified Public Accountants for a
review of the latest available unaudited interim financial statements of the
Company (as described in Statement on Auditing Standards ("SAS") No.
71--"Interim Financial Information"), with an indication of the date of the
latest available unaudited interim financial statements, a reading of the
latest available minutes of the stockholders and board of directors and the
various committees of the board of directors, consultations with officers and
other employees of the Company responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has come to
their attention which would lead them to believe that (a) the unaudited
financial statements of the
19
Company included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the Act
and the Regulations or any material modification should be made to the
unaudited interim financial statements included in the Registration Statement
for them to be in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements of the Company included in the Registration Statement,
(b) at a date not later than five days prior to the Effective Date, Closing
Date or Option Closing Date, as the case may be, there was any change in the
capital stock or long-term debt of the Company, or any decrease in the
stockholders' equity of the Company as compared with amounts shown in the
December 31, 1996 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if
there was any decrease, setting forth the amount of such decrease, and (c)
during the period from December 31, 1996 to a specified date not later than
five days prior to the Effective Date, Closing Date or Option Closing Date,
as the case may be, there was any decrease in revenues, net earnings or net
earnings per share of Common Stock, in each case as compared with the
corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus
in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting
records, and work sheets, of the Company with the results obtained from the
application of specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter and found them
to be in agreement;
(v) statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4 OFFICERS' CERTIFICATES.
4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Chief Executive Officer, the Chief
Financial Officer and General Counsel of the Company, dated the Closing Date
or the Option Closing Date, as the case may be, respectively, to the effect
that the Company has performed all covenants and complied with all conditions
required by this Agreement to be performed or complied with by the Company
prior to and as of the Closing Date, or the Option Closing Date, as the case
may be, and that the conditions set forth in Section 4.5 hereof have been
satisfied as of such date and that, as of Closing Date and the Option Closing
Date, as the case may be, the representations and warranties of the Company
set forth in Section 2 hereof are true and correct. In addition, the
Representative will have received such other and further certificates of
officers of the Company as the Representative may reasonably request.
4.4.2 Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force
and effect, (ii) that the resolutions relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified, (iii) all correspondence between the Company or its counsel and the
Commission, (iv) all correspondence between the Company or its counsel and
the NASD concerning inclusion of the Securities on Nasdaq, (v) all
correspondence between the Company or its counsel and the BSE concerning
listing on the BSE, and (vi) as to the incumbency of the
20
officers of the Company. The documents referred to in such certificate shall
be attached to such certificate.
4.5 NO MATERIAL CHANGES. Prior to and on each of the Closing Date and the
Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material change in the condition
or prospects or the business activities, financial or otherwise, of the Company
from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus provided, however, that continued losses,
consistent with prior periods, shall not be deemed a material adverse change or
development, (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company from the latest date as of which
the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is materially adverse to the Company, taken as a
whole, (iii) the Company shall not be in default under any provision of any
instrument relating to any outstanding indebtedness which default would have a
material adverse effect on the Company, (iv) no material amount of the assets of
the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus, (v) no action suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company or
affecting any of its property or business before or by any court or federal or
state commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus, (vi) no stop order shall
have been issued under the Act and no proceedings therefor shall have been
initiated or threatened by the Commission, and (vii) the Registration Statement
and the Prospectus and any amendments or supplements thereto contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations and conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.6 DELIVERY OF REPRESENTATIVE'S PURCHASE OPTION. The Company has
delivered to the Representative an executed copy of the Representative's
Purchase Option.
4.7 OPINION OF COUNSEL TO THE UNDERWRITERS. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to Xxxxxxxx Xxxx Xxxxxxxx Xxxxxx Xxxxxxxx & Xxxxx, P.C., counsel to
the Underwriters, and you shall have received from such counsel a favorable
opinion, dated the Closing Date and the Option Closing Date, if any, with
respect to such of these proceedings as you may reasonably require. On or
prior to the Effective Date, the Closing Date and the Option Closing Date, as
the case may be, counsel to the Underwriters shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 4.7, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions herein
contained.
4.8 UNAUDITED FINANCIALS. The Company has furnished to the Representative
a copy of the latest available unaudited interim financial statements for the
quarter ended March 31, 1997 ("Unaudited Financials") of the Company which have
been read by the Company's independent accountants, as stated in their letter
dated as of the Closing Date to be furnished pursuant to Section 4.3 hereof.
21
5. Indemnification.
5.1 INDEMNIFICATION OF THE UNDERWRITERS.
5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, their
respective directors, officers, agents and employees and each person, if any,
who controls any such Underwriter ("controlling person") within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against any
and all loss, liability, claim, damage and expense whatsoever (including but
not limited to any and all legal or other expenses reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, whether arising out of any action between any of the Underwriters
and the Company or between any of the Underwriters and any third-party or
otherwise) to which they or any of them may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact directly relating to the
transactions effected by the Underwriters in connection with this offering
contained in (i) any Preliminary Prospectus, the Registration Statement or
the Prospectus (as from time to time each may be amended and supplemented);
(ii) in any post-effective amendment or amendments or any new registration
statement and prospectus in which are included securities of the Company
issued or issuable upon exercise of the Representative's Purchase Option; or
(iii) any application or other document or written communication (in this
Section 5 collectively called "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in
order to qualify the Securities under the securities laws thereof or filed
with the Commission, any state securities commission or agency, Nasdaq or any
securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, unless such statement or omission was made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to an Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement
or Prospectus, or any amendment or supplement thereof, or in any application,
as the case may be; provided, further, that the indemnification hereunder
shall not be applicable to any Preliminary Prospectus if the untrue statement
or alleged untrue statement was contained in a Preliminary Prospectus and was
corrected in the Prospectus. The Company agrees promptly to notify the
Representative of the commencement of any litigation or proceedings against
the Company or any of its officers, directors or controlling persons in
connection with the issue and sale of the Securities or in connection with
the Registration Statement or Prospectus.
5.1.2 Procedure. If any action is brought against an Underwriter or
controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, such Underwriter shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of
counsel (subject to the approval of such Underwriter) and payment of actual
expenses. Underwriter or controlling person shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling
person unless (i) the employment of such counsel shall have been authorized
in writing by the Company in connection with the defense of such action, or
(ii) the Company shall not have employed counsel to have charge of the
defense of such action, or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such
action on
22
behalf of the indemnified party or parties), in any of which events the fees
and expenses of not more than one additional firm of attorneys selected by
the Underwriter and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if an Underwriter
or controlling person shall assume the defense of such action as provided
above, the Company shall have the right to approve the terms of any
settlement of such action which approval shall not be unreasonably withheld.
5.2 INDEMNIFICATION OF THE COMPANY. Each Underwriter, severally and not
jointly, agrees to indemnify and hold harmless the Company against any and
all loss, liability, claim, damage and expense described in the foregoing
indemnity from the Company to the several Underwriters, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements
or omissions by the Underwriters made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto
or in any application in reliance upon, and in strict conformity with,
written information furnished to the Company with respect to such Underwriter
by or on behalf of such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any such application. In case any action shall be
brought against the Company or any other person so indemnified based on any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have
the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the several
Underwriters by the provisions of Section 5.1.2.
5.3 CONTRIBUTION.
5.3.1 Contribution Rights. In order to provide for just
and equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriters, as incurred, in such proportions that the Underwriters are
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a 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. Notwithstanding
the provisions of this Section 5.3, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay in respect of such losses, liabilities, claims,
damages and expenses. For purposes of this Section, each director, officer and
employee of an Underwriter, and each person, if any, who controls an Underwriter
within the meaning of Section 15 of the Act, shall have the same rights to
contribution as such Underwriter, and each director, officer and employee of the
Company, and
23
each person, if any, who controls the Company within the meaning of Section
15 of the Act, shall have the same rights to contribution as the Company.
5.3.2 Contribution Procedure. Within fifteen days after receipt by
any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim
for contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not
relieve it from any liability which it may have to any other party other than
for contribution hereunder. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party or
its representative of the commencement thereof within the aforesaid fifteen
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action
or proceeding which was effected by the party seeking contribution without
the written consent of the contributing party. The contribution provisions
contained in this Section are intended to supersede, to the extent permitted
by law, any right to contribution under the Act, the Exchange Act or
otherwise available.
6. Default by an Underwriter.
6.1 Default Not Exceeding 10% of Firm Securities. If any Underwriter or
Underwriters shall default in its or their obligations to purchase the Firm
Securities or the Option Securities if exercised, hereunder, and if the
number of the Firm Securities with respect to which such default relates does
not exceed in the aggregate 10% of the number of Firm Securities or Option
Securities which all Underwriters have agreed to purchase hereunder, then
such Firm Securities or Option Securities to which the default relates shall
be purchased by the non-defaulting Underwriters in proportion to their
respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Securities. In the event that such
default relates to more than 10% of the Firm Securities or Option Securities,
you may in your discretion arrange for yourself or for another party or
parties to purchase such Firm Securities or Option Securities to which such
default relates on the terms contained herein. If within one business day
after such default relating to more than 10% of the Firm Securities or Option
Securities you do not arrange for the purchase of such Firm Securities or
Option Securities, then the Company shall be entitled to a further period of
one business day within which to procure another party or parties
satisfactory to you to purchase said Firm Securities or Option Securities on
such terms. In the event that neither you nor the Company arrange for the
purchase of the Firm Securities or Option Securities to which a default
relates as provided in this Section 6, this Agreement may be terminated by
you or the Company without liability on the part of the Company (except as
provided in Section 3.15 and Sections 5.1 hereof) or the several
Underwriters; provided, however, that if such default occurs with respect to
the Option Securities, this Agreement will not terminate as to the Firm
Securities, and provided further that nothing herein shall relieve a
defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default
hereunder.
6.3 POSTPONEMENT OF CLOSING DATE. In the event that the Firm Securities or
Option Securities to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
24
made necessary in the Registration Statement or the Prospectus or in any
other documents and arrangements, and the Company agrees to file promptly any
amendment to the Registration Statement or the Prospectus which in the
opinion of counsel for the Underwriters may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include any party
substituted under this Section 6 with like effect as if it had originally
been a party to this Agreement with respect to such Securities.
7. Additional Covenants.
7.1 BOARD DESIGNEE. For a period of five years from the Effective Date,
the Company will elect a designee of the Representative (reasonably
acceptable to the Company) as a member of the Board of Directors of the
Company. Such designee shall receive no more or less compensation than is
paid to other non-management directors of the Company. If the Representative
does not exercise its option to designate a member of the Company's Board of
Directors, the Representative shall nevertheless have the right to send a
representative (who need not be the same individual from meeting to meeting)
to observe each meeting of the Board of Directors. Such person, whether a
member of the Board of Directors or a representative, shall be entitled to
receive reimbursement for all reasonable costs incurred in attending such
meetings, including, but not limited to, food, lodging and transportation.
7.2 INSIDER SALES. During the five year period following the Effective
Date, the Representative shall have the right to purchase for the
Representative's account or to sell for the account of the insiders set forth on
Schedule 7.2 hereto ("Insiders") any securities sold on any United States
securities market or exchange, including, but not limited to, open market sales
or sales pursuant to Rule 144 under the Act. Each of the Insiders will agree to
consult with the Representative with regard to any such sales and will offer the
Representative the exclusive opportunity to purchase or sell such securities on
terms at least as favorable to the Insiders as they can secure elsewhere. If the
Representative fails to accept in writing any such proposal for sale by the
Insiders within one business day after receipt of a notice containing such
proposal, then the Representative shall have no claim or right with respect to
any such sales contained in any such notice. If, thereafter, such proposal is
modified in any material respect, the Insiders shall adopt the same procedures
as with respect to the original proposal.
7.3 COMPENSATION AND OTHER ARRANGEMENTS. The Company hereby agrees that
for a period of three years from the Effective Date, all compensation and other
arrangements between the Company and its officers, directors and affiliates
shall be approved by the Option Plan/Compensation Committee of the Company's
Board of Directors, a majority of the members of which shall be independent.
8. Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
at the Closing Dates and such representations, warranties and agreements of the
Underwriters and Company, including the indemnity agreements contained in
Section 5 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the several Underwriters until the
earlier of the expiration of any applicable statute of limitations and the
seventh anniversary of the later of the Closing Date or the Option Closing Date,
if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.
25
9. Effective Date of This Agreement and Termination Thereof.
9.1 EFFECTIVE DATE. This Agreement shall become effective on the Effective
Date at the time that the Registration Statement is declared effective.
9.2 TERMINATION. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will
in the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the
American Stock Exchange, The Boston Stock Exchange or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States shall have become involved in a war or major hostilities,
or (iv) if a banking moratorium has been declared by a New York State or
federal authority, or (v) if a moratorium on foreign exchange trading has
been declared which materially adversely impacts the United States securities
market, or (vi) if the Company shall have sustained a material loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will,
in your opinion, make it inadvisable to proceed with the delivery of the
Securities, or (vii) if Xxxx X. Xxxxxxxxx or Xxxxx X. Xxxxx, Esq. shall no
longer serve the Company in their present capacities, or (viii) if the
Company has breached any of its representations, warranties or obligations
hereunder, or (ix) if the Representative shall have become aware after the
date hereof of such a material adverse change in the condition (financial or
otherwise), business, or prospects of the Company, or such adverse material
change in general market conditions, as in the Representative's judgment
would make it impracticable to proceed with the offering, sale and/or
delivery of the Securities or to enforce contracts made by the Underwriters
for the sale of the Securities.
9.3 NOTICE. If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 9, the Company shall
be notified on the same day as such election is made by you by telephone or
telecopy, confirmed by letter.
9.4 EXPENSES. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.15 hereof.
9.5 INDEMNIFICATION. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
10. Miscellaneous.
10.1 NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed
26
If to the Representative:
GKN Securities Corp.
00 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Chairman
Copy to:
Xxxxxxxx Xxxx Xxxxxxxx Xxxxxx Xxxxxxxx & Xxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
If to the Company:
Global Telecommunication Solutions, Inc.
0000 Xxxxxx Xxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
Copy to:
Xxxxxxxx Mollen & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxx Xxxxxx, Esq.
10.2 HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.3 AMENDMENT. This Agreement may be amended only by a written instrument
executed by each of the parties hereto.
10.4 ENTIRE AGREEMENT. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
10.5 BINDING EFFECT. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Representative, the Underwriters, the
Company and the controlling persons, directors and officers referred to in
Section 5 hereof, and their respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provisions herein contained.
10.6 Governing Law, Jurisdiction. This Agreement shall be governed by and
construed and enforced in accordance with the law of the State of New York,
without giving effect
27
to conflicts of law. The Company hereby agrees that any action, proceeding or
claim against it arising out of, relating in any way to this Agreement shall
be brought and enforced in the courts of the State of New York or the United
States District Court for the Southern District of New York, and irrevocably
submits to such jurisdiction, which jurisdiction shall be exclusive. The
Company hereby waives any objection to such exclusive jurisdiction and that
such courts represent an inconvenient forum. Any such process or summons to
be served upon the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address set forth in Section 10.1 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim. The parties hereto agree that the
prevailing party(ies) in any such action shall be entitled to recover from
the other party(ies) all of its reasonable attorneys' fees and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.
10.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
10.8 Waiver, Etc. The failure of any of the parties hereto to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every provision of this
Agreement. No waiver of any breach, non-compliance or non-fulfillment of any
of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver
of any other or subsequent breach, non-compliance or non-fulfillment.
28
If the foregoing correctly sets forth the understanding between the
Representative and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between us.
VERY TRULY YOURS,
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By:
-------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Executive Officer
Accepted as of the date first
above written.
NEW YORK, NEW YORK
GKN SECURITIES CORP.
(for itself and as Representative
of the Underwriters listed on
Schedule I hereto)
By:
-------------------------------
Xxxxxxx X. Xxxxxx
Title: Senior Vice President
29
SCHEDULE I
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
2,000,000 Shares of Common Stock
NUMBER OF FIRM
SECURITIES
UNDERWRITER TO BE PURCHASED
----------- ---------------
GKN Securities Corp.
Barington Capital Group, L.P. ---------------
Total
---------------
---------------
30
