Exhibit 1.1
1,100,000 Units, Each Unit Consisting
of One Share of Common Stock and
One Redeemable Warrant
U.S. GOLF AND ENTERTAINMENT INC.
UNDERWRITING AGREEMENT
Commack, New York
August __, 1997
Westport Resources Investment Services, Inc.
National Securities Corporation
As Representatives of the Several Underwriters
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
U.S. Golf and Entertainment Inc., a Delaware corporation (the
"Company"), hereby agrees with Westport Resources Investment Services, Inc.
("Westport") and National Securities Corporation ("National") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters," which
term shall also include any underwriter substituted as hereinafter provided in
Section 11), for whom Westport and National are acting as representatives (in
such capacity, Wesport and National shall hereinafter be referred to as "you" or
the "Representatives") with respect to the sale by the Company and the purchase
by the Underwriters, acting severally and not jointly, of the respective amount
of units (the "Units") set forth in said Schedule A, consisting of one (1) share
of the Company's Common Stock, par value .001 per share share (the "Common
Stock"), and one (1) warrant (the "Warrants") to purchase one (1) share of
Common Stock at an exercise price of $7.20 and exercisable at any time over a
sixty (60) month period commencing one (1) year from the date of the Prospectus,
pursuant to a Warrant Agreement, as defined herein, to be entered into at the
Closing, which aggregate to 1,100,000 Units (collectively, the "Shares"). The
Warrant and Common Stock will not be separately tradeable for a period of six
(6) months from the effective date or such sooner time as the Representatives
may determine in their sole discretion. The Warrants will be redeemable by the
Company commencing twelve (12) months after the date of the Prospectus, with the
prior written consent of the Representative, at $0.05 per Warrant on thirty (30)
days' prior written notice if the closing bid price of the Common Stock as
reported on the Nasdaq SmallCap Market averages an amount equal to $12.25 per
share of Common Stock for any twenty (20) trading days within a period of thirty
(30) consecutive trading days ending on the fifth trading day prior to the
notice of redemption. Upon your request, as provided in Section 2(b) of this
Agreement, the Company shall also issue and sell to the Underwriters, acting
severally and not jointly, up to an additional aggregate of
165,000 Units for the purpose of covering over-allotments, if any. Such Units
are hereinafter referred to as the "Option Shares." The Company also proposes to
issue and sell to you warrants (the "Representative's Warrants") pursuant to the
Representative's Warrant Agreement (the "Representative's Warrant Agreement")
for the purchase of an additional 110,000 Units. The Units, and the shares of
Common Stock and the Warrants underlying such Units, and the shares of Common
Stock underlying the Warrants issuable upon exercise of the Representative's
Warrants are hereinafter referred to as the "Representative's Shares." The
Shares, Option Shares, the Representative's Warrants, and the Representative's
Shares are more fully described in the Registration Statement and the Prospectus
referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date and the Option Closing Date, if any, as
follows:
(a) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No. 333-4873), including
any related preliminary prospectus (the "Preliminary Prospectus"), for the
registration of the Shares, the Option Shares, the Representative's Warrants,
and the Representative's Shares (collectively, hereinafter referred to as the
"Registered Securities") under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Regulations (as defined below) of the Commission under the Act. The Company will
not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the Regulations), is hereinafter called the "Registration
Statement," and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called the
"Prospectus." For purposes hereof, "Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Preliminary Prospectus, the Registration Statement or the Prospectus and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement have been instituted, or, to the Company's knowledge, are threatened.
Each of the Preliminary Prospectus, the Registration Statement and the
Prospectus at the time of filing thereof conformed in all material respects with
the requirements of the Act and Regulations, and none of the Preliminary
Prospectus, the Registration Statement or the Prospectus at the time of filing
thereof contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein and necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
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statements made in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date (as defined in
Section 2(c) hereof) and each Option Closing Date (as defined in Section 2(b)
hereof), if any, and during such longer period as the Prospectus may be required
to be delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus, as amended or supplemented as
required, will contain all statements which are required to be stated therein in
accordance with the Act and the Regulations, 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, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
conformity with information furnished to the Company in writing by or on behalf
of any Underwriter expressly for use in the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto.
(d) The Company and each of its subsidiaries have
been duly organized and are validly existing as corporations in good standing
under the laws of the respective states of their incorporation. The Company does
not own or control, directly or indirectly, any corporation, partnership, trust,
joint venture or other business entity other than the subsidiaries listed in
Exhibit 21 of the Registration Statement. Each of the Company and its
subsidiaries is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations require such qualification or
licensing (except these jurisdictions in which the failure to not qualify will
not, in the aggregate, have a material adverse effect on the Company). Each of
the Company and its subsidiaries has all requisite power and authority
(corporate and other), and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters), to
own or lease its properties and conduct its business as described in the
Prospectus; the Company and each of its subsidiaries have been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and neither the Company nor any of its subsidiaries
have received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license, certificate,
franchise, or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely affect
the condition, financial or otherwise, or the business affairs, operations,
properties, or results of operations of the Company and its subsidiaries, taken
as a whole. The disclosures in the Registration Statement concerning the effects
of federal, state, local, and foreign laws, rules and regulations on the
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Company's business as currently conducted and as contemplated are correct in all
material respects and do not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which they were made.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Capital Stock" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the Prospectus. The
Registered Securities and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform, in all material respects to
all statements with respect thereto contained in the Registration Statement and
the Prospectus. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company and the related notes
thereto included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or arrangements
and the options or other rights granted and exercised thereunder as set forth in
the Prospectus conforms in all material respects with the requirements of the
Act. All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, and the
holders thereof have no rights of rescission with respect thereto and are not
subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company.
(f) The Registered Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and will conform in all
material respects to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such holders; all
corporate action required to be taken for the authorization, issue and sale of
the Registered Securities has been duly and validly taken; and the certificates
representing the Registered Securities will be in due and proper form. Upon the
issuance and delivery pursuant to the terms hereof of the Registered Securities
to be sold by the Company hereunder, the Underwriters or the Representative, as
the case may be, will acquire good and marketable title to such Registered
Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect, or other restriction or equity of any kind
whatsoever. No stockholder of the Company has any right which has not been
waived in writing to require the Company to register the sale of any shares
owned by such stockholder under the Act in the public offering
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contemplated by this Agreement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the Shares, the Option Shares and the Representative's
Warrants to be sold by the Company as contemplated herein.
(g) The financial statements of the Company, together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present the
financial position, changes in stockholders' equity and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Regulations,
consistently applied throughout the periods involved. There has been no material
adverse change or development involving a material prospective change in the
condition, financial or otherwise, or in the business, affairs, operations,
properties, or results of operation of the Company and its subsidiaries taken as
a whole whether or not arising in the ordinary course of business since the date
of the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and intangible,
and the business of the Company and its subsidiaries taken as a whole conform in
all material respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Financial information set forth in the Prospectus
under the headings "Prospectus Summary - Selected Financial Data,"
"Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(h) The Company (i) has paid all federal, state,
local, franchise, and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21 through 24
of the Internal Revenue Code of 1986, as amended (the "Code"), and has furnished
all information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(i) No transfer tax, stamp duty or other similar tax
is payable by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Registered Securities, (ii) the purchase by the
Underwriters of the Registered Securities from the Company and the purchase by
the Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Registered Securities in connection with the distribution
contemplated hereby.
(j) There is no action, suit, proceeding, inquiry,
arbitration, mediation, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
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businesses of, the Company which (i) questions the validity of the capital stock
of the Company, this Agreement or the Representative's Warrant Agreement, or of
any action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representative's Warrant Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) might materially and adversely
affect the condition, financial or otherwise, or the business, affairs,
position, stockholders' equity, operation, properties, or results of operations
of the Company and its subsidiaries taken as a whole.
(k) The Company has the corporate power and authority
to authorize, issue, deliver, and sell the Registered Securities and to enter
into this Agreement and the Representative's Warrant Agreement, and to
consummate the transactions provided for in such agreements; and this Agreement
and the Representative's Warrant Agreement have each been duly and properly
authorized, executed, and delivered by the Company. Each of this Agreement and
the Representative's Warrant Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms (except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law), and none of the issue and sale of the Registered Securities, execution by
the Company, delivery or performance of this Agreement and the Representative's
Warrant Agreement, the consummation by the Company of the transactions
contemplated herein and therein, or the conduct of the Company's businesses as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company pursuant to the terms of (i)
the articles of incorporation or by-laws of the Company, as amended and
restated, (ii) any license, contract, indenture, mortgage, deed of trust, voting
trust agreement, stockholders agreement, note, loan or credit agreement or any
other agreement or instrument to which the Company is a party or by which it is
or may be bound or to which its properties or assets (tangible or intangible) is
or may be subject, or any indebtedness, or (iii) any statute, judgment, decree,
order, rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over the Company of
any of their activities or properties.
(l) No consent, approval, authorization or order of,
and no filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Registered Securities
pursuant to the Prospectus and the Registration Statement, the performance of
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this Agreement, the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Registered Securities, except such as have
been or may be obtained under the Act or may be required under state securities
or Blue Sky laws in connection with the Underwriters' purchase and distribution
of the Registered Securities to be sold by the Company hereunder.
(m) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement to which the Company is a party or by
which it may be bound or to which its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law). The descriptions in
the Registration Statement of such agreements, contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by Form 1, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(n) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus (i) the Company has
not incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or which could
result in a material reduction in the future earnings of the Company; (ii) the
Company has not sustained any material loss or interference with its business or
properties from fire, flood, windstorm, accident or other calamity, whether or
not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock, and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the capital
stock (other than upon the sale of the Shares, the Option Shares and the
Representative's Shares hereunder and upon the exercise of options and warrants
described in the Registration Statement) of, or indebtedness material to, the
Company (other than in the ordinary course of business); (v) the Company has not
issued any securities or incurred any liability or obligation, primary or
contingent, for borrowed money; and (vi) there has not been any material adverse
change in the condition (financial or otherwise), business, properties, results
of operations, or prospects of the Company.
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(o) Except as disclosed in or specifically
contemplated by the Prospectus, (i) the Company has sufficient trademarks, trade
names, patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct its business as now conducted; (ii) the expiration of
any trademarks, trade names, patent rights, copyrights, licenses, approvals or
governmental authorizations would not have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Company; (iii) the Company has no knowledge of any infringement by it or
its subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) there is no
claim being made against the Company regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which could have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company.
(p) No default exists in the due performance and
observance of any term, covenant or condition of any license, contract,
indenture, mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, note, loan or credit agreement other
than as a result of defaults in the borrowing arrangements with NBD Bank, or any
other material 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 the property or assets
(tangible or intangible) of the Company is subject or affected.
(q) To 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, local, or foreign 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 its knowledge threatened against or involving the Company. No
representation question exists respecting the employees of the Company. 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.
No labor dispute with the employees of the Company exists or to its knowledge is
imminent.
(r) Except as described in the Prospectus, the
Company does not maintain, sponsor or contribute to any program or arrangement
that is an "employee pension benefit plan," an "employee welfare benefit plan,"
or a "multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute
to a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan
(or any trust created thereunder) has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, which
could subject the Company to any tax penalty on prohibited transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance with
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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 "multiemployer plan."
(s) None of the Company, nor any of its employees,
directors, stockholders, or affiliates (within the meaning of the Regulations)
of any of the foregoing has taken or will take directly or indirectly, any
action designed to or which has constituted or which might be expected to cause
or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Registered Securities.
(t) The Company has good and marketable title to, or
valid and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, free and clear of
all liens, charges, claims, encumbrances, pledges, security interests, or other
restrictions or equities of any kind whatsoever other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
(u) Xxxxxx, Xxxxxx & Xxxxxxx, L.L.P. ("Xxxxxx,
Xxxxxx"), whose report is filed with the Commission as a part of the
Registration Statement, are independent certified public accountants as required
by the Act and the Regulations.
(v) The Company has caused to be duly executed
legally binding and enforceable agreements pursuant to which all persons or
entities that directly or beneficially own Common Stock, as of the effective
date of the Registration Statement, have agreed not to, directly or indirectly,
offer, offer to sell, sell, grant any option for the sale of, transfer, assign,
pledge, hypothecate or otherwise encumber or dispose of any shares of Common
Stock or securities convertible into Common Stock, exercisable or exchangeable
for or evidencing any right to purchase or subscribe for any shares of Common
Stock (either pursuant to Rule 144 of the Regulations or otherwise) or dispose
of any interest therein for a period from the date of the Prospectus until at
least three (3) months following the date that the Registration Statement
becomes effective, without the prior written consent of National (the "Lock-up
Agreements"). The Company will cause the Transfer Agent (as defined herein) to
place "stop transfer" orders on the Company's stock ledgers in order to effect
the Lock-up Agreements.
(w) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Registered
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company or any of its officers,
directors, stockholders, employees or affiliates that may affect the
Underwriters' compensation as determined by the Commission and the National
Association of Securities Dealers, Inc. (the "NASD").
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(x) The Registered Securities have been approved for
quotation on the NASDAQ SmallCap Market.
(y) Neither the Company nor any of its officers,
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which might subject the Company or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign). The Company's internal accounting controls are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
(z) Except as set forth in the Prospectus, no
officer, director or stockholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the
Regulations) of any of the foregoing persons or entities has or has had, either
directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficiary
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus there
are no existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions, between or
among the Company, and any officer, director, principal shareholder (as such
term is used in the Prospectus) of the Company, or any affiliate or associate of
any of the foregoing persons or entities.
(aa) The Company is not, and does not intend to
conduct its business in a manner in which it would become an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(bb) Any certificate signed by any officer of the
Company and delivered to the Underwriters or to the Underwriters' Counsel (as
defined in Section 4(d) herein) shall be deemed a representation and warranty by
the Company to the Underwriters as to the matters covered thereby.
(cc) The minute books of the Company have been made
available to the Underwriters and contain a complete summary of all meetings and
actions of the directors and stockholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
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(dd) The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares in this offering other than the Prospectus,
the Registration Statement and the other materials permitted by the Act. Except
as described in the Prospectus, no holders of any securities of the Company or
of any options, warrants or other convertible or exchangeable securities of the
Company have the right to include any securities issued by the Company as part
of the Registration Statement or to require the Company to file a registration
statement under the Act and no person or entity holds any anti-dilution rights
with respect to any securities of the Company.
(ee) Each of the Company and its subsidiaries
maintains insurance by insurers of recognized financial responsibility of the
types and in the amounts as are prudent, customary and adequate for the business
in which it is engaged, including, but not limited to, insurance covering real
and personal property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
The Company has no reason to believe that it will not be able to renew existing
insurance coverage with respect to the Company as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business, in either case, at a cost that would not have a material
adverse effect on the financial condition, operations, business, assets or
properties of the Company. The Company has not failed to file any claims, has no
material disputes with its insurance company regarding any claims submitted
under its insurance policies, and has complied with all material provisions
contained in its insurance policies.
(ff) The Company has entered into a warrant agreement
(the "Warrant Agreement") substantially in the form filed as Exhibit 4.4 to the
Registration Statement with Continental Stock Transfer & Trust Company, in form
and substance satisfactory to the Representative, with respect to the Warrants
providing for the payment of commissions contemplated by Section 4(y), hereof.
The Warrant Agreement has been duly and validly authorized by the Company and,
assuming due execution by the parties thereto other than the Company,
constitutes a valid and legally binding agreement of the Company, 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. Purchase, Sale and Delivery of the Registered Securities.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter, and
each Underwriter, severally and not jointly agrees to purchase from the Company,
at a price equal to $________ per share, that number of Shares set forth in
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Schedule A opposite the name of such Underwriter, subject to such adjustment as
the Representative in its discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional numbers of Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of the
Option Shares at a price equal to $______. The option granted hereby will
expire 45 days after (i) the date the Registration Statement becomes effective,
if the Company has elected not to rely on Rule 430A under the Regulations, or
(ii) the date of this Agreement if the Company has elected to rely upon Rule
430A under the Regulations, and may be exercised in whole or in part from time
to time (but not on more than two (2) occasions) only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Shares upon notice by the Representative to the Company
setting forth the number of Option Shares as to which the several Underwriters
are then exercising the option and the time and date of payment and delivery for
any such Option Shares. Any such time and date of delivery (an "Option Closing
Date") shall be determined by the Representative, but shall not be later than
three full business days after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representative and the Company. Nothing herein contained shall obligate
the Underwriters to exercise the over-allotment option described above. No
Option Shares shall be delivered unless the Shares shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery
of certificates for, the Shares shall be made at the offices of National, at
0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx, or at such other place as
shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 11:00 a.m. (New York time) on August ___, 1997, or at
such other time and date as shall be agreed upon by the Representative and the
Company, but no more than four (4) business days after the date hereof (such
time and date of payment and delivery being herein called the "Closing Date").
In addition, in the event that any or all of the Option Shares are purchased by
the Underwriters, payment of the purchase price for, and delivery of
certificates for, such Option Shares shall be made at the above mentioned office
of National or at such other place as shall be agreed upon by the Representative
and the Company on each Option Closing Date as specified in the notice from the
Representative to the Company. Delivery of the certificates for the Shares and
the Option Shares, if any, shall be made to the Underwriters against payment by
the Underwriters, of the purchase price for the Shares and the Option Shares, if
any, by wire transfer to the Company. In the event such option is exercised,
each of the Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Shares then being purchased which the
number of Shares set forth in Schedule A hereto opposite the name of such
Underwriter bears to the total number of Shares, subject in each case to such
adjustments as the Representative in their discretion shall make to eliminate
any sales or purchases of fractional shares. Certificates for
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the Shares and the Option Shares, if any, shall be in definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least three (3) business days prior to Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Shares and the
Option Shares, if any, shall be made available to the Representative at such
office or such other place as the Representative may designate for inspection,
checking and packaging no later than 9:30 a.m. on the last business day prior to
Closing Date or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and
sell to the Representative Representative's Warrants at a purchase price of
$0.0001 per warrant, which warrants shall entitle the holders thereof to
purchase an aggregate of 110,000 Units. The Representative's Warrants shall
expire five (5) years after the effective date of the Registration Statement and
shall be exercisable for a period of four (4) years commencing one (1) year from
the effective date of the Registration Statement at a price equaling one hundred
thirty percent (130%) of the initial public offering price of the Shares. The
Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit ____ to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Shares. As soon after the
Registration Statement becomes effective as the Representative deems advisable,
the Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Representative may from time to time increase or
decrease the public offering price after distribution of the Shares has been
completed to such extent as the Representative, in its sole discretion, deems
advisable. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause
the Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the Shares
by the Underwriters of which the Representative shall not previously have been
advised and furnished with a copy, or to which the Representative shall have
objected or which is not in compliance with the Act, the Exchange Act or the
Regulations.
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(b) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Representative and confirm the
notice in writing, (i) when the Registration Statement, as amended, becomes
effective, if the provisions of Rule 430A promulgated under the Act will be
relied upon, when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement becomes
effective, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus, or any amendment or supplement
thereto, or the institution of proceedings for that purpose, (iii) of the
issuance by the Commission or by any state securities commission of any
proceedings for the suspension of the qualification of any of the Registered
Securities for offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose, (iv) of the receipt of any
comments from the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will use its best efforts to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form
and substance satisfactory to the Representative) in accordance with the
requirements of the Act.
(d) The Company will give the Representative notice
of its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Registered Securities
which differs from the corresponding prospectus on file at the Commission at the
time the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such amendment or supplement to which the
Representative or Camhy Xxxxxxxxx & Xxxxx LLP ("Underwriters' Counsel") shall
reasonably object.
(e) The Company shall endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Registered Securities for offering
and sale under the securities laws of such jurisdictions as the Representative
may reasonably designate to permit the continuance of sales and dealings therein
for as long as may be necessary to complete the distribution, and shall make
such applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or become subject to service of process in
any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agree that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
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make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to
be delivered under the Act, the Company shall use all reasonable efforts to
comply with all requirements imposed upon it by the Act, as now and hereafter
amended, and by the Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Registered
Securities in accordance with the provisions hereof and the Prospectus, or any
amendments or supplements thereto. If at any time when a prospectus relating to
the Registered Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act, each such
amendment or supplement to be satisfactory to Underwriters' Counsel, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not
later than 45 days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the effective
date of the Registration Statement occurs (90 days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(h) During a period of five (5) years after the date
hereof, the Company will furnish to its stockholders, as soon as practicable,
annual reports (including financial statements audited by independent public
accountants) and will make available to its stockholders unaudited quarterly
reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such
quarterly reports to its stockholders, statements of income of
the Company for each quarter in the form furnished to the
Company's stockholders;
(ii) concurrently with furnishing such
annual reports to its stockholders, a balance sheet of the
Company as at the end of the preceding fiscal
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year, together with statements of operations, stockholders'
equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the certificate thereon of
independent certified public accountants;
(iii) as soon as they are available, copies
of all reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies
of all reports and financial statements furnished to or filed
with the Commission, the Nasdaq National Market or any
securities exchange;
(v) every press release and every material
news item or article of interest to the financial community in
respect of the Company or its affairs which was released or
prepared by or on behalf of the Company; and
(vi) any additional information of a public
nature concerning the Company (and any future subsidiaries) or
its businesses which the Representative may reasonably
request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent (the
"Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a registrar (which may be the same entity as the transfer agent)
for the Units Common Stock Warrants and the Representative's Warrants.
(j) The Company will furnish to the Representative or
on the Represen- tative's order, without charge, at such place as the
Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits), each Preliminary Prospectus, the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Representative may reasonably request.
(k) On or before the effective date of the
Registration Statement, the Company shall provide the Representative with true
copies of duly executed, legally binding and enforceable Lock-up Agreements. On
or before the Closing Date, the Company shall deliver instructions to the
Transfer Agent authorizing it to place appropriate stop transfer orders on the
Company's ledgers.
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(l) The Company shall use its best efforts to cause
its officers, directors, stockholders or affiliates (within the meaning of the
Regulations) not to take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the
sale of the Registered Securities substantially in the manner, and subject to
the conditions, set forth under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports,
forms or other documents as may be required (including, but not limited to, a
Form SR as may be required pursuant to Rule 463 under the Act) from time to
time, under the Act, the Exchange Act, and the Regulations, and all such
reports, forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Regulations.
(o) The Company shall cause the Registered Securities
to be quoted on the NASDAQ SmallCap Market, and for a period of two (2) years
from the date hereof shall use its best efforts to maintain the quotation of the
Registered Securities to the extent outstanding.
(p) For a period of two (2) years from the Closing
Date, the Company shall furnish to the Representative, at the Company's sole
expense, daily consolidated transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the
effective date of the Registration Statement the Company shall, at the Company's
sole expense, take all necessary and appropriate actions to further qualify the
Company's securities in all jurisdictions of the United States in order to
permit secondary sales of such securities pursuant to the Blue Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of
the Registration Statement, has filed a Form 8-A with the Commission providing
for the registration of the Common Stock under the Exchange Act and (ii) as soon
as practicable, will use its best efforts to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
Xxxxx'x OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(s) The Company agrees that for a period of thirteen
(13) months following the effective date of the Registration Statement it will
not, without the prior written consent of National, offer, issue, sell, contract
to sell, grant any option for the sale of or otherwise dispose of any Units, or
securities convertible into Common Stock, except for the issuance of the Option
Shares, the Representative's Warrants, and shares of Common Stock issued upon
-17-
the exercise of currently outstanding warrants or options issued under any stock
option plan in effect on the Closing Date, shares of Common Stock automatically
granted pursuant to any stock option plan in effect on the Closing Date, or
shares of Common Stock issued pursuant to any employee stock purchase plan in
effect on the Closing Date.
(t) Until the completion of the distribution of the
Registered Securities, the Company shall not without the prior written consent
of National or Underwriters' Counsel, issue, directly or indirectly any press
release or other communication or hold any press conference with respect to the
Company or its activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) five (5)
years from the date hereof, and (ii) the sale to the public of the
Representative's Shares, the Company will not take any action or actions which
may prevent or disqualify the Company's use of SB-2 (or other appropriate form)
for the registration under the Act of the Representative's Shares.
(v) The Company agrees that upon the request of
National it shall use its best efforts, which shall include, but shall not be
limited to, the solicitation of proxies, to elect one (1) designee of National
to the Company's Board of Directors for a period of five (5) years following the
Closing, provided that such designee is reasonably acceptable to the Company. In
the event National does not exercise its right to designate a member of the
Board of Directors, then it shall have the right to designate one person to
attend all meetings of the Board of Directors of the Company, and all committees
thereof, as an observer. Such observer shall be entitled to receive notices of
all such meetings, and all correspondence and communications sent by the Company
to members of its Board of Directors, and to attend all such meetings. The
Company shall reimburse the designee of National for his out-of-pocket expenses
incurred in connection with their attendance at such meetings.
(w) The Company agrees that within forty-five (45)
days after the Closing it shall retain a public relations firm which is
acceptable to National. The Company shall keep such public relations firm, or
any replacement, for a period of three (3) years from the Closing. Any
replacement public relations firm shall be retained only with the consent of
National.
(x) The Company agrees that any and all future
transactions between the Company and its officers, directors, principal
stockholders and the affiliates of the foregoing persons will be on terms no
less favorable to the Company than could reasonably be obtained in arm's length
transactions with independent third parties, and that any such transactions also
be approved by a majority of the Company's outside independent directors
disinterested in the transaction.
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(y) The Company shall prepare and deliver, at the
Company's sole expense, to National within the one hundred and twenty (120) day
period after the later of the effective date of the Registration Statement or
the latest Option Closing Date, as the case may be, one bound volume containing
all correspondence with regulatory officials, agreements, documents and all
other materials in connection with the offering as requested by the
Underwriters' Counsel.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the
Closing Date and each Option Closing Date (to the extent not previously paid)
all expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, the Warrant Agreement and the Representative's
Warrant Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing, filing, delivery and
mailing (including the payment of postage with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the duplication, mailing (including the payment of postage with
respect thereto) and delivery of this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreements, the Powers of Attorney, and
related documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the certificates representing the
Registered Securities, (iv) the qualification of the Registered Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and reasonable disbursements
and fees of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to the costs and expenses incurred by the Company and
the Representative in connection with the "road show," information meetings and
presentations, bound volumes and prospectus memorabilia and "tombstone"
advertisement expenses, (vi) experts, (vii) fees and expenses of the transfer
agent and registrar, (viii) the fees payable to the Commission and the NASD,
(ix) issue and transfer taxes, if any (x) the fees and expenses incurred in
connection with the listing of the Common Stock on the Nasdaq National Market or
any other market or exchange, (xi) costs and expenses in connection with due
diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained and (xii) applications for
assignments of a rating of the Securities by qualified rating agencies.
(b) If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 6, Section 10(a) or
Section 12, the Company shall reimburse and indemnify the Representative for all
of its actual out-of-pocket expenses on an accountable basis,
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including the fees and disbursements of Underwriters' Counsel, less any amounts
already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to
the expenses payable pursuant to subsection (a) of this Section 5, it will pay
to the Representative on the Closing Date by certified or bank cashier's check
or, at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to two
and one-half percent (2 1/2%) of the gross proceeds received by the Company from
the sale of the Shares. In the event the Representative elects to exercise the
over-allotment option described in Section 2(b) hereof, the Company further
agrees to pay to the Representative on the Option Closing Date (by certified or
bank cashier's check or, at the Representative's election, by deduction from the
proceeds of the offering) a non-accountable expense allowance equal to two and
one-half percent (2 1/2%) of the gross proceeds received by the Company from the
sale of the Option Shares.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date or each Option Closing Date,
as the case may be; the accuracy on and as of the Closing Date or Option Closing
Date, if any, of the statements of officers of the Company made pursuant to the
provisions hereof; and the performance by the Company on and as of the Closing
Date and each Option Closing Date, if any, of its covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 p.m., New York City time, on the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representative, and, at Closing Date and each Option Closing Date, if any, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of Underwriters' Counsel. If the Company has elected
to rely upon Rule 430A of the Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Regulations within the
prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Regulations.
(b) The Representative shall not have advised the
Company that the Registration Statement, or any amendment thereto, contains an
untrue statement of fact which,
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in the Representative's opinion, is material, or omits to state a fact which, in
the Representative's opinion, is material and is required to be stated therein
or is necessary to make the statements therein not misleading, or that the
Prospectus, or any supplement thereto, contains an untrue statement of fact
which, in the Representative's reasonable opinion, is material, or omits to
state a fact which, in the Representative's reasonable opinion, is material and
is required to be stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Underwriters
shall have received from Underwriters' Counsel such opinion or opinions with
respect to the organization of the Company, the validity of the Registered
Securities, the Registration Statement, the Prospectus and other related matters
as the Representative may request and Underwriters' Counsel shall have received
from the Company such papers and information as they request to enable them to
pass upon such matters.
(d) At Closing Date, the Underwriters shall have
received the favorable opinion of Ruskin, Moscou, Xxxxx & Faltischek ("Ruskin,
Moscou"), counsel to the Company, dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel, to
the effect that:
(i) the Company (A) has been duly organized
and is validly existing as a corporation in good
standing under the laws of its jurisdiction of
incorporation, (B) is duly qualified and licensed and
in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any
properties or the character of its operations
requires such qualification or licensing, and (C) to
the best of such counsel's knowledge, has all
requisite corporate power and authority and has
obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or
regulatory officials and bodies (including, without
limitation, those having jurisdiction over
environmental or similar matters), to own or lease
its properties and conduct its business as described
in the Prospectus.
(ii) except as described in the Prospectus,
and to the best of such counsel's knowledge after
reasonable investigation, the Company does not own an
interest in any corporation, limited liability
company, partnership, joint venture, trust or other
business entity;
(iii) the Company has a duly authorized,
issued and outstanding capitalization as set forth in
the Prospectus, and any amendment or supplement
thereto, under "Capitalization" and "Description of
Capital Stock," and to the knowledge of such counsel,
the Company is not a party
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to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities,
except for this Agreement, the Representative's
Warrant Agreement, and as described in the
Prospectus. The Registered Securities and all other
securities issued or issuable by the Company conform
in all material respects to the statements with
respect thereto contained in the Registration
Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and
nonassessable; 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 the preemptive rights of any holders of any
security of the Company. The Registered Securities to
be sold by the Company hereunder and under the
Representative's Warrant Agreement are not and will
not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in
accordance with their terms, will be validly issued,
fully paid and nonassessable and will conform in all
material respects to the description thereof
contained in the Prospectus; the holders thereof will
not be subject to any liability solely as such
holders; all corporate action required to be taken
for the authorization, issue and sale of the
Registered Securities has been duly and validly
taken; and the certificates representing the
Registered Securities are in due and proper form. The
Representative's Warrants constitute valid and
binding obligations of the Company to issue and sell,
upon exercise thereof and payment therefor, the
number and type of securities of the Company called
for thereby (except as such enforceability may be
limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be
limited by applicable law). Upon the issuance and
delivery pursuant to this Agreement of the Registered
Securities to be sold by the Company, the Company
will convey, against payment therefor as provided
herein, to the Underwriters and the Representative,
respectively, good and marketable title to the
Registered Securities free and clear of all liens and
other encumbrances;
(iv) the Registration Statement is effective
under the Act, and, if applicable, filing of all
pricing information has been timely made in the
appropriate form under Rule 430A, and no stop order
suspending the use of the Preliminary Prospectus, the
Registration Statement or Prospectus or any part of
any thereof or suspending the effectiveness of the
Registration Statement has been issued and no
proceedings for that purpose have been
-22-
instituted or are pending or, to the best of such
counsel's knowledge, threatened or contemplated under
the Act;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any
amendments or supplements thereto (other than the
financial statements and other financial and
statistical data included therein as to which no
opinion need be rendered) comply as to form in all
material respects with the requirements of the Act
and the Regulations. Such counsel shall state that
such counsel has participated in conferences with
officers and other representatives of the Company and
the Representative and representatives of the
independent public accountants for the Company, at
which conferences the contents of the Preliminary
Prospectus, the Registration Statement, the
Prospectus, and any amendments or supplements thereto
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 Preliminary Prospectus,
the Registration Statement and Prospectus, and any
amendments or supplements thereto, on the basis of
the foregoing, no facts have come to the attention of
such counsel which lead them to believe that either
the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment
became effective or the Preliminary Prospectus or
Prospectus or amendment or supplement thereto as of
the date of such opinion contained any untrue
statement of a material fact or omitted to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading (it being understood that such counsel
need express no opinion with respect to the financial
statements and schedules and other financial and
statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus,
and any amendments or supplements thereto);
(vi) to the best of such counsel's knowledge
after reasonable investigation, (A) there are no
agreements, contracts or other documents required by
the Act to be described in the Registration Statement
and the Prospectus and filed as exhibits to the
Registration Statement other than those described in
the Registration Statement and the Prospectus and
filed as exhibits thereto; (B) the descriptions in
the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and
other documents to which the Company is a party or by
which it is bound are accurate in all material
respects and fairly represent the information
required to be shown by Form SB-2; (C) there is not
pending or threatened against the Company any action,
arbitration, suit, proceeding, litigation,
governmental or other proceeding (including, without
limitation, those having jurisdiction over
environmental or similar matters), domestic or
-23-
foreign, pending or threatened against the Company
which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and
such proceedings as are summarized in the
Registration Statement are accurately summarized in
all material respects), (y) questions the validity of
the capital stock of the Company or this Agreement,
or the Representative's Warrant Agreement, or of any
action taken or to be taken by the Company pursuant
to or in connection with any of the foregoing; and
(D) there is no action, suit or proceeding pending or
threatened against the Company before any court or
arbitrator or governmental body, agency or official
in which there is a reasonable possibility of an
adverse decision which may result in a material
adverse change in the financial condition, business,
affairs, stockholders' equity, operations,
properties, business or results of operations of the
Company, which could adversely affect the present or
prospective ability of the Company to perform its
obligations under this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement
or which in any manner draws into question the
validity or enforceability of this Agreement, the
Warrant Agreement or the Representative's Warrant
Agreement;
(vii) the Company has the corporate power
and authority to enter into each of this Agreement,
the Warrant Agreement and the Representative's
Warrant Agreement and to consummate the transactions
provided for therein; and each of this Agreement, the
Warrant Agreement and the Representative's Warrant
Agreement has been duly authorized, executed and
delivered by the Company. Each of this Agreement, the
Warrant Agreement and the Representative's Warrant
Agreement, assuming due authorization, execution and
delivery by each other party thereto, constitutes a
legal, valid and binding obligation of the Company
enforceable against the Company in accordance with
its terms (except as the enforceability thereof may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's
execution, delivery or performance of this Agreement,
the Warrant Agreement and the Representative's
Warrant Agreement, the consummation by the Company of
the transactions contemplated herein or therein, or
the conduct of the Company's business as described in
the Registration Statement, the Prospectus, and any
amendments or supplements thereto conflicts with or
results in any breach or violation of any of the
terms or provisions of, or constitutes a default
under, or result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of
any kind whatsoever upon,
-24-
any property or assets (tangible or intangible) of
the Company pursuant to the terms of (A) the articles
of incorporation or by-laws of the Company, as
amended, (B) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit
agreement or any other agreement or instrument known
to such counsel to which the Company is a party or by
which it is bound, or (C) any federal, state or local
statute, rule or regulation applicable to the Company
or any judgment, decree or order known to such
counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or
body (including, without limitation, those having
jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the
Company or any of its activities or properties;
(viii) no consent, approval, authorization
or order, and no filing with, any court, regulatory
body, government agency or other body (other than
such as may be required under Blue Sky laws, as to
which no opinion need be rendered or under federal
securities laws, as to which no opinion need be
rendered pursuant to this subsection (viii) is
required in connection with the issuance of the
Registered Securities pursuant to the Prospectus, and
the Registration Statement, the performance of this
Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, and the
transactions contemplated hereby and thereby;
(ix) to the best of such counsel's knowledge
after reasonable investigation, the properties and
business of the Company conform in all material
respects to the description thereof contained in the
Registration Statement and the Prospectus;
(x) to the best knowledge of such counsel,
and except as disclosed in Registration Statement and
the Prospectus, the Company is not in breach of, or
in default under, any term or provision of any
license, contract, indenture, mortgage, installment
sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any
other agreement or instrument to which the Company is
a party or by which the Company is bound or to which
the property or assets (tangible or intangible) of
the Company is subject; and the Company is not in
violation of any term or provision of its articles of
incorporation or by-laws, as amended, and to the best
of such counsel's knowledge after reasonable
investigation, not in violation of any franchise,
license, permit, judgment, decree, order, statute,
rule or regulation;
-25-
(xi) the statements in the Prospectus under
"Dividend Policy," "Description of Capital Stock,"
and "Shares Eligible for Future Sale" have been
reviewed by such counsel, and insofar as they refer
to statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions,
are correct in all material respects;
(xii) the Units, the Common Stock and the
Warrants have been accepted for quotation on the
NASDAQ SmallCap Market;
(xiii) to the best of such counsel's
knowledge and based upon a review of the outstanding
securities and the contracts furnished to such
counsel by the Company, no person, corporation,
trust, partnership, association or other entity has
the right to include and/or register any securities
of the Company in the Registration Statement, require
the Company to file any registration statement or, if
filed, to include any security in such registration
statement;
(xiv) assuming due execution by the parties
thereto other than the Company, each Lock-up
Agreement is a legal, valid and binding obligation of
the party thereto, enforceable against the party and
any subsequent holder of the securities subject
thereto in accordance with its terms (except as such
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or
affecting enforcement of creditors' rights and the
application of equitable principles in any action,
legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law);
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws, rules and
regulations of the United States and the laws, rules and regulations of the
State of Delaware, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written statements
of officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested. The opinion of such counsel shall state that
knowledge shall not include the knowledge of a director or officer of the
Company who is affiliated with such firm in his or her capacity as an officer or
director of the Company. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel.
-26-
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of Ruskin, Moscou, counsel to the Company,
dated the Option Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel confirming as of such Option
Closing Date the statements made by Ruskin, Moscou in their opinion delivered on
the Closing Date.
(e) On or prior to each of the Closing Date and the
Option Closing Date, if any, Underwriters' Counsel shall have been furnished
such documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
(f) Prior to each of the Closing Date and each Option
Closing Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness which default has not been waived; (iv) the Company
shall not have issued any securities (other than the Registered Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class and there has not been any change in the capital stock, or
any material increase in the debt (long or short term) or liabilities or
obligations of the Company (contingent or otherwise); (v) 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; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or affecting any of its
respective properties or businesses before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the Company, except as
set forth in the Registration Statement and Prospectus; and (vii) no stop order
shall have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(g) At each of the Closing Date and each Option
Closing Date, if any, the Underwriters shall have received a certificate of the
Company signed on behalf of the Company by the principal executive officer of
the Company, dated the Closing Date or Option Closing Date, as the case may be,
to the effect that such executive has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
-27-
(i) The representations and warranties of
the Company in this Agreement are true and correct,
as if made on and as of the Closing Date or the
Option Closing Date, as the case may be, and the
Company has complied with all agreements and
covenants and satisfied all conditions contained in
this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Option
Closing Date, as the case may be;
(ii) No stop order suspending the
effectiveness of the Registration Statement or any
part thereof has been issued, and no proceedings for
that purpose have been instituted or are pending or,
to the best of each of such person's knowledge after
due inquiry, are contemplated or threatened under the
Act;
(iii) The Registration Statement and the
Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and
information required by the Act to be included
therein, and none of the Registration Statement, the
Prospectus nor any amendment or supplement thereto
includes any untrue statement of a material fact or
omits to state any material fact required to be
stated therein or necessary to make the statements
therein not misleading and neither the Preliminary
Prospectus or any supplement, as of their respective
dates, thereto included any untrue statement of a
material fact or omitted to state any material fact
required to be stated therein or necessary to make
the statements therein, in light of the circumstances
under which they were made, not misleading; and
(iv) Subsequent to the respective dates as
of which information is given in the Registration
Statement and the Prospectus, (a) the Company has not
incurred up to and including the Closing Date or the
Option Closing Date, as the case may be, other than
in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; (b)
the Company has not paid or declared any dividends or
other distributions on its capital stock; (c) the
Company has not entered into any transactions not in
the ordinary course of business; (d) there has not
been any change in the capital stock or material
increase in long-term debt or any increase in the
short-term borrowings (other than any increase in the
short-term borrowings in the ordinary course of
business) of the Company, (e) the Company has not
sustained any loss or damage to its property or
assets, whether or not insured, (f) there is no
litigation which is pending or threatened (or
circumstances giving rise to same) against the
Company or any affiliated party of any of the
foregoing which is required to be set forth in an
amended or supplemented Prospectus which has not been
set forth, and (g) there has occurred no event
required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
-28-
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriters will have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters.
(i) At the time this Agreement is executed, the
Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory in all respects (including the
non-material nature of the changes or decreases, if any, referred to in clause
(iii) below) to the Underwriters and Underwriters' Counsel, from Xxxxxx, Xxxxxx:
(i) confirming that they are independent
certified public accountants with respect to the
Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that
the financial statements and supporting schedules of
the Company included in the Registration Statement
comply as to form in all material respects with the
applicable accounting requirements of the Act and the
Regulations thereunder and that the Representative
may rely upon the opinion of Xxxxxx, Xxxxxx with
respect to the financial statements and supporting
schedules included in the Registration Statement;
(iii) stating that, on the basis of a
limited review which included a reading of the latest
available unaudited interim financial statements of
the Company (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
of the Company, consultations with officers and other
employees of the Company responsible for financial
and accounting matters and other specified procedures
and inquiries, nothing has come to their attention
which would lead them to believe that (A) the
unaudited financial statements and supporting
schedules of the Company included in the Registration
Statement, if any, do not comply as to form in all
material respects with the applicable accounting
requirements of the Act and the Regulations or are
not fairly presented in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited
financial statements of the Company included in the
Registration Statement, or (B) at a specified date
not more than five (5) days prior to the effective
date of the Registration Statement, there has been
any change in the capital stock or material increase
in long-term debt of the Company, or any material
decrease in the stockholders' equity or net
-29-
current assets or net assets of the Company as
compared with amounts shown in the March 31, 1997
balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the
Registration Statement, or, if there was any change
or decrease, setting forth the amount of such change
or decrease.
(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, including work sheets, of
the Company and excluding any questions requiring an
interpretation by legal counsel, with the results
obtained from the application of specified readings,
inquiries and other appropriate procedures (which
procedures do not constitute an examination in
accordance with generally accepted auditing
standards) set forth in the letter and found them to
be in agreement; and
(v) statements as to such other material
matters incident to the transaction contemplated
hereby as the Representative may reasonably request.
(j) At the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received from Xxxxxx, Xxxxxx a letter, dated
as of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iv) of Subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial information
as specified by the Representative and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (iv).
(k) On each of Closing Date and Option Closing Date,
if any, there shall have been duly tendered to the Representative for the
several Underwriters' accounts the appropriate number of Registered Securities.
(l) No order suspending the sale of the Registered
Securities in any jurisdiction designated by the Representative pursuant to
subsection (e) of Section 4 hereof shall have been issued on either the Closing
Date or the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
-30-
(m) On or before the Closing Date, the Company shall
have executed and delivered to the Representative, (i) the Representative's
Warrant Agreement, substantially in the form filed as Exhibit 4(b), to the
Registration Statement, in final form and substance satisfactory to the
Representative, and (ii) the Representative's Warrants in such denominations and
to such designees as shall have been provided to the Company.
(n) On or before Closing Date, the Common Stock shall
have been duly approved for quotation on the NASDAQ SmallCap Market.
(o) On or before Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements in final form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at the Closing Date or the relevant Option
Closing Date, as the case may be, is not so fulfilled, the Representative may
terminate this Agreement or, if the Representative so elect, they may waive any
such conditions which have not been fulfilled or extend the time for their
fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each of the Underwriters (for purposes of this Section 7 "Underwriters" shall
include the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented); or
(B) in any application or other document or communication (in this Section 7
collectively called "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company in any
jurisdiction in order to qualify the Registered Securities under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, The Nasdaq Stock Market, Inc. or any securities exchange; or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading (in the case
of the Prospectus, in the light of the circumstances under which they were
made), unless such statement or omission was made in
-31-
reliance upon and in conformity with written information furnished to the
Company with respect to any Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement. The
indemnity agreement in this subsection (a) shall be in addition to any liability
which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but
not jointly, to indemnify and hold harmless the Company, each of its directors,
each of its officers, agents and counsel of the Company who has signed the
Registration Statement, and each other person, if any, who controls the Company,
within the meaning of the Act, to the same extent as the foregoing indemnity
from the Company to the Underwriters but only with respect to statements or
omissions, if any, made in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment thereof or supplement thereto or in any
application made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to any Underwriter by such
Underwriter or the Representative expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Registered Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters or the Representative for inclusion
in the Prospectus.
(c) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action, suit or
proceeding, such indemnified party shall, if a claim in respect thereof is to be
made against one or more indemnifying parties under this Section 7, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure to so notify an indemnifying party shall
not relieve it from any liability which it may have otherwise or which it may
have under this Section 7, except to the extent that it has been prejudiced in
any material respect by such failure). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party or parties
of the commencement thereof, the indemnifying party or parties will be entitled
to participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by the
indemnifying parties in connection with the defense of such action
-32-
at the expense of the indemnifying party, (ii) the indemnifying parties shall
not have employed counsel reasonably satisfactory to such indemnified party to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 7, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of this Section 7 provide for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Registered Securities or (B) if the allocation provided by clause (A) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any case
where the Company is a contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Registered
Securities (before deducting expenses other than underwriting discounts and
commissions) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover Page
of the Prospectus. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
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indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Registered Securities
purchased by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this subparagraph (d), or to the extent that such party or
parties were not adversely affected by such omission. The contribution agreement
set forth above shall be in addition to any liabilities which any indemnifying
party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements of the Company
at the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, any controlling person of either
the Underwriter or the Company, and shall survive termination of this Agreement
or the issuance and delivery of the Registered Securities to the Underwriters
and the Representative, as the case may be.
9. Effective Date.
(a) This Agreement shall become effective at 10:00
a.m., New York City time, on the date hereof. For purposes of this Section 9,
the Registered Securities to be purchased hereunder shall be deemed to have been
so released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such shares for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Registered Securities.
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10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Representative's reasonable opinion will in the immediate future disrupt the
financial markets; or (ii) any material adverse change in the financial markets
shall have occurred; or (iii) if trading on the New York Stock Exchange, the
American 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 required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iv) if the United States shall
have become involved in a war or major hostilities, or if there shall have been
an escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; or (vi) if the Company shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the delivery of
the Registered Securities; or (viii) if there shall have been such a material
adverse change in the prospects or conditions of the Company, or such material
adverse change in the general market, political or economic conditions, in the
United States or elsewhere as in the Representative's judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the Registered
Securities.
(b) If this Agreement is terminated by the
Representative in accordance with any of the provisions of Section 6, Section
10(a) or Section 12, the Company shall promptly reimburse and indemnify the
Underwriters pursuant to Section 5(b) hereof. Notwithstanding any contrary
provision contained in this Agreement, any election hereunder or any termination
of this Agreement (including, without limitation, pursuant to Sections 6, 10, 11
and 12 hereof), and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Registered Securities which it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangement for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, the Representative shall not have completed
such arrangements within such 24-hour period, then:
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(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10%
of the total number of Shares to be purchased on such date, this Agreement shall
terminate without liability on the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall
relieve any defaulting Underwriter from liability in respect of any default by
such Underwriter under this Agreement.
In the event of any such default which does not
result in a termination of this Agreement, the Representative shall have the
right to postpone the Closing Date for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements.
12. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Registered Securities which it is obligated to sell hereunder on such
date, then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Shares to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Shares from the Company on such date) without any liability on
the part of any non-defaulting party other than pursuant to Section 5, Section 7
and Section 10 hereof. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o National Securities Corporation, 0000 Xxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxxx, with a copy,
which shall not constitute notice, to Camhy Xxxxxxxxx & Xxxxx LLP, 0000
Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X. Annex, Esq.
Notices to the Company shall be directed to the Company at U.S. Golf and
Entertainment Inc., 0 Xxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000, Attention: Xxxxxx
X. Xxxx, with a copy, which shall not constitute notice, to Ruskin, Moscou,
Xxxxx & Faltischek, P.C., 000 Xxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
14. Parties. This Agreement shall inure solely to the benefit
of and shall be binding upon the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof and their
respective successors, legal representatives and assigns,
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and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Agreement or
any provisions herein contained. No purchaser of Registered Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
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If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
U.S. GOLF AND ENTERTAINMENT INC.
By:______________________________
Name: Xxxxxx X. Xxxx
Title: Chairman
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
WESTPORT RESOURCES
INVESTMENT SERVICES, INC.
By:____________________________
Name:
Title:
NATIONAL SECURITIES CORPORATION
By:____________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A hereto.
SCHEDULE A
Number of Shares
Name of Underwriters to be Purchased
-------------------- ----------------
Westport Resources Investment
Services, Inc.
National Securities Corporation
---------
TOTAL 1,100,000
SCH. A-1
