[Form of Underwriting Agreement]
Shares of Common Stock
U.S. Golf and Entertainment Inc.
UNDERWRITING AGREEMENT
Garden City, New York
, 199
First United Equities Corporation
As Representative of the
Several Underwriters listed on Schedule A hereto
000 Xxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
U.S. Golf and Entertainment Inc., a Delaware corporation (the
"Company"), confirms its agreement with First United Equities Corporation
("First United") 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 hereof), for whom First United
is acting as representative (in such capacity, First United shall hereinafter be
referred to as "you" or the "Representative"), with respect to the sale by the
Company and the purchase by the Underwriters, acting severally and not jointly,
of the respective numbers of shares ("Shares") of the Company's common stock,
$0.001 par value par share ("Common Stock"), set forth in Schedule A hereto are
hereinafter referred to as the "Firm Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also sell to the Underwriters, acting severally and not jointly,
up to an additional 165,000 shares of Common Stock for the purpose of covering
over-allotments, if any. Such 165,000 additional shares of Common Stock are
hereinafter referred to as the "Option Securities," and together with the Firm
Securities are hereinafter referred to as the "Securities."
The Company also proposes to issue and sell to you certain warrants
(the "Representative's Warrants") pursuant to the Representative's Warrant
Agreement (the "Representative's Warrant
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Agreement") to be dated as of the Closing Date (as hereinafter defined) for the
purchase of up to an additional 110,000 shares of Common Stock, each such
Representative's Warrant entitling the registered holder thereof to purchase one
share of Common Stock. The Representatives's Warrants shall be exercisable
commencing 12 months from the effective date of the Registration Statement and
for a period of 60 months thereafter (such 6-year period hereinafter the
Representative's Warrant Period). The Representative's Warrants and the shares
of Common Stock issuable upon exercise of the Representative's Warrants are
hereinafter referred to as the "Representative's Securities." The Securities and
the Representative's Securities are more fully described in the Registration
Statement and the Prospectus referred to below.
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each
of the Underwriters as of the date hereof, and as of the Closing Date and each
Option Closing Date (as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an amendment or
amendments thereto, on Form SB-2 (No. 333-4873), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Securities and the Representative's Securities under the Securities Act of 1933,
as amended (the "Act"), which registration statement and amendment or amendments
have been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Rules and Regulations") 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 such
registration statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part thereof
or incorporated therein (including without limitation those documents or
information incorporated by reference therein) and all information deemed to be
a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Rules and 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 Rules and Regulations under the Act, is hereinafter called
the "Prospectus." For purposes hereof, "Rules and Regulations" mean the rules
and regulations adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any of any Preliminary
Prospectus, the Registration Statement, or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of the
Registration Statement have been instituted or are pending or, to the best
knowledge of the Company after due inquiry, threatened. Each of the Preliminary
Prospectus, the Registration Statement, and the Prospectus at the time of filing
thereof conformed with the requirements of the Act and the Rules and
Regulations, and none of the Preliminary Prospectus, the
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Registration Statement, or the Prospectus at the time of filing thereof
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,
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
written information furnished to the Company with respect to the Underwriters by
or on behalf of any Underwriter expressly for use in the Preliminary Prospectus,
Registration Statement or the Prospectus, or any amendment thereof or supplement
thereto.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Option Closing Date, 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, each of the
Registration Statement and the Prospectus will contain all statements that are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company with respect to the Underwriters by or on behalf of any Underwriter
expressly for use in the Preliminary Prospectus, the Registration Statement, or
the Prospectus, or any amendment thereof or supplement thereto.
(d) Each of the Company and its subsidiary, U.S. Golf and Entertainment
Corp., a Delaware corporation ("U.S. Golf Corp.") has been duly organized and is
validly existing as a corporation in good standing under the laws of the state
of Delaware. U.S. Golf Corp. is sometimes hereinafter referred to as a
"Subsidiary." Except as set forth in the Prospectus, neither the Company nor the
Subsidiary owns an interest in any corporation, partnership, limited liability
company, trust, joint venture or other business entity. Each of the Company and
the Subsidiary is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations require such qualification or
licensing. The Company owns 100% of the outstanding capital stock of the
Subsidiary and all such shares have been validly issued, are fully paid and
non-assessable, were not issued in violation of any preemptive rights and are
owned free and clear of any liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever (collectively, "Liens"). Each of the Company and the Subsidiary has
all requisite power and authority (corporate and otherwise), and has obtained
any and all necessary authorizations, approvals, orders, licenses, certificates,
franchises, and permits of and from all governmental or regulatory authorities
(including without limitation those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; each of the Company and the Subsidiary is and has
been doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all federal, state,
local and foreign laws,
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rules and regulations; and neither the Company nor the Subsidiary has received
any notice of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise or permit that,
if the subject of an unfavorable decision, ruling or finding, could,
individually or in the aggregate, have a Material Adverse Effect (as hereinafter
defined). The disclosures in the Registration Statement concerning the effects
of federal, state, local and foreign laws, rules and regulations on each of the
Company's and the Subsidiary's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state any
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which they were made. For purposes of this
Agreement, "Material Adverse Effect" means any circumstance, change in or effect
on the Company or the Subsidiary that, individually or in the aggregate with any
other circumstance, change or in effect on the Company or the Subsidiary is, or
could be, materially adverse to the condition (financial or otherwise),
earnings, position, prospects, value, operation, properties, employee
relationships, customer or supplier relationships, liabilities, business or
results of operations of the Company or of the Subsidiary.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and each Option Closing Date, if any, based upon the
assumptions set forth therein, and neither the Company nor the Subsidiary is a
party to or bound by any instrument, agreement or other arrangement providing
for it to issue any capital stock, warrants, options or other securities, or any
rights with respect thereto, except for this Agreement and the Representative's
Warrant Agreement and as described in the Prospectus. The Securities and the
Representative's Securities and all other securities issued or issuable by the
Company conform or, when issued and paid for, will conform, in all material
respects, to all statements with respect thereto contained in the Registration
Statement and the Prospectus. All issued and outstanding securities of the
Company and the Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable 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 was issued in
violation of the preemptive rights of any holders of any security of the Company
or similar contractual rights granted by or binding upon the Company or the
Subsidiary. The Securities and the Representative's Securities are not and will
not be subject to any preemptive or other similar rights of any stockholder of
the Company or any other person, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof (and to the extent
applicable, of the Representative's Warrant Agreement), will be validly issued,
fully paid, and non-assessable and will conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be taken for
the authorization, issue, and sale of the Securities and the Representative's
Securities has been duly and validly taken; and the certificates evidencing the
Securities and the Representative's Securities will be in due and proper form.
Upon the issuance and delivery of the Securities and the Representative's
Securities against full payment therefor, the Underwriters or the
Representative, as the case may be, will acquire good and marketable title to
such Securities and Representative's Securities, free and clear of any Liens.
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(f) The financial statements of the Company, the Subsidiary and Commack
Golf and Family Recreation Center, L.P., a New York limited partnership (the
"Commack Partnership"), together with the related notes and schedules thereto,
included in the Registration Statement, each Preliminary Prospectus and the
Prospectus present fairly, in all material respects, the financial position,
income, changes in cash flow, changes in stockholders' equity, and the results
of operations of the Company, the Subsidiary and the Commack Partnership 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 Rules and Regulations, consistently applied
throughout the periods involved. The pro forma financial statements and other
pro forma financial information (including the notes thereto) included in the
Registration Statement and the Prospectus (A) present fairly, in all material
respects, the information shown therein, (B) have been prepared, in all material
respects, in accordance with the applicable requirements of Item 310 of
Regulation S-B promulgated under the Act, (C) have been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements, and (D) have been properly compiled on the bases described therein,
and the assumptions used in the preparation of the pro forma financial
statements and other pro forma financial information included in the
Registration Statement and the Prospectus are reasonable and the adjustments
used therein are appropriate to give effect to the transactions or circumstances
referred to therein. There has been no Material Adverse Effect on the Company or
the Subsidiary 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 business of each of the Company and the
Subsidiary conform in all respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information set forth in
the Prospectus under the headings "Summary Financial Data," "Selected Financial
Data," "Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," present fairly, 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.
(g) Each of the Company, the Subsidiary and the Commack Partnership (i)
has paid all federal, state, local, and foreign taxes for which it is liable
(other than such taxes as are being contested in good faith for which adequate
reserves have been established) including, without limitation, withholding taxes
and amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has duly filed all information returns it is
required to file pursuant to the Code, (ii) has established adequate reserves
for such taxes that are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by the Company
of the Securities or the Representative's Securities, (ii) the purchase by the
Underwriters of the Securities, and the purchase and exercise by the
Representative of the Representative's Warrants, the purchase of the Common
Stock issuable upon exercise of the Representative's Warrants, (iv) the
consummation by the Company of any of its obligations under this Agreement, the
Representative's Warrant Agreement
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or the Representative's Warrants, (v) the initial sale to the public of the
Securities or (vi) resales of the Securities in connection with the distribution
contemplated hereby.
(i) Each of the Company and the Subsidiary maintains insurance
policies, including without limitation, general liability and property
insurance, that insure the Company, the Subsidiary and their employees and
agents against such losses and risks as are generally insured against by
comparable businesses. Neither the Company nor the Subsidiary has failed to give
notice or present any insurance claim with respect to any matter, including
without limitation, to the Company's or the Subsidiary's business, property or
employees, under any insurance policy or surety bond in a due and timely manner
and has failed to pay any premiums due and payable thereunder. To the best
knowledge of the Company after due inquiry, there are no facts or circumstances
under any such insurance policy or surety bond that would relieve any insurer of
its obligation to satisfy in full any otherwise valid claim of the Company or
the Subsidiary.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including without
limitation those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or, to the best knowledge of the Company after due
inquiry, threatened against (or circumstances that may give rise to the same),
or involving the properties or business of, the Company or the Subsidiary that
(i) questions the validity of the capital stock of the Company or the
Subsidiary, this Agreement, the Representative's Warrant Agreement or the
Representative's Warrants, or any action taken or to be taken by the Company or
the Subsidiary pursuant to or in connection with this Agreement, the
Representative's Warrant Agreement or the Representative's Warrants, (ii) is
required to be disclosed in the Registration Statement that is not so disclosed
(and such proceedings, if any, as are summarized in the Registration Statement
are accurately summarized in all respects) or (iii), could, if adversely
determined, have a Material Adverse Effect.
(k) The Company has full legal right, power, and authority to
authorize, issue, deliver, and sell the Securities and the Representative's
Securities, and to enter into this Agreement, the Representative's Warrant
Agreement and the Representative's Warrants, and to consummate the transactions
provided for in such agreements; and this Agreement has been duly and properly
authorized, executed and delivered by the Company; and the Representative's
Warrant Agreement and the Representative's Warrants have been duly authorized by
the Company and will be duly executed and delivered by the Company at the
Closing. This Agreement constitutes, and each of the Representative's Warrant
Agreement and the Representative's Warrants, when delivered at the Closing will
constitute, a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms; and none of the Company's
issue and sale of the Securities or the Representative's Securities, its
execution or delivery of this Agreement, the Representative's Warrant Agreement
or the Representative's Warrants, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will conflict with, or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or
6
result in the creation or imposition of any Lien of any kind whatsoever upon,
any property or assets (tangible or intangible) of the Company or the Subsidiary
pursuant to the terms of (i) the certificate of incorporation or by-laws, in
each case as amended to date, of the Company or the Subsidiary, (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 or the Subsidiary is a party or by which
either of them is bound or to which any of their properties or assets (tangible
or intangible) is or may be subject, or any indebtedness, or (iii) any statute,
judgment, decree, order, rule or regulation, applicable to the Company or the
Subsidiary, of any arbitrator, court, regulatory body, or administrative agency
or other governmental agency or body (including without limitation those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or the Subsidiary or any of their activities or
properties.
(l) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court or governmental or
regulatory authority, domestic or foreign, or any other person or entity, is
required for the issuance of the Securities and the Representative's Securities
pursuant to the Prospectus and the Registration Statement, the performance of
the Company's obligations under this Agreement, the Representative's Warrant
Agreement and the Representative's Warrants, and the transactions contemplated
hereby and thereby, including without limitation any waiver of any preemptive,
first refusal or other rights that any person or entity may have for the issue
and/or sale of any of the Securities or the Representative's Securities, except
such as have been or may be obtained under the Act or may be required under the
state securities or blue sky laws ("Blue Sky laws"), in connection with the
Underwriters' purchase and distribution of the Securities and the purchase of
the Representative's Securities to be sold by the Company under the
Representative's Warrant Agreement and the Representative's Warrants.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company or the Subsidiary is party or by
which either of them may be bound or to which any of their assets, properties,
or business may be subject, have been duly and validly authorized, executed and
delivered by the Company or the Subsidiary and constitute the legal, valid and
binding agreements of the Company or the Subsidiary, and to the best knowledge
of the Company after due inquiry, the other parties thereto, enforceable against
the Company or the Subsidiary, as the case may be, and to the best knowledge of
the Company after due inquiry, the other parties thereto, in accordance with
their respective terms. The descriptions in the Registration Statement of
agreements, contracts and other documents are accurate and fairly present the
information required to be shown with respect thereto by Form SB-2, and there
are no contracts, agreements or other documents that are required by the Act to
be described in the Registration Statement or filed as exhibits to the
Registration Statement that are not described or filed as required, and the
exhibits that have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated
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herein or therein, neither the Company nor the Subsidiary has (i) issued any
securities or incurred any liability or obligation, direct or contingent, for
borrowed money, (ii) entered into any transaction other than in the ordinary
course of business consistent with past practice, or (iii) declared or paid any
dividend or made any other distribution on or in respect of its capital stock of
any class, and, since such respective dates, there has not been (i) any change
in the capital stock, in the debt (long or short term) or in the liabilities of
the Company or the Subsidiary or (ii) a Material Adverse Effect.
(o) No breach or default by or of the Company or the Subsidiary or, to
the best knowledge of the Company after due inquiry, any other party exists in
the due performance and observance of any term, covenant or condition of any
material license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders agreement,
partnership agreement, note, loan or credit agreement, purchase order, or any
other material agreement or instrument evidencing an obligation for borrowed
money, or any other material agreement or instrument to which the Company or the
Subsidiary is a party or by which it may be bound or to which the property or
assets (tangible or intangible) of the Company or the Subsidiary is subject or
affected.
(p) Each of the Company and the Subsidiary has generally enjoyed a
satisfactory employer-employee relationship with its employees and is in
material compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment, and wages and hours. There are no pending investigations
involving the Company by the U.S. Department of Labor, or any other governmental
agency responsible for the enforcement of such federal, state, local, or foreign
laws and regulations. There is no unfair labor practice charge or complaint
against the Company or the Subsidiary pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or, to the best knowledge of the Company after due inquiry, threatened
against or involving the Company or the Subsidiary, or any predecessor entity,
and none has ever occurred. No representation question exists respecting the
employees of the Company or the Subsidiary, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
or the Subsidiary. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or the
Subsidiary. No labor dispute with the employees of the Company or the Subsidiary
exists or, to the best knowledge of the Company after due inquiry, is imminent.
(q) Except as described in the Prospectus, neither the Company nor the
Subsidiary maintains, sponsors or contributes to any program or arrangement that
is an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). Neither the Company nor the Subsidiary maintains or
contributes (and has not previously maintained or contributed) 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, that could subject the
Company or the Subsidiary to any tax penalty on prohibited
8
transactions and that has not adequately been corrected. Each ERISA Plan is in
compliance with all material reporting, disclosure, and other requirements of
the Code and ERISA as they relate to any such ERISA Plan. Determination or
opinion 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 the form of such ERISA Plan and the attendant trust are qualified
thereunder. Neither the Company nor the Subsidiary has ever completely or
partially withdrawn from a "multiemployer plan."
(r) Neither of the Company, the Subsidiary, nor any of their respective
employees, directors, stockholders, partners, or affiliates (within the meaning
of the Rules and Regulations) has taken or will take, directly or indirectly,
any action designed to, or that has constituted or might be expected to cause or
result in (under the Exchange Act or otherwise), stabilization or manipulation
of the price of any security of the Company, whether to facilitate the sale or
resale of the Securities or otherwise; and neither the Company nor the
Subsidiary shall take, or permit any such person to take, any such action.
(s) Except as disclosed in the Prospectus, none of the patents, patent
applications, trademarks, service marks, trade names, copyrights, technology,
and know-how, and none of the license or rights to the foregoing, presently
owned or held by the Company and the Subsidiary or used in or necessary to the
conduct of their respective businesses as now conducted or proposed to be
conducted (all of the foregoing, collectively, its "Intellectual Properties"),
are in dispute or are in any conflict with the right of any other person or
entity. To the best of knowledge of the Company after due inquiry, each of the
Company and the Subsidiary (i) owns or has the right to use all of its
Intellectual Properties, free and clear of all Liens of any kind whatsoever,
without infringing upon or otherwise acting adversely to the right or claimed
right of any person or other entity under or with respect to any of the
foregoing and (ii) except as set forth in the Prospectus, is not obligated or
under any liability whatsoever to make any payment by way of royalties, fees, or
otherwise to any owner or licensee of, or other claimant to, any Intellectual
Properties with respect to the use thereof or in connection with the conduct of
its business or otherwise as described in the Prospectus.
(t) Except as disclosed in the Prospectus, each of the Company and the
Subsidiary owns and has the unrestricted right to use all trade secrets,
know-how (including all unpatented and/or unpatentable proprietary or
confidential information, systems, and procedures), inventions, designs,
processes, works of authorship, computer programs, and technical data and
information that are material to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company or
the Subsidiary, free and clear of and without violating any right, Lien or claim
of others, including without limitation former employers of its employees;
provided, however, that the possibility exists that other persons or entities,
completely independently of the Company or the Subsidiary or their respective
employees or agents, could have developed trade secrets or items of technical
information similar or identical to those of the Company and the Subsidiary. The
Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
9
(u) Each of the Company and the Subsidiary has taken reasonable
security measures to protect the secrecy, confidentiality, and value of all of
its Intellectual Properties in all material respects.
(v) Each of the Company and the Subsidiary has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it free and
clear of all Liens of any kind whatsoever, other than (i) those referred to in
the Prospectus and (ii) Liens for taxes not yet due and payable.
(w) Xxxxxx, Xxxxxx & Xxxxxxx, L.L.P., whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Rules and Regulations.
(x) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors, stockholders, and all holders of securities, warrants, options or
other rights exchangeable or exercisable for, convertible into, or evidencing
any right to purchase or subscribe for, shares of Common Stock, has agreed that,
without the prior written consent of the Representative, such person or entity
will not directly or indirectly offer to sell, sell, grant any option for the
sale of, assign, transfer, pledge, hypothecate, or otherwise encumber or dispose
of any legal or beneficial interest in any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than 24 months following
the effective date of the Registration Statement. The Company will cause the
Transfer Agent, as defined below, to xxxx an appropriate legend on the face of
stock certificates representing all of such securities and to place "stop
transfer" orders with respect thereto on the Company's stock ledgers.
(y) There are no agreements, claims, payments, issuances, arrangements
or understandings, whether oral or written, for services in the nature of a
finder's, consulting or origination fee with respect to the sale of the
Securities or the Representative's Securities or any other agreements, claims,
payments, issuances, arrangements or understandings with respect to the Company,
the Subsidiary or any of their respective officers, directors, stockholders,
partners, employees, or affiliates that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(z) The Common Stock has been approved for quotation on the Nasdaq
SmallCap Market.
(aa) Neither the Company nor the Subsidiary nor any of their respective
officers, employees or agents, nor any other person acting on behalf of the
Company or the Subsidiary has, directly or indirectly, given or agreed to give
any money, gift, or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
10
employee, or agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company or the Subsidiary (or assist the Company or
the Subsidiary in connection with any actual or proposed transaction) that (a)
might subject the Company or the Subsidiary or any other such person to any
damage or penalty in any civil, criminal, or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, could have had a
Material Adverse Effect on the Company or the Subsidiary, or (c) if not
continued in the future, could have a Material Adverse Effect on the Company or
the Subsidiary. The Company's and the Subsidiary's internal accounting controls
are sufficient to cause the Company or the Subsidiary to comply with the Foreign
Corrupt Practices Act of 1977, as amended.
(bb) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company or the Subsidiary, nor any "affiliate" or "associate"
(as these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities, has or has had, either
directly or indirectly, (i) an interest in any person or entity that (A)
furnishes or sells services or products that are furnished or sold or are
proposed to be furnished or sold by the Company or the Subsidiary, or (B)
purchases from or sells or furnishes to the Company or the Subsidiary any goods
or services, or (ii) a beneficial interest in any contract or agreement to which
the Company or the Subsidiary is a party or by which it may be bound or
affected. Except as set forth in the Prospectus under "Certain Transactions,"
there are no existing or proposed agreements, arrangements, understandings, or
transactions between or among the Company or the Subsidiary and any officer,
director, or principal stockholder of the Company or the Subsidiary, or any
partner, affiliate or associate of any of the foregoing persons or entities.
(cc) Any certificate signed by any officer of the Company or Subsidiary
and delivered to the Underwriters or to Underwriters' Counsel (as defined
herein) shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(dd) Each of the minute books of the Company and the Subsidiary have
been made available to the Representative and contains a complete summary of all
meetings and actions of the directors and stockholders of the Company and the
Subsidiary since the time of its incorporation, and reflects accurately in all
material respects all transactions referred to in such minutes.
(ee) No holders of any securities of the Company or of any options,
warrants, or other convertible or exchangeable securities of the Company or the
Subsidiary (i) have the right to include any securities issued by the Company or
the Subsidiary in the Registration Statement or (ii) except and to the extent
described in the Prospectus, have the right to include any securities issued by
the Company or the Subsidiary in any registration statement to be filed by the
Company or the Subsidiary or to require the Company or the Subsidiary to file a
registration statement under the Act; and, except and to the extent described in
the Prospectus, no person or entity holds any anti-dilution rights with respect
to any securities of the Company or the Subsidiary.
11
(ff) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with each of Xxxxxx X. Xxxx,
Xxxxxx X. Xxxxxxxxx and Xxxxx Xxxxxxx in the forms filed as Exhibits 10.6, 10.7
and 10.8, respectively, to the Registration Statement, and (ii) purchased term
key-man insurance on the life of Xxxxxx X. Xxxxxxxxx in the amount of at least
$1,000,000, which policy names the Company as the sole beneficiary thereof.
2. Purchase, Sale, and Delivery of the Securities and Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$__________ (90% of the public offering price) per Share, those numbers of
Shares set forth in Schedule A opposite the name of such Underwriter, subject to
such adjustment as the Representative in its sole discretion shall make to
eliminate any sales or purchases of fractional shares, plus any additional
number of Firm Securities that such Underwriter may become obligated to purchase
pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 165,000 shares of Common of Stock at a price of $_____ (90% of the
public offering price) per share. 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 Rules and Regulations, or (ii)
the date of this Agreement if the Company has elected to rely upon Rule 430A
under the Rules and Regulations, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments that may be made
in connection with the offering and distribution of the Firm Securities upon
notice by the Representative to the Company setting forth the respective numbers
of Option Securities as to which the several Underwriters are then exercising
the option and the time and date of payment and delivery for any such Option
Securities. Any such time and date of delivery (an "Option Closing Date") shall
be determined by the Representative, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Date, as hereinafter defined, unless otherwise agreed upon by the
Representative and the Company. Nothing herein contained shall obligate the
Underwriters to make any over-allotments. No Option Securities shall be
delivered unless the Firm Securities shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and the delivery of certificates
for, the Firm Securities shall be made at the offices of the Representative at
000 Xxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxx Xxxx 00000, or at such other
place as shall be agreed upon by the Representative and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
__________________, 199 or at such other time and date as shall be agreed upon
by the Representative and the Company, but not less than three nor more than
fifteen full business days after the effective date of the Registration
Statement (such time and date of payment and delivery
12
being herein called "Closing Date"). In addition, in the event that any or all
of the Option Securities are purchased by the Underwriters, payment of the
purchase price for, and delivery of certificates for, such Option Securities
shall be made at the above-mentioned office of the Representative or at such
other place as shall be agreed upon by the Representative and the Company on
each Option Closing Date as specified in the notice from the Representative to
the Company. Delivery of the certificates for the Firm Securities and the Option
Securities, if any, shall be made to the Underwriters against payment by the
Underwriters, severally and not jointly, of the purchase price for the Firm
Securities and the Option Securities, if any, to the order of the Company, by
New York Clearing House funds. If such option is exercised, each of the
Underwriters, acting severally and not jointly, shall purchase that proportion
of the total number of Option Securities then being purchased that the number of
Firm Securities set forth in Schedule A hereto opposite the name of such
Underwriter bears to the total number of Firm Securities, subject in each case
to such adjustments as the Representative in its discretion shall make to
eliminate any sales or purchases of fractional shares. Certificates for the Firm
Securities and the Option Securities, if any, shall be in the definitive, fully
registered form, shall bear no restrictive legends and shall be in such
denominations and registered in such names as the Underwriters may request in
writing at least two (2) business days prior to the Closing Date or the relevant
Option Closing Date, as the case may be. The certificates for the Firm
Securities and the Option Securities, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to the Closing Date or the relevant Option Closing Date,
as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrants for an aggregate purchase price of
$110, which warrants shall entitle the holders thereof to purchase up to an
aggregate of 110,000 shares of Common Stock. The Representative's Warrants shall
be exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at an exercise price per share
purchased thereunder equal to 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 attached hereto
as Exhibit A. 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 of the Shares after distribution thereof 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.
13
4. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and shall 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
the 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 and the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company shall advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, or 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 or authority of any proceedings
for the suspension of the qualification of any of the Securities or the
Representative's Securities for offering or sale in any jurisdiction or of the
initiation or 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 or authority shall enter a stop order or suspend
such qualification at any time, the Company shall use its best efforts to obtain
promptly the lifting of such order or suspension.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
second business day following the execution and delivery of this Agreement.
(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 that the Company proposes for use by the
Underwriters in connection with the offering of the Securities that differs from
the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such
14
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such prospectus to
which the Representative or its counsel ("Underwriters' Counsel") shall object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities and the Representative's Securities for
offering and sale under the securities laws of such jurisdictions as the
Representative may designate to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution, and shall
make such applications, file such documents and furnish such information as may
be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company shall, unless the
Representative agrees that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under
the Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities and the Representative's Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or supplements thereto.
If at any time when a prospectus relating to the Securities or the
Representative's Securities is required to be delivered under the Act, any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company shall 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 shall 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 twelve-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 Rules and Regulations, and to the Representative, an earnings
statement that will be in the detail required by, and otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations, which statement need not be audited unless required by the Act,
covering a period of at least twelve consecutive months after the effective date
of the Registration Statement.
15
(h) The Company shall, for so long as the Shares are registered under
the Exchange Act, hold an annual meeting of stockholders for the election of
directors within 180 days after the end of each of the Company's fiscal years
and, within 150 days after the end of the Company's fiscal years, will provide
the Company's stockholders with the audited financial statements of the Company
as of the end of the fiscal year just completed prior thereto. Such financial
statements shall be those required by Rule 14a-3 under the Exchange Act and
shall be included in an annual report pursuant to the requirements of such Rule.
(i) During a period of seven years after the date hereof, the Company
shall furnish to its stockholders, as soon as practicable but no later than the
end of the period specified in the immediately preceding paragraph, if
applicable, annual reports (including financial statements audited by
independent public accountants) and unaudited quarterly reports of earnings, and
shall deliver to the Representative:
i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company and the Subsidiary
for each quarter in the form furnished to the Company's stockholders
and certified by the Company's principal financial or accounting
officer;
ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company and the Subsidiary as at
the end of the preceding fiscal year, together with statements of
operations, stockholders' equity, and cash flows of the Company and the
Subsidiary for such fiscal year, accompanied by a copy of the
certificate thereon of independent certified public accountants;
iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
v) every press release and every material news item or article
of interest to the financial community in respect of the Company, the
Subsidiary or their respective affairs that was released or prepared by
or on behalf of the Company or the Subsidiary; and
vi) any additional information of a public nature concerning
the Company or the Subsidiary (and any future subsidiaries) or any of
their businesses that the Representative may reasonably request.
During such seven-year period, if the Company has active subsidiaries,
the foregoing financial statements shall be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are consolidated,
and shall be accompanied by similar financial statements for any significant
subsidiary that is not so consolidated.
16
(j) The Company shall maintain a transfer agent, and if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for its Common Stock.
(k) The Company shall furnish or cause to be furnished to the
Representative or on the Representative's order, without charge, at such place
as the Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto (one of which copies shall be manually signed and shall include all
financial statements and exhibits), the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the Registration Statement, in each case as soon as available and in such
quantities as the Representative may request.
(l) The Company has provided the Representative with true copies of
duly executed, legally binding and enforceable agreements (collectively, the
"Lock-Up Agreements") pursuant to which, for a period of twenty-four (24) months
after the effective date of the Registration Statement, each of the Company's
officers, directors, stockholders and all holders of securities convertible
into, exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock has agreed that, without the prior
written consent of the Representative, such person or entity (each, a
"Restricted Party") shall not directly or indirectly offer to sell, sell, grant
any option for the sale of, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of any shares of Common Stock or securities convertible
into, exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Rules and Regulations or otherwise) or dispose of any beneficial interest
therein in accordance with the Rules and Regulations (all of the foregoing being
referred to collectively as "Restricted Securities"). Notwithstanding the
foregoing, a Restricted Party may transfer any or all of the Restricted
Securities, either during the Restricted Party's lifetime or on the Restricted
Party's death, by grant of a bona fide gift to any person, by will or intestate
succession to the Restricted Party's immediate family or to a trust the
beneficiaries of which are exclusively the Restricted Party's and/or a member or
members of the Restricted Party's immediate family, or to any affiliate (within
the meaning of the Rules and Regulations), associate, shareholders, employee or
partner of the Restricted Party; provided, however, that in any such case it
shall be a condition to the transfer that the transferee is receiving and
holding the Restricted Securities subject to the provision of the LockUp
Agreement, and there shall be no further transfer of such Restricted Securities
except in accordance with such Lock-Up Agreement. In addition, during the 12
month period commencing with the effective date of the Registration Statement,
the Company shall not, without the prior written consent of the Representative,
sell, contract or offer to sell, issue, transfer, assign, pledge, distribute, or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for shares of Common
Stock (other than upon the exercise or conversion of currently outstanding
options, warrants, convertible securities and other rights to acquire shares of
Common Stock (including the Representative's Warrants)). On or before the
Closing Date, the Company shall deliver instructions to the transfer agent
authorizing it to place appropriate legends on the certificates representing the
securities subject to the Lock-up Agreements and to place appropriate stop
transfer orders on the Company's ledgers.
17
(m) Neither the Company nor the Subsidiary shall take, or permit any of
their respective officers, directors, or stockholders, or any of their
respective affiliates (within the meaning of the Rules and Regulations) to take,
directly or indirectly, any action designed to, or that might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any securities of the Company or the Subsidiary.
(n) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. No portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the Company or the
Subsidiary.
(o) The Company shall timely file all such reports, forms and other
documents as may be required (including without limitation a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed shall comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(p) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date, and each Option
Closing Date, if any, but no later than two full business days prior thereto, a
copy of the latest available unaudited interim financial statements of the
Company (which in no event shall be as of a date more than 30 days prior to the
date of the Registration Statement) which have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Sections 6(m) and (n) hereof.
(q) Unless otherwise agreed by the Company and the Representative, the
Company shall cause the Common Stock to be quoted on the Nasdaq SmallCap Market,
and for a period of seven years from the date hereof, shall use its best efforts
to maintain the Nasdaq SmallCap Market quotation.
(r) For a period of five years from the Closing Date, the Company shall
furnish to the Representative, as and to the extent requested by the
Representative, at the Company's sole expense, (i) daily consolidated transfer
sheets relating to the Company's securities, (ii) the list of holders of all of
the Company's securities, and (iii) a Blue Sky "Trading Survey" for secondary
sales of the Company's securities prepared by counsel to the Company.
(s) The Company has filed a Form 8-A with the Commission providing for
the registration under the Exchange Act of the Common Stock, and has requested
that such filing be declared effective at the same time as the Registration
Statement becomes effective, and as soon as practicable hereafter but in no
event more than 30 days from the effective date of the Registration Statement,
shall take all necessary and appropriate actions for the Common Stock 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 seven years.
18
(t) The Company hereby agrees that it will not for a period of 24
months from the effective date of the Registration Statement, adopt, propose to
adopt or otherwise permit to exist any employee, officer, director, consultant
or compensation plan or arrangement permitting (i) the grant, issue, sale or
entry into any agreement to grant, issue or sell any option, warrant or other
contract right (x) at an exercise price that is less than the greater of the
public offering price of the Shares set forth herein and the fair market value
on the date of grant or sale or (y) to any of its executive officers or
directors or to any holder of 5% or more of the Common Stock; (ii) the maximum
number of shares of Common Stock or other securities of the Company purchasable
at any time pursuant to options or warrants issued by the Company to exceed
______ shares; (iii) the payment for such securities with any form of
consideration other than cash; or (iv) the existence of stock appreciation
rights, phantom options or similar arrangements.
(u) Until the completion of the distribution of the Securities, the
Company shall not, without the prior written consent of the Representative and
Underwriters' Counsel, issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company or its
activities or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past practices
with respect to the Company's operations.
(v) Until after the earlier of (i) seven years from the date hereof,
and (ii) the sale to the public of all of the Representative's Securities, the
Company shall not take any action or actions that might prevent or disqualify
the Company's use of Form SB-2 (or other appropriate form) for the registration
under the Act of the Representative's Securities.
(w) For a period of five years after the effective date of the
Registration Statement, (i) the Company shall notify the Representative of each
meeting of the Board of Directors of the Company (the "Board"), and (ii) one
individual selected by the Representative (who may be a director, officer, agent
or affiliate of the Representative) shall be permitted to attend all meetings of
the Board and to receive all notices and other correspondence and communications
sent by the Company to the members of the Board. Such individual shall be
reimbursed for all reasonable out-of-pocket expenses incurred in connection with
such person's attendance at meetings of the Board of Directors.
(x) The Company shall use its best efforts to keep the Registration
Statement current for at lease until the expiration of the Representative's
Warrants and shall bear all of the costs associated with the filing of a new
registration statement in the event the Representative's Warrants are exercised.
(y) The Company shall, upon written request by a majority of holders of
the Representative's Warrants after 12 months from the effective date of the
Registration Statement and within the Representative's Warrant Period, one time
only, cause the securities underlying the Representative's Warrants to be
subject to a registration statement, as may be appropriate under the Act, so as
to enable the Representative or the Representative's assigns to offer publicly
the securities underlying the Representative's Warrants. All costs incurred in
the preparation of
19
such registration statement shall be paid by the Company with the exception of
fees and expenses of counsel for the holders of the Representative's Warrants
and selling commissions to be paid to any underwriter with respect to such
securities.
(z) If, at any time or times during a period of five (5) years from the
effective date of the Registration Statement, the Company shall register any
primary or secondary offering of any debt or equity security issued or to be
issued by it pursuant to a registration statement under the Act, the Company
shall in each such event notify the Representative in writing not less than 30
days prior to filing such registration statement with the Commission, and the
Representative or the Representative's assigns shall have the right to register
the securities underlying the Representative's Warrants by notifying the Company
in writing, within 15 days of receipt of the Company's notice, requesting
registration of such securities and setting forth the intended method of
distribution and such other data or information as the Company or its counsel
shall reasonably require. Such registration shall be without cost to the
Representative except for sales commissions incurred if the securities
underlying the Representative's Warrants are sold, and fees and expenses of
counsel for the holders of the Representative's Warrants.
(aa) The Company hereby grants to First United, for a period of three
years after the effective date of the Registration Statement, a right of first
refusal on the terms and subject to the conditions set forth herein, should the
Company or any of its affiliates desire to sell any securities (including,
without limitation, any Securities) of the Company. The Company (or such
affiliate) shall consult with First United with regard to such sale and shall
offer to First United the opportunity, on terms not more or less favorable to
the Company (or such affiliate) than the Company (or such affiliate) can receive
elsewhere, to purchase or sell any such securities. If First United fails to
accept in writing such proposal made by the Company (or such affiliate) by the
end of the tenth business day following the date of receipt of a written notice
containing such proposal, then First United shall have no further claims or
rights with regard to the proposal contained in such notice, provided that the
Company (or such affiliate) consummates a sale of such securities on the same
terms and conditions within 90 days thereafter. If, thereafter, such proposal is
modified or such sale is not consummated with such 90-day period, the Company
(or such affiliate) shall again consult with First United with respect to any
sale of such securities (including with respect to the original proposal), any
modified proposal or any new proposal.
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 paid at the Closing Date), all
expenses and fees (other than fees and expenses of Underwriters' Counsel, except
as provided in clause (iv) below) incident to the performance of the obligations
of the Company under this Agreement and the Representative's Warrant Agreement,
including without limitation (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing (including mailing and handling charges),
filing, delivery, and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the
20
Prospectus and any amendments and supplements thereto and the printing, mailing
(including the payment of postage with respect thereto), and delivery of this
Agreement, the Agreement Among Underwriters, the Selected Dealer Agreements, and
related documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the Securities, including, but not
limited to (x) the purchase by the Underwriters of the Securities and the
purchase by the Representative of the Representative's Warrants from the
Company, and (y) the consummation by the Company of any of its obligations under
this Agreement and the Representative's Warrant Agreement, and (z) resale of the
Securities by the Underwriters in connection with the distribution contemplated
hereby, (iv) the qualification of the Securities and the Representative's
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 the "Legal Investment
Survey," if any, and disbursements and fees of counsel in connection therewith,
(v) advertising costs and expenses, and costs and expenses in connection with
bound volumes and prospectus memorabilia and "tomb-stone" advertisement
expenses, (vi) costs and expenses in connection with Company counsel's due
diligence investigations, including without limitation the fees of any
independent counsel or consultant retained, (vii) fees and expenses of the
transfer agent and registrar for the Common Stock, (viii) the fees payable to
the Commission and the NASD, and (ix) the fees and expenses incurred in
connection with the listing or quotation, as the case may be, of the Securities
on the Nasdaq SmallCap Market and any other exchange or market system.
(b) The Company further agrees that, in addition to the expenses
payable pursuant to Section 5(a), it shall 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 three (3) percent of the
gross proceeds received by the Company from the sale of the Firm Securities,
$25,000 of which has been paid to date. If the Representative elects to exercise
the over-allotment option described in Section 2(b) hereof, the Company agrees
to pay to the Representative on each 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 three (3)
percent of the gross proceeds from the sale of the Option Securities sold on
such Option Closing Date.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, if any,
of the statements of the officers of the Company made pursuant to the provisions
hereof and the performance by the Company on and as of the Closing Date and each
Option Closing Date, if any, of its covenants and obligations hereunder and to
the following further conditions:
21
(a) The Registration Statement shall have become effective not later
than 12:00 A.M., New York time, on the date of this Agreement or such later date
and time as shall be consented to in writing by the Representative, and at the
Closing Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representative of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact that, in the Representative's opinion, is material, or omits to state a
fact that, 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 that, in the Representative's opinion, is material, or omits to state a
fact that, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date or Option Closing Date, as the case
may be, the Representative shall have received from Underwriters' Counsel, such
opinion or opinions with respect to the organization of the Company, the
validity of the Securities, the Representative's Warrants, the Registration
Statement, the Prospectus, and other related matters as the Representative may
request and Underwriters' Counsel shall have received such papers and
information as they request to enable them to pass upon such matters.
(d) On the Closing Date, the Underwriters shall have received the
favorable opinion of Ruskin, Moscou, Xxxxx & Faltischek, P.C., counsel to the
Company and the Subsidiary, dated the Closing Date, addressed to the
Underwriters, and in form and substance satisfactory to Underwriters ("Company
Counsel"), to the effect that:
i) Each of the Company and the Subsidiary (A) has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the state of its 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,
(C) has all requisite power and authority (corporate and other), and
has obtained all material authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental or
22
regulatory authorities (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;
to the best knowledge of such Counsel, each of the Company and the
Subsidiary is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all applicable federal, state and local laws, rules and
regulations; and to the best knowledge of such Counsel, neither the
Company nor the Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or permit that,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect. The
disclosures in the Registration Statement concerning the effects of
federal, state, and local laws, rules and regulations on the Company's
and Subsidiary's business as currently conducted and as contemplated by
the Prospectus are correct in all material respects and do not omit to
state a fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made;
ii) the Company owns 100% of the outstanding capital stock of
the Subsidiary, and, to the best knowledge of such Counsel, neither the
Company nor the Subsidiary owns an interest in any corporation,
partnership, joint venture, trust or other business entity (other than
the Company's interest in the Subsidiary);
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 will have the adjusted
capitalization set forth therein on the Closing Date and each Option
Closing Date, if any, based upon the assumptions set forth therein
(except that the effects of the exercise of the Underwriters'
over-allotment option are not reflected therein), and, to the best
knowledge of such Counsel, neither the Company nor the Subsidiary is a
party to or bound by any instrument, agreement, or other arrangement
providing for it to issue any capital stock, warrants, options, or
other securities, or rights with respect thereto, except for this
Agreement and the Representative's Warrant Agreement and as described
in the Prospectus. The terms and provisions of the Securities and the
Representative's Securities, and the other securities issued or
issuable by the Company or the Subsidiary, conform in all material
respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
securities of each of the Company and the Subsidiary have been duly
authorized and validly issued and the shares of Common Stock issued and
outstanding immediately prior to the Closing Date are fully paid and
non-assessable and the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities of the
Company was issued in violation of the preemptive rights of any person
or entity. The Securities and the Representative's Securities to be
sold by the Company hereunder and under the Representative's Warrant
Agreement (i) are not and will not be subject to any preemptive or
other similar rights of any stockholder or any other person or entity,
(ii) have been duly authorized and, when issued, paid for, and
delivered in
23
accordance with the terms hereof and thereof, will be validly issued,
fully paid, and non-assessable and will conform to the description
thereof contained in the Prospectus; the holders thereof will not be
subject to any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of the
Securities and the Representative's Securities has been duly and
validly taken; and the certificates representing the Securities are in
due and proper form. The Representative's Warrants constitute legal,
valid and binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor pursuant to the terms thereof,
the numbers and types of securities of the Company called for thereby.
Upon the issuance and delivery pursuant to this Agreement of the
Securities and the Representative's Securities to be sold by the
Company, and assuming that the Underwriters acquire such Securities,
and the holders of the Representative's Securities acquire such
Representative's Securities, in good faith and without notice of any
adverse claim, then the Underwriters will acquire good and marketable
title to the Securities, and the holders of the Representative's
Securities will acquire good and marketable title to the
Representative's Securities, free and clear of any Lien of any kind
whatsoever, except as the Underwriters and the Representative, or any
of them, may have granted. No transfer tax is payable by or on behalf
of the Underwriters in connection with (A) the issuance by the Company
of the Securities or the Representative's Securities, (B) the purchase
by the Underwriters of the Securities and the purchase and exercise by
the Representative of the Representative's Warrants, (C) the
consummation by the Company of any of its obligations under this
Agreement, the Representative's Warrant Agreement or the
Representative's Warrants, or (D) the initial sale to the public of the
Securities in connection with the distribution contemplated hereby;
iv) such Counsel has been orally advised by the Commission
that the Registration Statement was declared effective under the Act,
and, if applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, that such Counsel has
been advised by the Commission that no stop order suspending the use of
the Preliminary Prospectus, the Registration Statement, or the
Prospectus, or any part of any thereof, or suspending the effectiveness
of the Registration Statement has been issued, and to the best
knowledge of such Counsel, no proceedings for that purpose have been
instituted or are pending or 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) complies as to form in all material respects with the
requirements of the Act and the Rules and Regulations. Such Counsel
shall state that such Counsel has participated in conferences with
officers and other representatives of the Company and the Subsidiary
and representatives of the independent public accountants for the
Company and the Subsidiary, at which conferences such Counsel made
inquiries of such officers, representatives and accountants, and
discussed the contents of the Preliminary Prospectus, the Registration
Statement and the Prospectus and at which related matters were
discussed and, although such
24
Counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Preliminary Prospectus, the Registration Statement and Prospectus,
on the basis of the foregoing, no facts have come to the attention of
such Counsel that 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 in light of the
circumstances in which they were made (it being understood that such
Counsel need express no opinion with respect to the financial
statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement or
the Prospectus);
vi) to the best of such Counsel's knowledge, (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 (or required to be filed under the Exchange
Act if upon such filing they would be incorporated, in whole or in
part, by reference therein) and the Prospectus and filed as exhibits
thereto, and the exhibits that have been filed are correct copies of
the documents of which they purport to be copies; (B) the descriptions
in the Registration Statement and the Prospectus and any supplement or
amendment thereto, of contracts and other documents to which the
Company and the Subsidiary is party or by which it is bound, including
any such document incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate and fairly represent, in
all material respects, the information required to be shown by Form
SB-2; (C) there is not pending or threatened against the Company or the
Subsidiary any action, arbitration, suit, proceeding, inquiry,
investigation, litigation, or governmental or other proceeding
(including without limitation those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or
threatened against (or circumstances that may give rise to the same),
or involving the properties or business of either of the Company or the
Subsidiary that (x) is required to be disclosed in the Registration
Statement and is not so disclosed (and such proceedings as are
summarized in the Registration Statement, if any, are accurately
summarized in all material respects), or (y) questions the validity of
the capital stock of the Company or the Subsidiary or this Agreement,
the Representative's Warrant Agreement or the Representative's
Warrants, or of any action taken or to be taken by the Company or the
Subsidiary pursuant to or in connection with any of the foregoing; (D)
no statute or regulation or legal or governmental proceeding required
to be described in the Prospectus is not described as required; and (E)
there is no action, suit or proceeding pending or threatened against or
affecting the Company or the Subsidiary before any court or arbitrator
or governmental or regulatory authority in which there is a reasonable
possibility of an adverse decision that could result in a Material
Adverse Effect, that could adversely affect the present or prospective
ability of the Company to perform its obligations under this Agreement,
the Representative's Warrant Agreement or the Representative's Warrants
or
25
which in any manner draws into question the validity or enforceability
of this Agreement, the Representative's Warrant Agreement or the
Representative's Warrants;
vii) the Company has full legal right, power and authority to
enter into each of this Agreement, the Representative's Warrant
Agreement and the Representative's Warrants and to consummate the
transactions provided for herein and therein; and each of this
Agreement and the Representative's Warrant Agreement has been, and the
Representative's Warrants, upon due execution and delivery against
payment therefor in accordance with the terms of the Representative's
Warrant Agreement, will be, duly authorized, executed and delivered by
the Company. Each of this Agreement, the Representative's Warrant
Agreement and the Representative's Warrants, assuming due
authorization, execution and delivery by each other party thereto,
constitutes, a legal, valid, and binding agreement of the Company
enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be
limited by applicable law); and none of the Company's execution or
delivery of this Agreement, the Representative's Warrant Agreement or
the Representative's Warrants, its performance hereunder or thereunder,
or its consummation of the transactions contemplated herein or therein,
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 of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company or the
Subsidiary pursuant to the terms of (A) the certificate of
incorporation or bylaws of the Company or of the Subsidiary, each as
amended and in effect as of the date of such opinion, (B) to the best
knowledge of such Counsel, 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 or the Subsidiary is party or by which they are or may be
bound or to which any of their respective properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or
(C) any statute, judgment, decree, order, rule or regulation applicable
to the Company or the Subsidiary of any arbitrator, court, or
governmental or regulatory authority (including without limitation
those having jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company or the
Subsidiary or any of their respective activities or properties;
viii) except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, governmental or regulatory authority or any other
person or entity (other than such as may be required under Blue Sky
laws, as to which no opinion need be rendered) is required in
connection with the issuance of the Securities pursuant to the
Prospectus, the issuance and the exercise the Representative's
Warrants, the performance of this Agreement, the Representative's
Warrant Agreement and the Representative's Warrants, and the
transactions contemplated hereby and thereby;
26
ix) to the best knowledge of such Counsel, the properties and
business of each of the Company and the Subsidiary conform to the
description thereof contained in the Registration Statement and the
Prospectus;
x) to the best knowledge of such Counsel, neither the Company
nor the Subsidiary is in breach of, or in default under, any term or
provision of any material license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders agreement, partnership agreement, note, loan or
credit agreement, or other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to
which the Company or the Subsidiary is a party or by which they are or
may be bound or to which any of their respective properties or assets
(tangible or intangible) are or may be subject or affected; and neither
the Company nor the Subsidiary is in violation of any term or provision
of its certificate of incorporation or bylaws, each as amended and in
effect as of the date of such opinion, or, to the best knowledge of
such Counsel, in violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation;
xi) the statements in the Prospectus under "THE COMPANY,"
"BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES," "SHARES ELIGIBLE FOR FUTURE
SALE" and "SELLING STOCKHOLDERS; PLAN OF DISTRIBUTION" 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 Company has been advised that the Common Stock has
been approved for quotation on the Nasdaq SmallCap Market;
xiii) to the best knowledge of such Counsel, the persons
listed under the caption "PRINCIPAL STOCKHOLDERS" and "SELLING
STOCKHOLDERS; PLAN OF DISTRIBUTION" in the Prospectus are the
respective "beneficial owners" (as such phrase is defined in Rule 13d-3
of the Rules and Regulations), of the securities set forth opposite
their respective names thereunder as and to the extent set forth
therein;
xiv) to the best knowledge of such Counsel, no person,
corporation, trust, partnership, association or other entity has the
right (x) to include and/or register any securities of the Company in
the Registration Statement or (y) except as described in the
Prospectus, to require the Company to file any registration statement
or, if any registration statement (other than the Registration
Statement) is filed, to include any security in such registration
statement;
xv) to the best knowledge of such Counsel, except as described
in the Prospectus, there are no claims, payments, issuances or other
agreements, understandings or arrangements for services in the nature
of a finder's or origination fee with respect to the sale
27
of the Securities or the Representative's Securities hereunder or
financial consulting arrangement or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriters'
compensation, as determined by the NASD;
xvi) assuming due execution by the parties thereto other than
the Company, the Lock-up Agreements are legal, valid and binding
obligations of the parties thereto, enforceable against the party and
any subsequent holder of the securities subject thereto in accordance
with its terms;
xvii) to the best knowledge of such Counsel, except as
described in the Prospectus, neither the Company nor any Subsidiary (A)
maintains, sponsors or contributes to any ERISA Plans, (B) maintains or
contributes, now or at any time previously, to a defined benefit plan,
as defined in Section 3(35) of ERISA, and (C) has ever completely or
partially withdrawn from a "multiemployer plan"; and
xviii) the Company is not an "investment company" required to
be registered or regulated under the Investment Company Act of 1940, as
amended.
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company or the Subsidiary and
certificates or other written statements of officers of, departments of
various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company or the Subsidiary,
provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel.
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Company Counsel dated the Option Closing Date,
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, confirming as of each Option Closing Date the statements
made by such counsel in its opinion delivered on the Closing Date.
(f) On or prior to each of the Closing Date and each Option Closing
Date, if any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in Section 6(c), or
in order to evidence the accuracy, completeness, or satisfaction of any of the
representations, warranties or conditions of the Company and the Subsidiaries,
or herein contained.
(g) Prior to each of the Closing Date and each Option Closing Date, if
any, (i) there shall have been no Material Adverse Effect on the Company or the
Subsidiary; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company or the Subsidiary, from the
latest date as of which the financial condition of the Company or the Subsidiary
is set forth in the Registration Statement and Prospectus that is materially
adverse to the Company or the Subsidiary; (iii) neither the Company nor the
Subsidiary shall be in material breach or material
28
default under any provision of any instrument relating to any outstanding
indebtedness; (iv) neither the Company nor the Subsidiary shall have issued any
securities (other than as described in the Registration Statement and other than
the Securities and the Representative's Securities) or declared or paid any
dividend or made any distribution in respect of its capital stock of any class
and there shall not have been any change in the capital stock or any material
change in the debt (long or short term) or liabilities or obligations of the
Company or the Subsidiary (contingent or otherwise); (v) no material amount of
the assets of the Company or the Subsidiary shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been pending
or threatened (or circumstances giving rise to same) against the Company or the
Subsidiary, or involving or affecting their respective business or properties,
before or by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding could
have a Material Adverse Effect on the Company or the Subsidiary, 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.
(h) At each of the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a certificate of the Company, signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus, and this Agreement, and that:
i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or such Option Closing Date, as the case may be, and the Company
has complied, in all material respects, with all agreements and
covenants and satisfied, in all material respects, 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 each
amendment and each supplement thereto, if any, contain all statements
and information required to be included therein, and none of the
Registration Statement, the Prospectus, or 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, in light of the circumstances under which
they were made, not misleading and neither the Preliminary Prospectus
or any supplement thereto included any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made,
29
not misleading; except that such certification may expressly exclude
statements or omissions 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; and
iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (a) neither
the Company nor the Subsidiary shall have 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 consistent with past
practice, any material liabilities or obligations, direct or
contingent; (b) neither the Company nor the Subsidiary shall have paid
or declared any dividends or other distributions on its capital stock;
(c) neither the Company nor the Subsidiary shall have entered into any
transactions not in the ordinary course of business consistent with
past practice; (d) there shall not have been any change in the capital
stock or 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 consistent with past practice) of the Company or the
Subsidiary; (e) neither the Company nor the Subsidiary shall have
sustained any material loss or material damage to their respective
property or assets, whether or not insured; (f) there shall be no
litigation which is pending or threatened (or circumstances giving rise
to same) against the Company or the Subsidiary or any affiliated party
that is required to be set forth in an amended or supplemented
Prospectus and that has not been so set forth; and (g) there shall not
have occurred any event required to be set forth in an amended or
supplemented Prospectus that shall not have been set forth.
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters shall have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated the date hereof, addressed to the Underwriters in form
and substance satisfactory (including as to the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from Xxxxxx, Xxxxxx & Xxxxxxx,
L.L.P.;
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, the Subsidiary and
the Commack Partnership included in the Registration Statement
comply as to form, in all material respects, with the
applicable accounting requirements of the Act and the Rules
and Regulations
30
thereunder and that the Representative may rely upon the
opinion of Xxxxxx, Xxxxxx & Xxxxxxx, L.L.P. with respect to
the financial statements and supporting schedules included in
the Registration Statement;
iii) stating that, on the basis of a limited review that included a
reading of the latest available unaudited interim consolidated
financial statements of the Company and the Subsidiary (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 boards of directors of the
Company and the Subsidiary, consultations with officers and
other employees of the Company and the Subsidiary responsible
for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention
that would lead them to believe that (A) the pro forma
financial information contained in the Registration Statement
and Prospectus does not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the Rules and Regulations or is not fairly presented
in conformity with generally accepted accounting principles
applied on a basis consistent with that of the audited
consolidated financial statements of the Company or the
unaudited pro forma financial information included in the
Registration Statement, (B) the unaudited financial statements
and supporting schedules of the Company, the Subsidiary and
the Commack Partnership included in the Registration Statement
do not comply as to form, in all material respects, with the
applicable accounting requirements of the Act and the Rules
and Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated
financial statements of the Company, the Subsidiary and the
Commack Partnership included in the Registration Statement, or
(C) at a specified date not more than five days prior to the
effective date of the Registration Statement, there has been
any change in the capital stock or long-term debt of the
Company and the Subsidiary, or any decrease in the
stockholders' equity or net current assets or net assets of
the Company as compared with amounts shown in the balance
sheet included in the Registration Statement, other than as
set forth in or contemplated by the Registration Statement,
or, if there was any change or decrease, setting forth the
amount of such change or decrease, and (D) during the period
from September 30, 1996 to a specified date not more than five
days prior to the effective date of the Registration
Statement, there was any increase or decrease in net revenues,
net earnings or increase in net earnings per common share of
the Company and the Subsidiary, in each case as compared with
the corresponding period in the preceding year other than as
set forth in or contemplated by the Registration Statement,
or, if there was any such decrease or increase, setting forth
the amount of such decrease or increase;
31
iv) setting forth at a date not later than five days prior to the
date of the Registration Statement, the amount of liabilities
of the Company and the Subsidiary (including a break-down of
commercial paper and notes payable to banks);
v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the
Company, the Subsidiary and the Commack Partnership 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, the Subsidiary and the Commack
Partnership 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, found
them to be in agreement;
vi) stating that they have not during the immediately preceding
five-year period brought to the attention of any of the
Company's or the Subsidiary's management any "weakness," as
defined in Statement of Auditing Standard No. 60
"Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's or the
Subsidiary's internal controls;
vii) stating that they have in addition carried out certain
specified procedures, not constituting an audit, with respect
to certain pro forma financial information which is included
in the Registration Statement and the Prospectus and that
nothing has come to their attention as a result of such
procedures that caused them to believe such unaudited pro
forma financial information does not comply in form in all
respects with the applicable accounting requirements of Item
301 of Regulation S-B or that the pro forma adjustments have
not been properly applied to the historical amounts in the
compilation of that information; and
viii) statements as to such other matters incident to the
transaction contemplated hereby as the Representative may
request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Xxxxxx, Xxxxxx & Xxxxxxx, L.L.P. a letter,
dated as of the Closing Date or such Option Closing Date, as the case may be, to
the effect that they reaffirm that the statements made in the letter furnished
pursuant to subsection (j) of this Section, except that the specified date
referred to therein as of which the examination made by them as described
therein shall have been made shall be a date not more that five days prior to
Closing Date or such Option Closing Date, as the case may be, and if the Company
has elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (v) of
subsection (j) of this Section with respect to certain amounts, percentages and
financial information as specified by the
32
Representative and deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and financial information
to be in agreement with the records specified in such clause (v).
(l) On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Representative for its account and
the several Underwriters' accounts, certificates representing the appropriate
numbers and types of Representative's Securities and Securities, as the case may
be, against payment therefor as provided herein.
(m) No order suspending the sale of the Securities or the
Representative's Securities in any jurisdiction designated by the Representative
pursuant to subsection (e) of Section 4 hereof shall have been issued on either
the Closing Date or the Option Closing Date, if any, and no proceedings for that
purpose shall have been instituted or shall be contemplated.
(n) On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement, in
the form attached hereto as Exhibit A, and (ii) the Representative's Warrants,
in such denominations and to such designees (who must be officers of the
Representative) as shall have been requested by the Representative.
(o) On or before Closing Date, the Common Stock shall have been duly
approved for quotation on the Nasdaq SmallCap Market, subject to official notice
of issuance.
(p) On or before Closing Date, there shall have been delivered to the
Representative all of the Lock-Up Agreements, in form and substance satisfactory
to Underwriters' Counsel.
If any representation or warranty of the Company herein shall not be
true and correct, or if any other material condition to the Underwriters'
obligations hereunder to be fulfilled prior to or at the Closing Date or the
relevant Option Closing Date, as the case may be, is not so fulfilled, the
Representative may terminate this Agreement or, if the Representative so elects,
it may waive any such conditions that have not been fulfilled or extend the time
for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7, "Underwriter" shall include the
officers, directors, stockholders, partners, employees, agents, and counsel of
each Underwriter, including specifically each person who may be substituted for
an Underwriter as provided in Section 11 hereof), and each person, if any, who
controls such Underwriter (each, a "controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any
and all losses, claims, damages, expenses, or liabilities, joint or several (and
actions, proceedings, investigations and inquiries in respect thereof),
whatsoever (including but not limited to any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation
commenced or threatened, or any claim whatsoever) (collectively, "Losses"), as
such are incurred, to which the Underwriter or such
33
controlling person may become subject under the Act, the Exchange Act, or any
other statute or at common law or otherwise or under the laws of foreign
countries, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in any Preliminary Prospectus, the
Registration Statement, or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement or prospectus in which is included securities of the
Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this Section
collectively called "application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, or the Nasdaq Stock Market, or any other
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
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
exclusively in 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.
The indemnity agreement in this subsection (a) shall be in addition to
any liability that 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 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, in reliance upon, and in strict conformity with,
written information furnished to the Company with respect to any Underwriter by
such Underwriter expressly for use in such Preliminary Prospectus, the
Registration Statement, or Prospectus or any amendment thereof or supplement
thereto or in any such application, provided that such written information or
omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement, or Prospectus directly relating to the transactions
effected by the Underwriters in connection with this offering. The Company
acknowledges that the statements with respect to the public offering of the
Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus or the Registration
Statement.
The indemnity agreement in this subsection (b) shall be in addition to
any liability that the several Underwriters may have at common law or otherwise.
34
(c) Promptly after receipt by an indemnified party under this Section
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, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section, except to the extent that it has
been prejudiced in any material respect by such failure or from any liability
that it may have otherwise). 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 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 period of time after notice of commencement of the
action, (iii) such indemnified party or parties shall have reasonably concluded
that there may be defenses available to it or them that 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) or (iv)
counsel to the indemnifying parties shall have concluded that a conflict exists
between the indemnified party or parties and the indemnifying parties, in any of
which events such fees and expenses of additional counsel shall be borne by the
indemnifying parties. Anything in this Section to the contrary notwithstanding,
an indemnifying party shall not be liable for any settlement of any claim or
action effected without its written consent unless such consent was unreasonably
withheld or delayed.
(d) In order to provide for just and equitable contribution in any case
in which (i) an indemnified party makes a claim for indemnification pursuant to
this Section, 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 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 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, as well as any other relevant equitable
considerations. In any case where the Company
35
is a contributing party and the Underwriters are the indemnified parties, 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 Securities (before deducting expenses) bear to
the total underwriting discounts received by the Underwriters hereunder, in each
case as set forth in the table on the cover page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
Losses (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 Securities purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section, 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 that any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Company submitted
pursuant hereto, shall be deemed to be representations, warranties and
agreements at the Closing Date and the applicable Option Closing Date, as the
case may be, and such representations, warranties and agreements of the Company
and the respective indemnity agreements contained in Section 7 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Underwriter, the Company, or any controlling person
of any Underwriter or the Company, and shall survive termination of this
Agreement and the issuance and delivery of the Securities to the Underwriters
and the Representative's Securities to the Representative, as the case may be.
36
9. Effective Date.
This Agreement shall become effective at 10:00 a.m., New York City
time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for the sale to
the public; provided, however, that the provisions of Sections 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this Section,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such Securities for offering or the release by the
Representative for publication of the first newspaper advertisement that is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section, the Representative shall
have the right to terminate this Agreement by providing written notice thereof
to the Company at any time prior to the delivery of any payment for the
Securities if prior to such time any of the following occurs: (i) any domestic
or international event or act or occurrence has disrupted, or in the
Representative's 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) 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 governmental or regulatory
authority having jurisdiction; or (iv) the United States shall have become
involved in a war or major hostilities, or 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) a banking moratorium shall have been
declared by a state or federal governmental or regulatory authority; or (vi) a
moratorium in foreign exchange trading shall have been declared; or (vii) 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 Securities; or (viii) there shall have been a Material Adverse
Effect, 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 Securities; or (ix) if _____________ no
longer serves the Company in his/her present capacity.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a), the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(b) above). Notwithstanding any
contrary provision contained in this Agreement, if this Agreement shall not be
carried out within the time specified herein, or any extension thereof granted
to the Representative,
37
by reason of any failure on the part of the Company to perform any undertaking
or satisfy any condition of this Agreement by it to be performed or satisfied
(including, without limitation, pursuant to Section 6 or Section 12 hereof) then
the Company shall promptly reimburse and indemnify the Representative for all of
its actual out-of-pocket expenses, including the fees and disbursements of
counsel for the Underwriters (less amounts previously paid pursuant to Section
5(b) above). In addition, the Company shall remain liable for all Blue Sky
counsel fees and expenses and Blue Sky filing fees. Notwithstanding any contrary
provision contained in this Agreement, any election hereunder or any termination
of this Agreement and whether or not this Agreement is otherwise carried out,
the provisions of Section 5 and Section 7 shall not be in any way affected by
such election or termination or failure to carry out the terms of this Agreement
or any part hereof.
11. Substitution of the Underwriters.
If one or more of the Underwriters shall fail (otherwise than for a
reason sufficient to justify the termination of this Agreement under the
provisions of Section 6, Section 10 or Section 12 hereof) to purchase the
Securities which it or they are obligated to purchase on such date under this
Agreement (the "Defaulted Securities"), the Representative shall have the right,
within 24 hours thereafter, to make arrangements 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:
(a) If the anticipated net proceeds to the Company from the
Defaulted Securities does not exceed 10% of the total anticipated net
proceeds to the Company from the Firm Securities to be purchased on
such date, the non-defaulting Underwriters shall be obligated to
purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the anticipated net proceeds to the Company from the
Defaulted Securities exceeds 10% of the total anticipated net proceeds
to the Company from the Firm Securities to be purchased on such date,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriters or the Company.
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 that 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.
38
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 respective numbers and types of
Securities that it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Representative to the
Company, terminate the Underwriters' obligation to purchase Option Securities
from the Company on such date) without any liability on the part of any
non-defaulting party other than pursuant to Sections 5, 7 and 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 by certified or registered mail, return receipt requested, sent
via an established, reputable overnight courier service, or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to the Representative at 000 Xxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxx,
Xxx Xxxx 00000, Attn: ____________ with a copy to Xxxxx Xxxx Xxxxx Constant
Xxxxxxxx & Bilzin, 000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx
00000, Attn: Xxxxxx X. Xxxxxxx, Esq. Notices to the Company shall be directed to
U.S. Golf and Entertainment Inc., 0 Xxxxx Xxxxxx, Xxxxxxx, Xxx Xxxx 00000, Attn:
Xxxxxx X. Xxxx, Chairman, with a copy to Ruskin Moscou Xxxxx & Faltischek, P.C.,
000 Xxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxx 00000, Attn: 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 6 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
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 its
choice of law or conflict of laws principles.
39
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, including without limitation a letter of intent dated
___________________. This Agreement may not be amended except in a writing
signed by the Representative and the Company.
18. Severability.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement. The parties agree, however, that in the event any
provision of this Agreement shall be declared invalid or unenforceable, the
parties shall negotiate a new provision achieving to the extent possible the
purpose of the invalid provision.
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
the Company and each of the several Underwriters.
Very truly yours,
U.S. GOLF AND ENTERTAINMENT INC.
By__________________________________
Name:
Title:
Confirmed and accepted as
of the date first above
written:
FIRST UNITED EQUITIES CORPORATION
For itself and as Representative
of the several Underwriters listed
in the attached Schedule A
By_______________________________
Name:
Title:
40
SCHEDULE A
Number of Firm
Securities to
Name of Underwriter Be Purchased
TOTAL
41
