EXHIBIT 1.1
[Form of Underwriting Agreement - Subject to Additional Review]
______________ SHARES OF COMMON STOCK
GENESIS MEDIA GROUP, INC.
UNDERWRITING AGREEMENT
New York, New York
_______________, 1998
MILLENNIUM FINANCIAL GROUP, INC.
As Representative of the
Several Underwriters listed on Schedule A hereto
000 Xxxx 00xx Xxxxxx, Xxxxx 00X
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Genesis Media Group, Inc., a Delaware corporation (the "Company"), confirms
its agreement with Millennium Financial Group, Inc. ("Millennium"), and each of
the underwriters named in Schedule A hereto (collectively, the "Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 11), for Millennium is acting as representative (in such
capacity, Millennium shall hereinafter sometimes 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 of the Company's common stock, $0.001 par value per share ("Common
Stock") set forth in Schedule A hereto. The aggregate 2,000,000 shares of Common
Stock are hereinafter referred to as the "Firm Securities."
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and not
jointly, up to an additional 300,000 Shares of Common Stock for the purpose of
covering over-allotments, if any. Such 300,000 Shares of Common Stock are
hereinafter referred to as the "Option Securities." The Company also proposes to
issue and sell to the Representative warrants (the "Representatives' Warrants")
pursuant to the Representatives' Warrant Agreement (the "Representatives'
Warrant Agreement") for the purchase of an additional 200,000 Shares of Common
Stock.
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The Shares of Common Stock issuable upon exercise of the Representatives'
Warrants are hereinafter referred to as the "Representatives' Securities." The
Firm Securities, the Option Securities, the Representatives' Warrants and the
Representatives' Securities (collectively, hereinafter referred to as the
"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 (as hereinafter defined) 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-______), including any related
preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Firm Securities, the Option Securities and the Representatives'
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 "Regulations") of the Commission under the Act. The Company
will promptly file a further amendment to said registration statement in the
form heretofore delivered to the Underwriters and will not file any other
amendment thereto to which the Underwriters shall have objected in writing after
having been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein (including, but not limited to 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 Regulations), is hereinafter called the "Registration Statement",
and the form of prospectus in the form first filed with the Commission pursuant
to Rule 424(b) of the Regulations, is hereinafter called the "Prospectus." For
purposes hereof, "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 Preliminary Prospectus, the
Registration Statement or Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
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or threatened. Each of the Preliminary Prospectus, the Registration Statement
and 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 Registration Statement or Prospectus at the time of filing thereof contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration Statement or
Prospectus 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 (as defined herein) and each Option
Closing Date (as defined herein), if any, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, the Registration Statement and the Prospectus will
contain all statements which 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 in writing by or on behalf of any Underwriter expressly for use
in the Preliminary Prospectus, Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
(d) The Company and each of its subsidiaries has been duly organized and
is validly existing as a corporation in good standing under the laws of the
state of its incorporation. Except as set forth in the Prospectus, each of the
Company and each subsidiary of the Company does not own an interest in any
corporation, partnership, trust, joint venture or other business entity. Each of
the Company and each subsidiary of the Company 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. Each of the Company and each
subsidiary of the Company has all requisite power and authority (corporate and
other), and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including,
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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 each subsidiary of the Company is and
has been doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all applicable
federal, state, local and foreign laws, rules and regulations; and each of the
Company and each subsidiary of the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of each of the Company and each
subsidiary of the Company. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on each of the Company and each subsidiary of the Company's business
as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading in light of
the circumstances under which they were made.
(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. Each of the Company and each subsidiary of the
Company is not a party to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement, the Representatives'
Warrant Agreement and as described in the Prospectus. The Securities and all
other securities issued or issuable by the Company conform or, when issued and
paid for, will conform, in all 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 each subsidiary of the Company
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 were issued in violation of the preemptive
rights of any holders of any security of each of the Company and each subsidiary
of the Company or similar contractual rights granted by each of the Company and
each subsidiary of the Company. All of the issued and outstanding shares of
capital stock of Genesis Intermedia and each other subsidiary of the Company (if
any) are owned by the Company free and clear of any security interest, mortgage,
pledge, lien, encumbrance or claim; and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights
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to convert any obligations into shares of capital stock or ownership interests
in Genesis Intermedia and each other subsidiary of the Company (if any) are
outstanding. The Securities are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and 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 has been
duly and validly taken; and the certificates representing the Securities will be
in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Securities to be sold by the Company hereunder, the Underwriters
or the Representatives, as the case may be, will acquire good and marketable
title to such Securities free and clear of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or equity of any kind
whatsoever.
(f) The financial statements of the Company, together with the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved and such
financial statements as are audited have been examined by Singer, Lewak,
Xxxxxxxxx & Xxxxxxxxx L.L.P., who are independent certified public accountants
within the meaning of the Act and the Rules and Regulations, as indicated in
their reports filed therewith. There has been no adverse change or development
involving a prospective adverse change in the condition, financial or otherwise,
or in the earnings, position, prospects, value, operation, properties, business,
or results of operations of the Company, whether or not arising in the ordinary
course of business, since the date of the financial statements included in the
Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company, conform
in all material respects to the descriptions thereof contained in the
Registration Statement and the Prospectus. Financial information (including,
without limitation, any pro forma 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," fairly present, on the basis stated in the
Prospectus, the information set forth therein, and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus; and, in the case of pro forma financial information,
if any, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are
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appropriate to give effect to the transactions and circumstances referred to
therein. The amounts shown as accrued for current and deferred income and other
taxes in such financial statements are sufficient for the payment of all accrued
and unpaid federal, state, local and foreign income taxes, interest, penalties,
assessments or deficiencies applicable to each of the Company and each
subsidiary of the Company, whether disputed or not, for the applicable period
then ended and periods prior thereto; adequate allowance for doubtful accounts
has been provided for unindemnified losses due to the operations of each of the
Company and each subsidiary of the Company; and the statements of income do not
contain any items of special or nonrecurring income not earned in the ordinary
course of business, except as specified in the notes thereto.
(g) Each of the Company and each subsidiary of the Company (i) has paid
all federal, state, local, and foreign taxes for which it is liable, including,
but not limited to, withholding taxes and amounts payable under Chapters 21
through 24 of the Internal Revenue Code of 1986, as amended (the "Code"), or has
established adequate reserves for such taxes, (ii) has furnished all information
returns it is required to furnish pursuant to the Code, (iii) has established
adequate reserves for such taxes which are not due and payable, and (iv) does
not have any tax deficiency or claims outstanding, proposed or assessed against
it, other than as described in the Registration Statement.
(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, (ii) the purchase by the Underwriters of the Firm Securities
and the Option Securities from the Company and the purchase by the
Representatives of the Representatives' Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement, or
(iv) resales of the Firm Securities and the Option Securities in connection with
the distribution contemplated hereby.
(i) Each of the Company and each subsidiary of the Company maintains
insurance policies, including, but not limited to, general liability,
malpractice and property insurance, which insures each of the Company, each
subsidiary of the Company and their respective employees, against such losses
and risks generally insured against by comparable businesses. Each of the
Company and each subsidiary of the Company (A) has not failed to give notice or
present any insurance claim with respect to any matter, including but not
limited to each of the Company and each subsidiary of the Company's business,
property or employees, under any insurance policy or surety bond in a due and
timely manner, (B) does not have any disputes or claims against any underwriter
of such insurance policies or surety bonds or has failed to pay any premiums due
and payable thereunder, or (C) has failed to comply with all conditions
contained in such
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insurance policies and surety bonds. There are no facts or circumstances under
any such insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of each of the Company and each
subsidiary of the Company.
(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 threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, each of the
Company and each subsidiary of the Company which (i) questions the validity of
the capital stock of each of the Company and each subsidiary of the Company,
this Agreement, or the Representatives' Warrant Agreement, or of any action
taken or to be taken by each of the Company and each subsidiary of the Company
pursuant to or in connection with this Agreement or the Representatives' Warrant
Agreement, (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects), or (iii) might
materially and adversely affect the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of each of the Company and each
subsidiary of the Company.
(k) The Company has full legal right, power and authority to authorize,
issue, deliver and sell the Securities, enter into this Agreement and the
Representatives' Warrant Agreement and to consummate the transactions provided
for in this Agreement and the Representatives' Warrant Agreement; and this
Agreement and the Representatives' Warrant Agreement have each been duly and
properly authorized, executed and delivered by the Company. Each of this
Agreement and the Representatives' Warrant Agreement constitutes a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, and neither of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Representatives'
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, nor 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 result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of each of the Company and
each subsidiary of the Company pursuant to the terms of (i) the certificate of
incorporation or by-laws of each of the Company and each subsidiary of the
Company, (ii) any license, contract, collective bargaining agreement,
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indenture, mortgage, deed of trust, lease, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or instrument
to which each of the Company and each subsidiary of the Company is a party or by
which each of the Company and each subsidiary of the Company is or may be bound
or to which its 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 each of the Company and each subsidiary of the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over each of the Company and each subsidiary of the Company or any
of its activities or properties.
(l) No consent, approval, authorization or order of, and no filing with,
any court, regulatory body, governmental agency or other body, domestic or
foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the performance of this Agreement and
the Representatives' Warrant Agreement and the transactions contemplated hereby
and thereby, including without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the issue and/or
sale of any of the Securities, except such as have been or may be obtained under
the Act or may be required under state securities or Blue Sky laws in connection
with the Underwriters' purchase and distribution of the Firm Securities and the
Option Securities, and the Representatives' Warrants to be sold by the Company
hereunder.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which each of the Company and each subsidiary of the
Company is a party or by which it or they may be bound or to which its or their
respective assets, properties or business may be subject have been duly and
validly authorized, executed and delivered by each of the Company and each
subsidiary of the Company and constitute the legal, valid and binding agreements
of each of the Company and each subsidiary of the Company, as the case may be,
enforceable against it in accordance with its 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 or other documents which are required by
the Act to be described in the Registration Statement or filed as exhibits to
the Registration Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
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(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 herein or therein, each of the Company and each
subsidiary of the Company has not (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, or (iii)
declared or paid any dividend or made any other distribution on or in respect of
its capital stock of any class, and there has not been any change in the capital
stock, or any change in the debt (long or short term) or liabilities or material
adverse change in or affecting the general affairs, management, financial
operations, stockholders' equity or results of operations of each of the Company
and each subsidiary of the Company.
(o) No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, collective bargaining agreement,
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 agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which each of the Company and each subsidiary of the Company is a
party or by which each of the Company and each subsidiary of the Company may be
bound or to which the property or assets (tangible or intangible) of each of the
Company and each subsidiary of the Company is subject or affected.
(p) Each of the Company and each subsidiary of the Company has generally
enjoyed a satisfactory employer-employee relationship with its employees and is
in 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
each of the Company and each subsidiary of 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 each of the Company and each subsidiary of
the Company pending before the National Labor Relations Board or any lockout,
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving each of the Company and each subsidiary of the Company, or
any predecessor entity, and none has ever occurred. No representation question
exists respecting the employees of each of the Company and each subsidiary of
the Company, and no collective bargaining agreement or modification thereof is
currently being negotiated by each of the Company and each subsidiary of the
Company. No grievance or arbitration proceeding is pending under any expired or
existing collective bargaining agreements of each of the Company and each
subsidiary of the
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Company. No labor dispute with the employees of each of the Company and each
subsidiary of the Company exists, or, is imminent.
(q) Neither the Company nor any subsidiary of the Company maintains,
sponsors or contributes to any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan," or a "multi employer
plan" as such terms are defined in Sections 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 any subsidiary of the Company maintains
or contributes, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject each of
the Company and each subsidiary of the Company to any tax penalty on prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is in
compliance with all reporting, disclosure and other requirements of the Code and
ERISA as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. Each of the Company and each
subsidiary of the Company has never completely or partially withdrawn from a
"multi employer plan."
(r) Neither the Company, nor any subsidiary of the Company, nor any of
their respective employees, directors, stockholders, partners, or affiliates
(within the meaning of the Rules and Regulations) of any of the foregoing has
taken or will take, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the Exchange
Act, or otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or held or
contemplated to be owned or held by each of the Company and each subsidiary of
the Company, are in dispute so far as known by each of the Company and each
subsidiary of the Company or are in any conflict with the right of any other
person or entity. Each of the Company and each subsidiary of the Company (i)
owns or has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other restrictions or
equities of any kind whatsoever, all patents, trademarks, service marks, trade
names and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed to
be conducted without infringing upon or otherwise
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acting adversely to the right or claimed right of any person, corporation or
other entity under or with respect to any of the foregoing and (ii) 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 patent, trademark, service xxxx, trade name, copyright, know-how, technology
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
(t) Each of the Company and each subsidiary of the Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus to be owned or leased by it,
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus and liens for taxes not yet due
and payable.
(u) Singer, Lewak, Xxxxxxxxx & Xxxxxxxxx, 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.
(v) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which each of the Company's officers,
directors and all holders of the Common Stock of the Company or securities
exchangeable or exercisable for or convertible into shares of Common Stock, has
agreed not to, directly or indirectly, issue, offer, offer to sell, sell, grant
any option for the sale or purchase 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 for a period of not less than twelve (12) months following the
effective date of the Registration Statement without the prior written consent
of Millennium. During the twelve (12) month period commencing on the effective
date of the Registration Statement, the Company shall not, without the prior
written consent of Millennium, 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 options, rights or warrants with respect to any
shares of Common Stock. The Company will cause the Transfer Agent (as
hereinafter defined) to xxxx an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers.
(w) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other
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arrangements, agreements, understandings, payments or issuance with
respect to the Company, or any of its officers, directors, stockholders,
partners, employees or affiliates, that may affect the Underwriters'
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(x) The Common Stock has been approved for quotation on the National
Market System of the National Association of Securities Dealers, Inc.
("Nasdaq/NMS").
(y) None of the Company nor any subsidiary of the Company, nor any of
their respective officers, employees, agents nor any other person acting on
behalf of the Company nor any subsidiary of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency (domestic or foreign) or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of each of the Company and any
subsidiary of the Company (or assist each of the Company and any subsidiary of
the Company in connection with any actual or proposed transaction) which (a)
might subject each of the Company and any subsidiary of the Company, 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, might have had a material adverse effect on the assets, business or
operations of each of the Company and any subsidiary of the Company, or (c) if
not continued in the future, might adversely affect the assets, business,
condition, financial or otherwise, earnings, position, properties, value,
operations or prospects of each of the Company and any subsidiary of the
Company. Each of the Company and each subsidiary of the Company's internal
accounting controls are sufficient to cause each of the Company and each
subsidiary of the Company to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(z) Except as set forth in the Prospectus, no officer, director,
stockholder or partner of each of the Company and each subsidiary of the
Company, or 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 which (A) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by each of the Company
and each subsidiary of the Company, or (B) purchases from or sells or furnishes
to each of the Company and each subsidiary of the Company any goods or services,
or (ii) a beneficiary interest in any contract or agreement to which each of the
Company and/or each subsidiary of the Company is a party or by which it may be
bound or affected. Except as set
12
forth in the Prospectus under "Certain Transactions," there are no existing
agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among each
of the Company and/or each subsidiary of the Company, and any officer, director,
or 5% or greater security holder of the Company, or any partner, affiliate or
associate of any of the foregoing persons or entities.
(aa) Any certificate signed by any officer of the Company or of any
subsidiary of the Company, 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.
(ab) The minute books of each of the Company and each subsidiary of the
Company have been made available to the Underwriters and contain a complete
summary of all meetings and actions of the directors (including committees
thereof) and stockholders of each of the Company and each subsidiary of the
Company, since the time of its incorporation, and reflect all transactions
referred to in such minutes accurately in all material respects.
(ac) Except and to the extent described in the Prospectus, no holders of
any securities of each of the Company and each subsidiary of the Company or of
any options, warrants or other convertible or exchangeable securities of each of
the Company and each subsidiary of the Company have the right to include any
securities issued by each of the Company and each subsidiary of the Company in
the Registration Statement or any registration statement to be filed by the
Company or to require each of the Company and each subsidiary of the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of each of the Company and
each subsidiary of the Company.
(ad) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with Ramy El-Batrawi in the
form filed as Exhibit ____ to the Registration Statement and (ii) purchased term
key person insurance on the life of Ramy El-Batrawi in the amount of four (4)
million dollars which policy names the Company as the sole beneficiary thereof
except to the extent of $900,000 for which the beneficiary is the holder of the
deed of trust on the company headquarters and who is unaffiliated with the
Company.
(ae) The Company is not, and upon the issuance and sale of the
Securities as herein contemplated and the application of the net proceeds
therefrom as described in the Prospectus under the caption "Use of Proceeds"
will not be, an "investment company" or an entity "controlled" by an "investment
13
company" as such terms are defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
(af) Each of the Company and each subsidiary of the Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparations of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorizations; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(ag) The Company has entered into the Asset Purchase Agreement with
Vision Digital Communications, Inc., ____ and ____ (the "Asset Purchase
Agreement"), set forth as Exhibit ____ to the Registration Statement, pursuant
to which the Company will acquire in a separate Acquisition substantially all of
the assets of Vision Digital Communications, Inc. ("Vision"). The Asset Purchase
Agreement is in full force and effect, has been duly and validly authorized,
executed and delivered by the parties thereto, and is valid and binding on the
parties thereto in accordance with its terms and none of the parties thereto is
in default in any respect thereunder. A complete and correct copy of the Asset
Purchase Agreement (including exhibits and schedules) has been delivered to the
Representatives and no changes therein will be made subsequent hereto and prior
to the Closing Date.
(ah) The representations and warranties made in the Asset Purchase
Agreement by the Company and Vision and/or _________________ are true and
correct in all material respects, except for such changes permitted or
contemplated by such Asset Purchase Agreement.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$_______ [92% of the public offering price] per share of Common Stock, that
number of Firm Securities set forth in Schedule A opposite the name of such
Underwriter, subject to such adjustment as the Representatives in their
discretion shall make to eliminate any sales or purchases of fractional shares,
plus any additional number of Firm Securities which such Underwriter may become
14
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
andconditions 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 300,000 Shares of Common Stock at a price of $______ [92% of the
public offering price] per share of Common Stock. The option granted hereby will
expire forty-five (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 which 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 number 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 three (3) 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 delivery of certificates for,
the Firm Securities shall be made at the offices of Millennium at 000 Xxxx 00xx
Xxxxxx, Xxxxx 00X, Xxx 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 __________, 1998 or at such
other time and date as shall be agreed upon by the Representative and the
Company, but not less than three (3) nor more than five (5) full business days
after the effective date of the Registration Statement (such time and date of
payment and delivery being herein called the "Closing Date"). In addition, in
the event that any or all of the Option 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
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
15
Securities, if any, to the order of the Company for the Firm Securities and the
Option Securities, if any, by New York Clearing House funds. In the event such
option is exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Securities then
being purchased which 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 sole and absolute 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 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 Representatives' Warrants at a purchase price of $100, which
Representatives' Warrants shall entitle the holders thereof to purchase an
aggregate of 200,000 shares of Common Stock. The Representatives' Warrants shall
be exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at a price equaling one hundred
twenty percent (120%) of the initial public offering price of the shares of
Common Stock. The Representatives' Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit [___] to the
Registration Statement. Payment for the Representatives' Warrants shall be made
on the Closing Date.
3. Public Offering of the Shares of Common Stock. As soon after the
Registration Statement becomes effective as the Representative deems advisable,
the Underwriters shall make a public offering of the shares of Common Stock
(other than to residents of or in any jurisdiction in which qualification of the
shares of Common Stock is required and has not become effective) at the price
and upon the other terms set forth in the Prospectus. The Representative may
from time to time increase or decrease the public offering price after
distribution of the shares of Common Stock has been completed to such extent as
the Representative, in its sole and absolute discretion deems advisable. The
Underwriters may enter into one or more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company. The Company
16
covenants and agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the shares of Common Stock by the
Underwriters of which the Representative shall not previously have been advised
and furnished with a copy, or to which the Representative shall have objected or
which is not in compliance with the Act, the Exchange Act or the Rules and
Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the notice in writing (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective; (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose; (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose; (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every effort to
obtain promptly the lifting of such order.
(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
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Representative notice of its intention
17
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representatives with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative or Xxxxxxx, Mesereau & Leids ("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 for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(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 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 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 will notify the Representatives promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act,
18
each such amendment or supplement to be satisfactory to Underwriters' Counsel,
and the Company will furnish to the Underwriters copies of such amendment or
supplement as soon as available and in such quantities as the Underwriters may
request.
(g) As soon as practicable, but in any event not later than forty-five
(45) days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (ninety (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 Representatives, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations, which statement need not be audited unless required by
the Act, covering a period of at least twelve (12) consecutive months after the
effective date of the Registration Statement.
(h) During a period of seven (7) years after the date hereof, the
Company will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
i. concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in
the form furnished to the Company's stockholders 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 as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the 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;
19
v. every press release and every material news item or article of
interest to the financial community in respect of the Company, or its
affairs, which was released or prepared by or on behalf of the Company;
and
vi. any additional information of a public nature concerning the
Company (and any future subsidiary) or its businesses which the
Representative may reasonably request.
During such seven-year period, if the Company has an active subsidiary,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiary(ies) are consolidated, and
will be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent ("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.
(j) The Company will furnish 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 (two of which copies will
be signed and will 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 Representatives may request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Representative with true original copies of duly
executed, legally binding and enforceable agreements pursuant to which, for a
period of twelve (12) months from the effective date of the Registration
Statement, each of the Company's officers, directors and all holders of the
Common Stock of the Company or securities exchangeable or exercisable for or
convertible into shares of Common Stock agrees that it or he or she will not,
directly or indirectly, issue, offer to sell, sell, grant an option for the sale
or purchase 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
20
of any beneficial interest therein without the prior consent of Millennium
(collectively, the "Lock-up Agreements"). During the twelve (12) month period
commencing on the effective date of the Registration Statement, the Company
shall not, without the prior written consent of the Millennium, 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 options,
rights or warrants with respect to any shares of Common Stock. 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. The Company further covenants that it
will not file a registration statement with the Commission during the twelve
(12) month period commencing on the effective date of the Registration Statement
without the prior written consent of Millennium.
(l) None of each of the Company or any subsidiary of the Company, nor
any of their respective officers, directors, stockholders, nor any of their
affiliates (within the meaning of the Rules and Regulations) will take, directly
or indirectly, any action designed to, or which might in the future reasonably
be expected to cause or result in, stabilization or manipulation of the price of
any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
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.
(n) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, a Form SR as may be
required pursuant to Rule 463 under the Act) from time to time, under the Act,
the Exchange Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and Regulations.
(o) The Company shall furnish to the Representative as early as
practicable prior to each of the dates hereof, the Closing Date and each Option
Closing Date, if any, but no later than two (2) 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 thirty (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(n) and 6(o) hereof.
21
(p) The Company shall cause the Common Stock to be listed on Nasdaq/NMS
and, for a period of seven (7) years from the date hereof, use its best efforts
to maintain the Nasdaq/NMS listing of the Common Stock to the extent
outstanding.
(q) For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Representative's reasonable request
and the Company's sole expense, (i) daily consolidated transfer sheets relating
to the Common Stock (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.
(r) As soon as practicable, (i) but in no event more than five (5)
business days before the effective date of the Registration Statement, file a
Form 8-A with the Commission providing for the registration under the Exchange
Act of the Securities and (ii) but in no event more than thirty (30) days after
the effective date of the Registration Statement, take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions and Xxxxx'x OTC Manual and to continue such inclusion for a period
of not less than seven (7) years.
(s) The Company hereby agrees that, except as set forth above in Section
4(k) and the 800,000 shares reserved for future issuance under the Company's
1998 Stock Option Plan ("Stock Option Plan"), it will not, for a period of
twelve (12) 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 similar 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 Common Stock 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 such 800,000 shares reserved for future issuance under the
Company's Stock Option Plan; (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. Furthermore, the Company agrees
that for a period of twelve (12) months from the effective date of the
Registration Statement, the Company will not amend any material employment
agreement or option agreement or other agreement providing compensation to any
officer, director or other principal stockholder, without the prior written
consent of Millennium.
22
(t) 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.
(u) For a period equal to the lesser of (i) seven (7) years from the
date hereof, and (ii) the sale to the public of the Representative's Securities,
each of the Company and each subsidiary of the Company will not take any action
or actions which may prevent or disqualify the Company's use of Form S-1 (or
other appropriate form) for the registration under the Act of the
Representative's Securities.
(v) For a period of five (5) years after the effective date of the
Registration Statement, the Company agrees to use its best efforts to cause the
appointment or election, as the case may be, of a person designated by
Millennium to the Board of Directors of the Company ("the Board"). In addition,
the Company agrees that, to the extent no designee of Millennium is then a
member of the Board, Millennium shall have the right to designate one (1) person
to attend all meetings of the Board. The Company shall send to such person all
notices and other correspondence and communications sent by the Company to
members of the Board. Such designee(s) of Millennium shall be reimbursed for all
out-of-pocket expenses incurred in connection with their attendance of meetings
of the Board.
(w) Each of the Company, Vision Digital and ______________ will: (i) use
its/his best efforts to satisfy all conditions to consummation of the Vision
Digital Acquisition as set forth in the Asset Purchase Agreement with respect
thereto; (ii) use its/his best efforts to cause each other party to such Asset
Purchase Agreement to satisfy all conditions to the consummation of the Vision
Digital Acquisition; and (iii) promptly notify the Representative of the
occurrence of any event which may result in the non-consummation of the Vision
Digital Acquisition on the First Closing Date.
(x) The Company covenants that it will consummate the Acquisition
Transaction at the Closing Date upon notice that the Firm Securities have been
paid for and delivered in accordance with the terms set forth in Section 2 of
this Agreement.
(y) The Company grants to the Representative a five (5) year right of
first refusal (a) to underwrite or place any public or private sale of equity or
debt securities of the Company, or any subsidiary or successor of the Company,
offered for sale by the Company or any of its subsidiaries, successors or
stockholders and
23
(b) to purchase for the Representative's account or to sell for the account of
the Company's officers, directors and 10% or greater stockholders any securities
owned by such persons that such persons desire to sell, whether privately,
pursuant to a registered offering, pursuant to Rule 144 promulgated pursuant to
the Act or otherwise. Such right must be exercised by the Representative within
ten (10) business days after it receives written notice from the Company or such
persons, as applicable, of a proposed sale, which notice shall specify the terms
of such proposed sale in reasonable detail. If the Representative declines to
exercise the right granted hereunder but subsequent thereto the terms of such
proposed sale change, the Company or such persons, as applicable, shall again
provide written notice to the Representative of the new terms and the
Representative shall again have ten (10) business days after it receives such
written notice to exercise the right granted herein.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on the Closing Date, and each
Option Closing Date, if any, all expenses and fees (other than fees of
Underwriters' Counsel, except as provided in (iv) below) incident to the
performance of the obligations of the Company under this Agreement, the
Representatives' Warrant Agreement and the Asset Purchase 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 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 Representative's
Warrant 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 Firm Securities and the
Option Securities and the purchase by the Representative of the Representatives'
Warrants from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement and the Representatives' Warrant Agreement, and
(z) resale of the Firm Securities and the Option Securities by the Underwriters
in connection with the distribution contemplated hereby, (iv) the qualification
of the 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
24
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and "tombstone" advertisement expenses, (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel, expert or consultant retained, (vii) fees and
expenses of the Transfer Agent and registrar and all issue and transfer taxes,
if any, (viii) applications for assignment of a rating of the Securities by
qualified rating agencies, (ix) the fees payable to the Commission and the NASD,
and (x) the fees and expenses incurred in connection with the quotation of the
Securities on the Nasdaq/NMS and any other exchange.
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 6 (except Sections 6(c), 6(j) and 6(n)) or
Section 12, the Company shall reimburse and indemnify the Underwriters for all
of their actual out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters and all Blue Sky counsel fees
(excluding filing fees) and disbursements (less amounts previously paid pursuant
to Section 5(c) hereof).
(c) he Company further agrees that, in addition to the expenses payable
pursuant to subSection (a) of this Section 5, it will pay to the Representative
on the Closing Date by certified or bank cashier's check or, at the election of
the Representative, by deduction from the proceeds of the offering of the Firm
Securities, a non-accountable expense allowance equal to 3% of the gross
proceeds received by the Company from the sale of the Firm Securities, $35,000
of which has been paid to date. In the event the Representative elects to
exercise the over allotment option described in Section 2(b) hereof, the Company
further agrees to pay to the Representative on each Option Closing Date, by
certified or bank cashier's check, or at the Representative's election, by
deduction from the proceeds of the Option Securities purchased on such Option
Closing Date, a non-accountable expense allowance equal to 3% of the gross
proceeds received by the Company from the sale of such Option Securities.
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;
25
and the performance by the Company on and as of the Closing Date and each Option
Closing Date, if any, of its covenants and obligations hereunder and to the
following further conditions:
(a) The Registration Statement shall have become effective not later
than 9:30 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 Common Stock, the price
of the Convertible Preferred Stock 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
Representatives 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 which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to each of the Closing Date and each Option Closing
Date, if any, the Representative shall have received from Underwriters' Counsel,
such opinion or opinions with respect to the organization of each of the
Company, the validity of the Securities, the Registration Statement, the
Prospectus and other related matters as the Representative may reasonably
request and Underwriters' Counsel shall have received such papers and
information as they reasonably request to enable them to pass upon such matters.
(d) At the Closing Date, the Underwriters shall have received the
26
favorable opinion of Nida & Xxxxxxx, P.C., counsel to the Company, dated
the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
i. the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction, (B) is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership
or leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) has all requisite
corporate power and authority, and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and
bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company is
and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state and local laws, rules and
regulations; and, the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely
affect the business, operations, condition, financial or otherwise, or
the earnings, business affairs, position, prospects, value, operation,
properties, business or results of operations of the Company. The
disclosures in the Registration Statement concerning the effects of
federal, state and local laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in all
material respects and do not omit to state a fact required to be
stated therein or necessary to make the statements contained therein
not misleading in light of the circumstances in which they were made;
ii. except as described in the Prospectus, the
27
Company does not own beneficially or of record, directly or
indirectly, an interest in any other corporation, partnership, joint
venture, trust or other business entity;
iii. the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "CAPITALIZATION", and the Company is not a
party to or bound by any instrument, agreement or other arrangement
providing for it to issue, sell, transfer, purchase or redeem any
capital stock, rights, warrants, options or other securities, except
for this Agreement and the Representatives' Warrant Agreement and as
described in the Prospectus. The Securities and all other securities
issued or issuable by the Company conform in all material respects to
all statements with respect thereto contained in the Registration
Statement and the Prospectus. All issued and outstanding securities of
the Company have been duly authorized and validly issued and are fully
paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal
liability by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any holders of
any security of the Company or any similar rights granted by the
Company. The Securities to be sold by the Company hereunder and under
the Representatives' Warrant Agreement are not and will not be subject
to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid
and non-assessable and 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 has been
duly and validly taken; and the certificates representing the
Securities are in due and proper form. The Representatives' Warrants
constitute valid and binding obligations of the Company to issue and
sell, upon exercise thereof and payment
28
therefor, the number and type of securities of the Company called
for thereby. Upon the issuance and delivery pursuant to this
Agreement of the Firm Securities and the Option Securities and the
Representatives' Warrants to be sold by the Company, the
Underwriters and the Representative, respectively, will acquire
good and marketable title to the Firm Securities and the Option
Securities and the Representatives' Warrants free and clear of any
pledge, lien, charge, claim, encumbrance, pledge, security
interest, or other restriction or equity of any kind whatsoever. No
transfer tax is payable by or on behalf of the Underwriters in
connection with (A) the issuance by the Company of the Securities,
(B) the purchase by the Underwriters of the Firm Securities and the
Option Securities from the Company, and the purchase by the
Representative of the Representatives' Warrants from the Company
(C) the consummation by the Company of any of its obligations under
this Agreement or the Representatives' Warrant Agreement, or (D)
resales of the Firm Securities and the Option Securities in
connection with the distribution contemplated hereby.
iv. the Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 430A, and no stop order suspending
the use of the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the best of
such counsel's knowledge, threatened or contemplated under the Act;
v. each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations.
29
vi. (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 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 which 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 is a party or by which it is
bound, including any document to which the Company is a party or by
which it is bound, incorporated by reference into the Prospectus and
any supplement or amendment thereto, are accurate and fairly represent
the information required to be shown by Form SB-2; (C) there is not
pending or threatened against the Company any action, arbitration,
suit, proceeding, inquiry, investigation, litigation, 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 the
Company which (x) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in
all respects), (y) questions the validity of the capital stock of the
Company or this Agreement or the Representatives' Warrant Agreement,
or of any action taken or to be taken by the Company 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 before any court or arbitrator or
30
governmental body, agency or official (or any basis thereof known
to such counsel) in which there is a reasonable possibility of a
decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties,
business or results of operations of the Company, which could
adversely affect the present or prospective ability of the Company
to perform its obligations under this Agreement or the
Representatives' Warrant Agreement or which in any manner draws
into question the validity or enforceability of this Agreement or
the Representatives' Warrant Agreement;
vii. the Company has full legal right, power and authority to
enter into each of this Agreement and the Representatives' Warrant
Agreement, and to consummate the transactions provided for therein;
and each of this Agreement and the Representatives' Warrant Agreement
has been duly authorized, executed and delivered by the Company. Each
of this Agreement and the Representatives' Warrant Agreement, 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 and the Representatives' Warrant Agreement,
its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or 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 result
31
in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction
or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of,
(A) the certificate of incorporation or by-laws of the Company, (B)
any license, contract, collective bargaining agreement, indenture,
mortgage, deed of trust, lease, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which
it is or may be bound or to which any of its 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 of any arbitrator, court, regulatory body
or administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its respective activities
or properties.
viii. no consent, approval, authorization or order, and no filing
with, any court, regulatory body, government agency or other body
(other than such as may be required under Blue Sky laws, as to which
no opinion need be rendered) is required in connection with the
issuance of the Firm Securities and the Option Securities pursuant to
the Prospectus and the Registration Statement, the issuance of the
Representatives' Warrants, the performance of this Agreement and the
Representatives' Warrant Agreement, and the transactions contemplated
hereby and thereby;
ix. the properties and business of the Company conform in all
material respects to the description thereof contained in the
Registration Statement and the Prospectus; and the Company has good
and marketable title to, or valid and enforceable leasehold estates
in, all items of real and personal property stated in the Prospectus
to be owned or leased by it, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or
32
other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and liens for taxes not yet due
and payable;
x. the Company is not in breach of, or in default under, any
termor provision of any license, contract, collective bargaining
agreement, indenture, mortgage, installment sale agreement, deed of
trust, lease, voting trust agreement, stockholders' agreement,
partnership agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which the properties or
assets (tangible or intangible) of the Company is subject or affected;
and the Company is not in violation of any term or provision of its
Certificate of Incorporation or By-Laws or in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation;
xi. the statements in the Prospectus under "RISK FACTORS," "THE
COMPANY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN
TRANSACTIONS," "DESCRIPTION OF SECURITIES," and "SHARES ELIGIBLE FOR
FUTURE SALE" have been reviewed by such counsel, and insofar as they
refer to statements of law, descriptions of statutes, licenses, rules
or regulations or legal conclusions, are correct in all material
respects;
xii. the Securities have been accepted for inclusion on
Nasdaq/NMS;
xiii. the persons listed under the caption "PRINCIPAL
STOCKHOLDERS" in the Prospectus are the respective "beneficial owners"
(as such phrase is defined in regulation 13d-3 under the Exchange Act)
of the securities set forth opposite their respective names thereunder
as and to the extent set forth therein;
xiv. none of the Company nor any of its officers, stockholders,
employees or agents, nor any other
33
prson acting on behalf of the Company has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental
agency or instrumentality of any government (domestic or foreign)
or any political party or candidate for office (domestic or
foreign) or other person who is or may be in a position to help or
hinder the business of the Company (or assist it in connection with
any actual or proposed transaction) which (A) might subject the
Company to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (B) if not given in the
past, might have had an adverse effect on the assets, business or
operations of the Company, as reflected in any of the financial
statements contained in the Registration Statement, or (C) if not
continued in the future, might adversely affect the assets,
business, operations or prospects of the Company;
xv. no person, corporation, trust, partnership, association or
other entity has the right to include and/or register any securities
of the Company in the Registration Statement, require the Company to
file any registration statement or, if filed, to include any security
in such registration statement;
xvi. except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in
the nature of a finder's or origination fee with respect to the sale
of the Securities hereunder or financial consulting arrangements or
any other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation, as
determined by the NASD;
xvii. 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
34
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);
xviii. except as described in the Prospectus, the Company does
not (A) maintain, sponsor or contribute to any ERISA Plans, (B)
maintain or contribute, now or at any time previously, to a defined
benefit plan, as defined in Section 3(35) of ERISA, and (C) has never
completely or partially withdrawn from a "multi employer plan";
xix. the minute books of the Company have been made available to
the Underwriters and contain a complete summary of all meetings and
actions of the directors and stockholders of the Company since the
time of its incorporation and reflect all transactions referred to in
such minutes accurately in all material respects;
xx. except as set forth in the Prospectus, no officer, director
or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or entities has or has
had, either directly or indirectly, (A) an interest in any person or
entity which (x) furnishes or sells services or products which are
furnished or sold or are proposed to be furnished or sold by the
Company, or (y) purchases from or sells or furnishes to the Company
any goods or services, or (B) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound
or affected. Except as set forth in the Prospectus under "CERTAIN
TRANSACTIONS," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
35
understandings or transactions, between or among the Company, and any
officer, director, or 5% or greater security holder of the Company, or
any affiliate or associate of any such person or entity;
xxi. to the best of such counsel's knowledge, after due inquiry,
there is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding, domestic or foreign, pending or
threatened (or circumstances that may give rise to the same) involving
the Company's production, use, testing, manufacturing or marketing of
any products or services, which (i) questions the authority of the
Company to produce, use, test, manufacture or market any products or
services as described in the Prospectus, (ii) questions the
completeness or accuracy of data generated by any trials, tests or
studies being conducted by or on behalf of the Company, (iii) is
required to be disclosed in the Prospectus which is not so disclosed,
or (iv) might materially and adversely affect the condition, financial
or otherwise, or the earnings, prospects, value, operations or
business of the Company.
xxii. none of the Company nor any of its affiliates shall be
subject to the requirements of or shall be deemed an "Investment
Company," pursuant to and as defined under, respectively, the
Investment Company Act of 1940, as amended.
Such counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company, and representatives of
the independent public accountants for the Company, at which conferences such
counsel made inquiries of such officers, representatives and accountants and
discussed the contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and related matters and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Preliminary
Prospectus, the Registration Statement and Prospectus, on the basis of the
foregoing, no facts have come to the attention of such counsel which lead them
to believe that either the Registration Statement or any amendment thereto, at
the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion contained any untrue statement of a material fact or
36
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or the Prospectus). Such counsel shall
further state that its opinions may be relied upon by Underwriters' Counsel in
rendering its opinion to the Underwriters.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion of such
counsel for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and that the Representative,
Underwriters' Counsel and they are each justified in relying thereon. Any
opinion of counsel for the Company shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written policy
or other document relating to legal opinions, including, without limitation, the
Legal Opinion Accord of the ABA Section of Business Law (1991) or any comparable
state accord.
(e) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Nida & Xxxxxxx, P.C., counsel to the Company,
dated on such Option Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel confirming as of such Option
Closing Date the statements made by Nida & Xxxxxxx, P.C. in its opinions
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 subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
37
(g) Prior to each of the Closing Date and each Option Closing Date, if any,
(i) there shall have been no material adverse change nor development involving a
prospective change in the condition, financial or otherwise, earnings, position,
value, properties, results of operations, prospects, stockholders' equity or the
business activities of each of the Company and each subsidiary of the Company,
whether or not in the ordinary course of business, from the latest dates as of
which such condition is set forth in the Registration Statement and Prospectus;
(ii) there shall have been no transaction, not in the ordinary course of
business, entered into by each of the Company or each subsidiary of the Company,
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and Prospectus which is materially adverse
to the Company; (iii) the Company shall not be in material default under any
provision of any instrument relating to any outstanding indebtedness; (iv)
neither the Company nor any subsidiary of the Company shall have issued any
securities (other than the Securities) or declared or paid any dividend or made
any distribution in respect of its capital stock of any class and there has not
been any change in the capital stock or any material change in the debt (long or
short term) or liabilities or obligations of each of the Company or each
subsidiary of the Company (contingent or otherwise); (v) no material amount of
the assets of each of the Company or each subsidiary of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement and
Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall have
been pending or threatened (or circumstances giving rise to same) against each
of the Company or each subsidiary of the Company, or affecting any of its
respective properties or businesses before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business,
operations, earnings, position, value, properties, results of operations,
prospects or financial condition or income of each of the Company and each
subsidiary of the Company; 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, the Stock Purchase Agreement and this
Agreement, and that:
i. The representations and warranties of the
38
Company in this Agreement are true and correct, as if made on and
as of the Closing Date or the Option Closing Date, as the case may
be, and the Company has complied with all agreements and covenants
and satisfied all conditions contained in this Agreement on its
part to be performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
ii. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, are contemplated or
threatened under the Act;
iii. The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the
Registration Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and neither the Preliminary
Prospectus or any supplement thereto included any untrue statement of
a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; and
iv. Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) neither
the Company nor any subsidiary of the Company has incurred up to and
including the Closing Date or the Option Closing Date, as the case may
be, other than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; (b) neither the
Company nor any subsidiary of the Company has paid or declared any
dividends or other distributions on its capital stock; (c) neither the
Company nor any subsidiary of the Company
39
has entered into any material transactions not in the ordinary
course of business; (d) there has not 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) of each of the Company or any
subsidiary of the Company; (e) neither the Company nor any
subsidiary of the Company has sustained any material loss or damage
to its properties or assets, whether or not insured; (f) there is
no litigation which is pending or threatened (or circumstances
giving rise to same) against each of the Company or any subsidiary
of the Company or any affiliated party which is required to be set
forth in an amended or supplemented Prospectus which has not been
set forth; and (g) there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been
set forth.
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 will 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 such date, addressed to the Underwriters in form and
substance satisfactory (including 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 Singer Lewak Xxxxxxxxx Xxxxxxxxx
LLP:
i. confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act
and the applicable Rules and Regulations;
ii. stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with
the applicable accounting
40
requirements of the Act and the Rules and Regulations thereunder
and that the Representatives may rely upon the opinion of Singer
Lewak Xxxxxxxxx & Xxxxxxxxx LLP with respect to the financial
statements and supporting schedules included in the Registration
Statement;
iii. stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company, a reading of the latest available minutes
of the stockholders and board of directors and the various committees
of the board of directors of the Company, consultations with officers
and other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe
that (A) the unaudited financial statements and supporting schedules
of the Company included in the Registration Statement 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 financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than five
(5) days prior to the effective date of the Registration Statement,
there has been any change in the capital stock or long-term debt of
the Company, or any decrease in the stockholders' equity or net
current assets or net assets of the Company as compared with amounts
shown in the June 30, 1998 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 (C) during
the period from June 30, 1998 to a specified date not more than five
(5) days prior to the effective date of the Registration Statement,
there was any decrease in net revenues, net earnings or increase in
net earnings per common share of the Company or any of its
Subsidiaries, in each case as compared with the corresponding period
beginning June 30, 1997, other than as set forth in or
41
contemplated by the Registration Statement, or, if there was any
such decrease, setting forth the amount of such decrease;
iv. setting forth, at a date not later than five (5) days prior
to the date of the Registration Statement, the amount of liabilities
of the Company and each subsidiary of the Company taken as a whole
(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 set forth in
the Prospectus to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting
records, including work sheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
vi. statements as to such other matters incident to the
transaction contemplated hereby as the Representative may reasonably
request.
(k) At the Closing Date and each Option Closing Date, if any, the
underwriters shall have received from Singer Lewak Xxxxxxxxx & Xxxxxxxxx LLP a
letter, dated as of the Closing Date or the Option Closing Date, as the case may
be, to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (j) of this Section, except that the specified date
referred to shall be a date not more than five (5) days prior to the Closing
Date or the Option Closing Date, as the case may be, and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further effect
that they have carried out procedures as specified in clause (v) of subsection
(i) of this Section with respect to certain amounts, percentages and financial
information as specified by the Representatives 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).
42
(l) On each of the Closing Date and each Option Closing Date, if any, there
shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(m) No order suspending the sale of the Securities in anyjurisdiction
designated by the Representatives 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 Representatives' Warrant Agreement
substantially in the form filed as Exhibit ____ to the Registration Statement,
in final form and substance satisfactory to Millennium, and (ii) the
Representatives' Warrants in such denominations and to such designees as shall
have been provided to the Company by Millennium.
(o) On or before the Closing Date, the Firm Securities and Option
Securities shall have been duly approved for quotation on Nasdaq/NMS, subject to
official notice of issuance.
(p) On or before the Closing Date, there shall have been delivered to the
Representatives all of the Lock-up Agreements, in form and substance
satisfactory to Underwriters' Counsel.
(q) The Asset Purchase Agreement shall be in full force and effect and none
of the parties thereto shall be in default thereunder. The Representative shall
have received assurances reasonably satisfactory to it that all documents
required to be filed in the respective states in order to effectuate the
consummation of the Acquisition shall have been approved for filing by the
appropriate authorities in each state and that all of such Acquisition documents
shall be filed substantially concurrently with the consummation of the
transactions pursuant to this Agreement.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Representative may terminate this Agreement or,
if the Representative so elect, they may waive any such conditions which have
not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
43
(a) The Company agrees to indemnify, defend and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the 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 the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, suits and litigation in respect
thereof), whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such claim, action, proceeding, investigation, inquiry, suit or litigation,
commenced or threatened, or any claim whatsoever), as such are incurred, to
which the Underwriter or such 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 (A) 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 and 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 7 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, the Nasdaq/NMS or any
other securities exchange; (B) 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), or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company and or any of its officers
delivered pursuant hereto, unless, in the case of clause (A) or (B) above, such
statement or omission was made 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 which the Company may
have at common law or otherwise.
The foregoing indemnity with respect to any untrue statement contained in
or omission from a Preliminary Prospectus shall not inure to the benefit of any
44
Underwriter (or any person controlling such Underwriter) from whom the person
asserting any such loss, liability, claim, damage or expense purchased any of
the Securities which are the subject thereof if (1) the Company shall sustain
the burden of proving that such asserting person did not receive a copy of the
Prospectus (or the Prospectus as amended or supplemented) at or prior to the
written confirmation of the sale of such Securities to such person and the
untrue statement contained in or omitted from such Preliminary Prospectus was
corrected in the Prospectus (or the Prospectus as amended or supplemented); and
(2) the Company shall have complied with its covenant pursuant to Section 4(f)
of this Agreement.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify, defend and hold harmless the Company and its directors, officers who
have signed the Registration Statement, and each other person, if any, who
controls the Company within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company to the Underwriters but only with respect
to statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter 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 Firm Securities and the Option 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.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any claim, action, suit, investigation, inquiry,
proceeding or litigation, such indemnified party shall, if a claim in respect
thereof is to be made against one or more indemnifying parties under this
Section 7, notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 7 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may have
otherwise). In case any such claim, action, suit, investigation, inquiry,
proceeding or litigation is brought against any indemnified party, and it
notifies an indemnifying party or parties of the
45
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 thereof 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 thereof within a reasonable time after notice
of commencement thereof, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of
the indemnifying parties (in which case the indemnifying parties shall not
have the right to direct the defense thereof on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than
one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one claim, action,
suit, investigation, inquiry, proceeding or litigation or separate but
similar or related claims, actions, suits, investigations, inquiries,
proceedings or litigation in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim, action, suit, investigation, inquiry, proceeding or
litigation effected without its written consent; provided, however, that such
consent was not unreasonably withheld. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle,
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit, investigation, inquiry, proceeding
or litigation in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim, action, suit, investigation, inquiry,
proceeding or litigation), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit, investigation, inquiry,
proceeding or litigation and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree
46
by a court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) (A) in such proportion as is appropriate to reflect the relative
benefits received by each of the contributing parties, on the one hand, and
the party to be indemnified on the other hand, from the offering of the Firm
Securities and the Option Securities or (B) if the allocation provided by
clause (A) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of each of the contributing parties, on
the one hand, and the party to be indemnified on the other hand in connection
with the statements or omissions that resulted in such losses, claims,
damages, expenses or liabilities, as well as any other relevant equitable
considerations. In any case where the Company is the contributing party and
the Underwriters are the indemnified party, the relative benefits received by
the Company on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the
offering of the Firm Securities and the Option 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,
claims, damages, expenses or liabilities (or actions in respect thereof)
referred to above in this subsection (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 subsection (d), the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to
the Firm Securities and the Option 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 7, each person, if any, who controls the Company or
the Underwriter 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 and or the
Underwriter, as the case may be, subject in each case to this subsection (d).
Any party entitled to contribution will, promptly after receipt of
47
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 subsection (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 subsection (d), or to the extent that such party or parties were
not adversely affected by such omission. The contribution agreement set forth
above shall be in addition to any liabilities which any indemnifying party
may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of each of the Company and each subsidiary of the
Company submitted pursuant hereto, shall be deemed to be representations,
warranties and agreements at the Closing Date and the Option Closing Date, as
the case may be, and such representations, warranties and agreements of each of
the Company and each subsidiary of the Company and the 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,
each of the Company and each subsidiary of the Company, any controlling person
of any Underwriter or each of the Company and each subsidiary of the Company,
and shall survive termination of this Agreement or the issuance and delivery of
the Securities to the Underwriters and the Representative, as the case may be.
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 sole and absolute discretion, shall release the Securities
for 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 9, 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 which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the Representative shall
have the right to terminate this Agreement, (i) if any domestic or international
event or act or occurrence has materially adversely disrupted, or in the
Representative's opinion will in the immediate future materially adversely
disrupt, the financial markets; or (ii) if any material adverse change in the
financial
48
markets shall have occurred; or (iii) if trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the NASD, the Commission or
any governmental authority having jurisdiction over such matters; or (iv) if
trading of any of the securities of the Company shall have been suspended, or
any of the securities of the Company shall have been delisted, on any
exchange or in any over-the-counter market; (v) if the United States shall
have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities or a national
emergency shall have been declared in the United States; or (vi) if a banking
moratorium has been declared by a state or federal authority; or (vii) if a
moratorium in foreign exchange trading has been declared; or (viii) if either
the Company or any subsidiary of the Company shall have sustained a loss
material or substantial to either the Company or any subsidiary of 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 offering, sale and/or delivery of the Securities; or (ix) if
there shall have been such a material adverse change in the conditions or
prospects of either the Company or any subsidiary of the Company, or such
material adverse change in the general market, political or economic
conditions, in the United States or elsewhere, that, in each case, in the
Representative's judgment, would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities or (x) if Ramy El-Batrami
shall no longer serve either the Company or any subsidiary of the Company in
his 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 and all
Blue Sky counsel fees (excluding filing fees) and disbursements (less amounts
previously paid pursuant to Section 5(c) above). In addition, the Company shall
remain liable for all Blue Sky counsel fees and disbursements, expenses and
filing fees. 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, by reason of any failure on
the part of either the Company or any subsidiary 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 (except if this
Agreement is terminated pursuant to Sections 6(c), 6(l) or 6(q)) or Section 12)
then, the Company shall promptly reimburse and indemnify the Representative for
all of his actual out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters (less amounts previously paid
pursuant to Section 5(c) above). In addition, the Company shall remain liable
for all Blue Sky counsel
49
fees and disbursements, expenses and filing fees. Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be
in any way affected by such election or termination or failure to carry out
the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination
of this Agreement under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Securities which it or they are obligated to purchase
on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein
set forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of 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 number of Defaulted Securities exceeds 10% of the total
number of Firm Securities, this Agreement shall terminate without liability
on the part of any non-defaulting Underwriters (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).
No action taken pursuant to this Section 11 shall relieve any defaulting
underwriter from liability in respect of any default by such Underwriter
under this Agreement.
In the event of any such default which does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven (7) days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
12. Default by the Company. If the Company shall fail at the Closing Date
50
or at any Option Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option 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 Section 5, Section 7 and Section 10
hereof. No action taken pursuant to this Section 12 shall relieve the Company
from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative, Millennium Financial Group, Inc., 000 Xxxx 00xx Xxxxxx, Xxxxx
00X, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx Xxx Xxxxxx, Managing
Director, with a copy to Xxxxxxx, Mesereau & Leids, LLP, 0000 Xxxxxx xx xxx
Xxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxx,
Esq. Notices to the Company shall be directed to the Company at 00000 Xxxxxxx
Xxxxxxxxx, Xxxxxx Xxxx, Xxxxxxxxxx 00000, Attention: Ramy El-Batrami,
Chairman of the Board and Chief Executive Officer with a copy to: Nida &
Xxxxxxx, P.C., 000 Xxxxxxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respective successors, legal representatives and assigns, 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 the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the Representatives'
Warrant Agreement constitute the entire agreement of the parties
51
hereto and supersede all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may
not be amended except in a writing, signed by the Representative and the
Company.
52
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
GENESIS MEDIA GROUP, INC.
By:
-----------------------------------------
Mr. Rami El-Batrami
Chairman of the Board and
Chief Executive Officer
Confirmed and accepted as of
the date first above written.
MILLENNIUM FINANCIAL GROUP, INC.
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:
---------------------------------------
Name:
Title:
53
SCHEDULE A
Number of
Shares of
Common Stock
Name of Underwriters to be Purchased
---------------------------------- ---------------
Millennium Financial Group, Inc.
Total................................. 2,000,000
---------
---------
54
