XXXX XXXXXX GOLF, INC.
1,700,000 Shares of Common Stock
(Par Value $.001 Per Share)
UNDERWRITING AGREEMENT
Whale Securities Co., L.P New York, New York
000 Xxxxx Xxxxxx ___________, 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Xxxx Xxxxxx Golf, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Whale Securities Co., L.P. (the
"Underwriter") 1,700,000 shares of common stock, par value $.001 per share (the
"Offered Shares"), which Offered Shares are presently authorized but unissued
shares of the common stock, par value $.001 per share (individually, a "Common
Share" and collectively the "Common Shares"), of the Company. In addition, the
Underwriter, in order to cover over-allotments in the sale of the Offered
Shares, may purchase up to an aggregate of 255,000 Common Shares (the "Optional
Shares"; the Offered Shares and the Optional Shares are hereinafter sometimes
collectively referred to as the "Shares"). The Shares are described in the
Registration Statement, as defined below. The Company also proposes to issue and
sell to the Underwriter for its own account and the accounts of its designees,
warrants to purchase an aggregate of 170,000 Common Shares at an exercise price
of $13.20 per share (the "Underwriter's Warrants"), which sale will be
consummated in accordance with the terms and conditions of the form of
Underwriter's Warrant filed as an exhibit to the Registration Statement (as
hereinafter defined).
The Company hereby confirms its agreement with the Underwriter
as follows:
1. Purchase and Sale of Offered Shares. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company hereby agrees to sell the Offered
Shares to the Underwriter, and the Underwriter agrees to purchase the Offered
Shares from the Company, at a purchase price of $ per share. The Underwriter
plans to offer the Shares to the public at a public offering price of $___ per
Offered Share.
2. Payment and Delivery.
(a) Payment for the Offered Shares will be made to
the Company by wire transfer or certified or official bank check or checks
payable to its order in New York Clearing House funds, at the offices of the
Underwriter, Whale Securities Co., L.P., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, against delivery of the
Offered Shares to the Underwriter. Such payment and delivery will be made at
______________, New York City time, on the third business day following the
Effective Date (the fourth business day following the Effective Date in the
event that trading of the Offered Shares commences on the day following the
Effective Date), the date and time of such payment and delivery being herein
called the "Closing Date." The certificates representing the Offered Shares to
be delivered will be in such denominations and registered in such names as the
Underwriter may request not less than two full business days prior to the
Closing Date, and will be made available to the Underwriter for inspection,
checking and packaging at the office of the Company's transfer agent or
correspondent in New York City, American Stock Transfer & Trust Company, 00 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 not less than one full business day prior to
the Closing Date.
(b) On the Closing Date, the Company will sell the
Underwriter's Warrants to the Underwriter or to the designees of the Underwriter
limited to officers and partners of the Underwriter, members of the selling
group and/or their officers or partners (collectively, the "Underwriter's
Designees"). The Underwriter's Warrants will be in the form of, and in
accordance with, the provisions of the Underwriter's Warrant attached as an
exhibit to the Registration Statement. The aggregate purchase price for the
Underwriter's Warrants is $170.00. The Underwriter's Warrants will be restricted
from sale, transfer, assignment or hypothecation for a period of one year from
the Effective Date, except to the Underwriter's Designees. Payment for the
Underwriter's Warrant Agreement will be made to the Company by check or checks
payable to its order on the Closing Date against delivery of the certificates
representing the Underwriter's Warrants. The certificates representing the
Underwriter's Warrants will be in such denominations and such names as the
Underwriter may request prior to the Closing Date.
3. Option to Purchase Optional Shares.
(a) For the purposes of covering any overallotments
in connection with the distribution and sale of the Offered Shares as
contemplated by the Prospectus, the Underwriter is hereby granted an option to
purchase all or any part of the Optional Shares from the Company. The purchase
price to be paid for the Optional Shares will be the same price per Optional
Share as the price per Offered Share set forth in Section 1 hereof. The option
granted hereby may be exercised by the Underwriter as to all or any part of the
Optional Shares at any time within 45 days after the Effective Date. The
Underwriter will not be under any obligation to purchase any Optional Shares
prior to the exercise of such option.
(b) The option granted hereby may be exercised by the
Underwriter by giving oral notice to the Company, which must be confirmed by a
letter, telex or telegraph setting forth the number
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of Optional Shares to be purchased, the date and time for delivery of and
payment for the Optional Shares to be purchased and stating that the Optional
Shares referred to therein are to be used for the purpose of covering
over-allotments in connection with the distribution and sale of the Offered
Shares. If such notice is given prior to the Closing Date, the date set forth
therein for such delivery and payment will not be earlier than either two full
business days thereafter or the Closing Date, whichever occurs later. If such
notice is given on or after the Closing Date, the date set forth therein for
such delivery and payment will not be earlier than two full business days
thereafter. In either event, the date so set forth will not be more than 15 full
business days after the date of such notice. The date and time set forth in such
notice is herein called the "Option Closing Date." Upon exercise of such option,
the Company will become obligated to convey to the Underwriter, and, subject to
the terms and conditions set forth in Section 3(d) hereof, the Underwriter will
become obligated to purchase, the number of Optional Shares specified in such
notice.
(c) Payment for any Optional Shares purchased will be
made to the Company by wire transfer or certified or official bank check or
checks pay-able to its order in New York Clearing House funds, at the office of
the Underwriter, against delivery of the Optional Shares purchased to the
Underwriter. The certificates representing the Optional Shares to be delivered
will be in such denominations and registered in such names as the Underwriter
requests not less than two full business days prior to the Option Closing Date,
and will be made available to the Underwriter for inspection, checking and
packaging at the aforesaid office of the Company's transfer agent or
correspondent not less than one full business day prior to the Option Closing
Date.
(d) The obligation of the Underwriter to purchase and
pay for any of the Optional Shares is subject to the accuracy and completeness
(as of the date hereof and as of the Option Closing Date) of and compliance in
all material respects with the representations and warranties of the Company
herein, to the accuracy and completeness of the statements of the Company or its
officers made in any certificate or other document to be delivered by the
Company pursuant to this Agreement, to the performance in all material respects
by the Company of its obligations hereunder, to the satisfaction by the Company
of the conditions, as of the date hereof and as of the Option Closing Date, set
forth in Section 3(b) hereof, and to the delivery to the Underwriter of
opinions, certificates and letters dated the Option Closing Date substantially
similar in scope to those specified in Section 5, 6(b), (c), (d) and (e) hereof,
but with each reference to "Offered Shares" and "Closing Date" to be,
respectively, to the Optional Shares and the Option Closing Date.
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriter that:
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(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full power and authority, corporate and other, to own or lease and operate,
as the case may be, its properties, whether tangible or intangible, and to
conduct its business as described in the Registration Statement and to execute,
deliver and perform this Agreement and the Underwriter's Warrant Agreement and
to consummate the transactions contemplated hereby and thereby. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions wherein such qualification is necessary and failure so to
qualify could have a material adverse effect on the financial condition, results
of operations, business or properties of the Company. The Company has no
subsidiaries other than Gran Prix Marketing, Inc. and Rhino Marketing, Inc.
(collectively, the "Subsidiaries"), and the Company has no equity interests in
any entity other than the Subsidiaries.
Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state of California,
with full power and authority, corporate or other, to own or lease and operate,
as the case may be, its respective properties, whether tangible or intangible,
and to conduct its respective business as described in the Registration
Statement. Each Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure to so qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of such Subsidiary.
The Company owns all of the issued and outstanding
shares of capital stock of each Subsidiary, free and clear of any security
interests, liens, encumbrances, claims and charges, and all of such shares have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no options or warrants for the purchase of, or other rights to
purchase, or outstanding securities convertible into or exchangeable for, any
capital stock or other securities of any Subsidiary.
(b) This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, and each of the Underwriter's Warrant Agreement and the Consulting
Agreement described in Section 5(r) hereof (the "Consulting Agreement"), when
executed and delivered by the Company on the Closing Date, will be the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms. The execution, delivery and performance
of this Agreement, the Consulting Agreement and the Underwriter's Warrant
Agreement by the Company, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
of this Agreement, the Consulting Agreement and the Underwriter's Warrant
Agreement have been duly authorized by all necessary corporate action and do not
and will not, with or without the giving of notice or the lapse of
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time, or both, (i) result in any violation of the Certificate of Incorporation
or By-Laws, each as amended, of the Company; (ii) result in a breach of or
conflict with any of the terms or provisions of, or constitute a default under,
or result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any Subsidiary pursuant to any indenture,
mortgage, note, contract, commitment or other agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties or assets is or may be bound or
affected; (iii) violate any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their respective
properties or businesses; or (iv) have any effect on any permit, certification,
registration, approval, consent order, license, franchise or other authorization
(collectively, the "Permits") necessary for the Company or any Subsidiary to own
or lease and operate their respective properties and to conduct their respective
businesses or the ability of the Company to make use thereof.
(c) No Permits of any court or governmental agency or
body, other than under the Securities Act of 1933, as amended (the "Act"), the
Regulations (as hereinafter defined) and applicable state securities or Blue Sky
laws, are required (i) for the valid authorization, issuance, sale and delivery
of the Shares to the Underwriter, and (ii) the consummation by the Company of
the transactions contemplated by this Agreement, the Consulting Agreement or the
Underwriter's Warrant Agreement.
(d) The conditions for use of a registration
statement on Form SB-2 set forth in the General Instructions to Form SB-2 have
been satisfied with respect to the Company, the transactions contemplated herein
and in the Registration Statement. The Company has prepared in conformity with
the requirements of the Act and the rules and regulations (the "Regulations") of
the Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333- ) on Form SB-2 and has filed
one or more amendments thereto, covering the registration of the Shares and the
Warrant Shares under the Act, including the related preliminary prospectus or
preliminary prospectuses (each thereof being herein called a "Preliminary
Prospectus") and a proposed final prospectus. Each Preliminary Prospectus was
endorsed with the legend required by Item 501(a)(5) of Regulation S-B of the
Regulations and, if applicable, Rule 430A of the Regulations. Such registration
statement including any documents incorporated by reference therein and all
financial schedules and exhibits thereto, as amended at the time it becomes
effective, and the final prospectus included therein are herein, respectively,
called the "Registration Statement" and the "Prospectus," except that, (i) if
the prospectus filed by the Company pursuant to Rule 424(b) of the Regulations
differs from the
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Prospectus, the term "Prospectus" will also include the prospectus filed
pursuant to Rule 424(b), and (ii) if the Registration Statement is amended or
such Prospectus is supplemented after the date the Registration Statement is
declared effective by the Commission (the "Effective Date") and prior to the
Option Closing Date, the terms "Registration Statement" and "Prospectus" shall
include the Registration Statement as amended or supplemented.
(e) Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the best of the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
(f) The Registration Statement when it becomes
effective, the Prospectus (and any amendment or supplement thereto) when it is
filed with the Commission pursuant to Rule 424(b), and both documents as of the
Closing Date and the Option Closing Date, referred to below, will contain all
statements which are required to be stated therein in accordance with the Act
and the Regulations and will in all material respects conform to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, on such
dates, 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, except that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company in connection with the Registration
Statement or Prospectus or any amendment or supplement thereto by the
Underwriter expressly for use therein.
(g) The Company had at the date or dates indicated in
the Prospectus a duly authorized and outstanding capitalization as set forth in
the Registration Statement and the Prospectus. Based on the assumptions stated
in the Registration Statement and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein. Except as set
forth in the Registration Statement or the Prospectus, on the Effective Date and
on the Closing Date, there will be no options to purchase, warrants or other
rights to subscribe for, or any securities or obligations convertible into, or
any contracts or commitments to issue or sell shares of the Company's capital
stock or any such warrants, convertible securities or obligations. Except as set
forth in the Prospectus, no holders of any of the Company's securities has any
rights, "demand," "piggyback" or otherwise, to have such securities registered
under the Act.
(h) The descriptions in the Registration Statement
and the Prospectus of contracts and other documents are accurate and present
fairly the information required to be disclosed, and
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there are no contracts or other documents required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement under the Act or the Regulations which have not been so
described or filed as required.
(i) Xxxxx Xxxxxxxx LLP, the accountants who have
certified certain of the consolidated financial statements filed and to be filed
with the Commission as part of the Registration Statement and the Prospectus,
are independent public accountants within the meaning of the Act and
Regulations. The consolidated financial statements and schedules and the notes
thereto filed as part of the Registration Statement and included in the
Prospectus are complete, correct and present fairly the financial position of
the Company as of the dates thereof, and the results of operations and changes
in financial position of the Company for the periods indicated therein, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved except as otherwise stated in the
Registration Statement and the Prospectus. The selected financial data set forth
in the Registration Statement and the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of the
audited [and unaudited] financial statements included in the Registration
Statement and the Prospectus.
(j) The Company and each Subsidiary has filed with
the appropriate federal, state and local governmental agencies, and all
appropriate foreign countries and political subdivisions thereof, all tax
returns, including franchise tax returns, which are required to be filed or has
duly obtained extensions of time for the filing thereof and has paid all taxes
shown on such returns and all assessments received by it to the extent that the
same have become due; and the provisions for income taxes payable, if any, shown
on the consolidated financial statements filed with or as part of the
Registration Statement are sufficient for all accrued and unpaid foreign and
domestic taxes, whether or not disputed, and for all periods to and including
the dates of such consolidated financial statements. Except as disclosed in
writing to the Underwriter, neither the Company nor any Subsidiary has executed
or filed with any taxing authority, foreign or domestic, any agreement extending
the period for assessment or collection of any income taxes and is not a party
to any pending action or proceeding by any foreign or domestic governmental
agency for assessment or collection of taxes; and no claims for assessment or
collection of taxes have been asserted against the Company or any Subsidiary.
(k) The outstanding Common Shares and shares of
Series B Convertible preferred stock, par value $.001 per share (the "Preferred
Shares") of the Company, and outstanding options and warrants to purchase Common
Shares have been duly authorized and validly issued. The outstanding Common
Shares and Preferred Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and
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binding obligations of the Company, enforceable in accordance with their terms.
None of the outstanding Common Shares, Preferred Shares or options or warrants
to purchase Common Shares has been issued in violation of the preemptive rights
of any shareholder of the Company. None of the holders of the outstanding Common
Shares or Preferred Shares is subject to personal liability solely by reason of
being such a holder. The offers and sales of the outstanding Common Shares and
Preferred Shares and outstanding options and warrants to purchase Common Shares
were at all relevant times either registered under the Act and the applicable
state securities or Blue Sky laws or exempt from such registration requirements.
The authorized Common Shares and Preferred Shares and outstanding options and
warrants to purchase Common Shares conform to the descriptions thereof contained
in the Registration Statement and Prospectus. Except as set forth in the
Registration Statement and the Prospectus, on the Effective Date and the Closing
Date, there will be no outstanding options or warrants for the purchase of, or
other outstanding rights to purchase, Common Shares or securities convertible
into Common Shares.
(l) No securities of the Company have been sold by
the Company or by or on behalf of, or for the benefit of, any person or persons
controlling, controlled by, or under common control with the Company within the
three years prior to the date hereof, except as disclosed in the Registration
Statement.
(m) The issuance and sale of the Shares have been
duly authorized and, when the Shares have been issued and duly delivered against
payment therefor as contemplated by this Agreement, the Shares will be validly
issued, fully paid and nonassessable, and the holders thereof will not be
subject to personal liability solely by reason of being such holders. The Shares
will not be subject to preemptive rights of any shareholder of the Company.
(n) The issuance and sale of the Common Shares
issuable upon exercise of the Underwriter's Warrants have been duly authorized
and, when such Common Shares have been duly delivered against payment therefor,
as contemplated by the Underwriter's Warrant Agreement, such Common Shares will
be validly issued, fully paid and nonassessable. Holders of Common Shares
issuable upon the exercise of the Underwriter's Warrants will not be subject to
personal liability solely by reason of being such holders. Neither the
Underwriter's Warrants nor the Common Shares issuable upon exercise thereof will
be subject to preemptive rights of any shareholder of the Company. The Common
Shares issuable upon exercise of the Underwriter's Warrants have been duly
reserved for issuance upon exercise of the Underwriter's Warrants in accordance
with the provisions of the Underwriter's Warrant Agreement. The Underwriter's
Warrants conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
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(o) Neither the Company nor any Subsidiary is in
violation of, or in default under, (i) any term or provision of its Certificate
of Incorporation or By-Laws, each as amended; (ii) any material term or
provision or any financial covenants of any indenture, mortgage, contract,
commitment or other agreement or instrument to which it is a party or by which
it or any of its property or business is or may be bound or affected; or (iii)
any existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any Subsidiary or any of the Company's or any Subsidiary's properties
or business. The Company and each Subsidiary owns, possesses or has obtained all
governmental and other (including those obtainable from third parties) Permits,
necessary to own or lease, as the case may be, and to operate its properties,
whether tangible or intangible, and to conduct the business and operations of
the Company as presently conducted and all such Permits are outstanding and in
good standing, and there are no proceedings pending or, to the best of the
Company's knowledge, threatened, or any basis therefor, seeking to cancel,
terminate or limit such Permits.
(p) Except as set forth in the Prospectus, there are
no claims, actions, suits, proceedings, arbitrations, investigations or
inquiries before any governmental agency, court or tribunal, domestic or
foreign, or before any private arbitration tribunal, pending, or, to the best of
the Company's knowledge, threatened against the Company or any Subsidiary or
involving the Company's or any Subsidiary's properties or business which, if
determined adversely to the Company or any Subsidiary, would, individually or in
the aggregate, result in any material adverse change in the financial position,
shareholders' equity, results of operations, properties, business, management or
affairs of the Company or any Subsidiary or which question the validity of the
capital stock of the Company or this Agreement or of any action taken or to be
taken by the Company pursuant to, or in connection with, this Agreement; nor, to
the best of the Company's knowledge, is there any basis for any such claim,
action, suit, proceeding, arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court, governmental agency or
other tribunal naming the Company or any Subsidiary and enjoining the Company or
any Subsidiary from taking, or requiring the Company or any Subsidiary to take,
any action, or to which the Company or any Subsidiary, or the Company's or any
Subsidiary's properties or businesses is bound or subject.
(q) Neither the Company nor any of its affiliates has
incurred any liability for any finder's fees or similar payments in connection
with the transactions herein contemplated.
(r) The Company and each of the Subsidiaries owns or
possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, service marks, copyrights, rights, trade secrets,
confidential information, processes and formulations
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used or proposed to be used in the conduct of their businesses as described in
the Prospectus (collectively the "Intangibles"); to the best of the Company's
knowledge, neither the Company nor any Subsidiary has infringed nor is
infringing upon the rights of others with respect to the Intangibles; and
neither the Company nor any Subsidiary has received any notice of conflict with
the asserted rights of others with respect to the Intangibles which could,
singly or in the aggregate, materially adversely affect its business as
presently conducted or the prospects, financial condition or results of
operations of the Company or any Subsidiary, and the Company knows of no basis
therefor; and, to the best of the Company's knowledge, no others have infringed
upon the Intangibles of the Company or any Subsidiary.
(s) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus and the
Company's latest consolidated financial statements, neither the Company nor any
Subsidiary has incurred any material liability or obligation, direct or
contingent, or entered into any material transaction, whether or not incurred in
the ordinary course of business, and has not sustained any material loss or
interference with its business from fire, storm, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree; and since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
there have not been, and prior to the Closing Date referred to below there will
not be, any changes in the capital stock or any material increases in the
long-term debt of the Company or any material adverse change in or affecting the
general affairs, management, financial condition, shareholders' equity, results
of operations or prospects of the Company or any Subsidiary, otherwise than as
set forth or contemplated in the Prospectus.
(t) The Company does not own any real property. The
Company and each Subsidiary has good title to all personal property (tangible
and intangible) owned by it, free and clear of all security interests, charges,
mortgages, liens, encumbrances and defects, except such as are described in the
Registration Statement and Prospectus or such as do not materially affect the
value or transferability of such property and do not interfere with the use of
such property made, or proposed to be made, by the Company or any Subsidiary.
The leases, licenses or other contracts or instruments under which the Company
and each Subsidiary leases, holds or is entitled to use any property, real or
personal, are valid, subsisting and enforceable only with such exceptions as are
not material and do not interfere with the use of such property made, or
proposed to be made, by the Company or any Subsidiary, and all rentals,
royalties or other payments accruing thereunder which became due prior to the
date of this Agreement have been duly paid, and neither the Company nor any
Subsidiary, nor, to the best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's knowledge, no event has
occurred
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which, with the passage of time or the giving of notice, or both, would
constitute a default thereunder. Neither The Company nor any Subsidiary has
received notice of any violation of any applicable law, ordinance, regulation,
order or requirement relating to its owned or leased properties. The Company and
each Subsidiary has adequately insured its properties against loss or damage by
fire or other casualty and maintains, in adequate amounts, such other insurance
as is usually maintained by companies engaged in the same or similar businesses
located in its geographic area.
(u) Each contract or other instrument (however
characterized or described) to which the Company or any Subsidiary is a party or
by which their properties or businesses are or may be bound or affected and to
which reference is made in the Prospectus has been duly and validly executed, is
in full force and effect in all material respects and is enforceable against the
parties thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company or any Subsidiary, and neither the
Company nor any Subsidiary, nor, to the best of the Company's knowledge, any
other party, is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder.
None of the material provisions of such contracts or
instruments violates any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court having jurisdiction over the
Company or any Subsidiary or any of their respective assets or businesses,
including, without limitation, those promulgated by the Federal Trade
Commission, including, without limitation, the Federal Telephone Consumer
Protection Act of 1991 and the Federal Telemarketing and Consumer Fraud and
Abuse Prevention Act of 1994 and the rules and regulations promulgated
thereunder.
(v) The employment, consulting and confidentiality
agreements between the Company and between each Subsidiary and its officers,
employees and consultants, described in the Registration Statement, are binding
and enforceable obligations upon the respective parties thereto in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(w) Except as set forth in the Prospectus, the
Company has no employee benefit plans (including, without limitation, profit
sharing and welfare benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement Income Security Act of
1974.
(x) To the best of the Company's knowledge, no labor
problem exists with any of the Company's or any Subsidiary's
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employees or is imminent which could adversely affect the Company or any
Subsidiary.
(y) The Company has not, directly or indirectly, at
any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(z) The Shares have been approved for listing on the
Nasdaq SmallCap Market.
(aa) The Company has provided to Xxxxxx Xxxxxxxxxx
LLP, counsel to the Underwriter ("Underwriter's Counsel"), all agreements,
certificates, correspondence and other items, documents and information
requested by such counsel's Corporate Review Memorandum dated January 28, 1998.
Any certificate signed by an officer of the Company
or of any Subsidiary and delivered to the Underwriter or to Underwriter's
Counsel shall be deemed to be a representation and warranty by the Company to
the Underwriter as to the matters covered thereby.
5. Certain Covenants of the Company. The Company covenants
with the Underwriter as follows:
(a) The Company will not at any time, whether before
the Effective Date or thereafter during such period as the Prospectus is
required by law to be delivered in connection with the sales of the Shares by
the Underwriter or a dealer, file or publish any amendment or supplement to the
Registration Statement or Prospectus of which the Underwriter has not been
previously advised and furnished a copy, or to which the Underwriter shall
object in writing.
(b) The Company will use its best efforts to cause
the Registration Statement to become effective and will advise the Underwriter
immediately, and, if requested by the Underwriter, confirm such advice in
writing, (i) when the Registration Statement, or any post-effective amendment to
the Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplementation of the
Registration Statement or Prospectus or for additional information; and (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any Preliminary
-12-
Prospectus, or of the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, or of the initiation of any proceedings for any of
such purposes. The Company will use its best efforts to prevent the issuance of
any such stop order or of any order preventing or suspending such use and to
obtain as soon as possible the lifting thereof, if any such order is issued.
(c) The Company will deliver to the Underwriter,
without charge, from time to time until the Effective Date, as many copies of
each Preliminary Prospectus as the Underwriter may reasonably request, and the
Company hereby consents to the use of such copies for purposes permitted by the
Act. The Company will deliver to the Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as the Underwriter may
reasonably request. The Company has furnished or will furnish to the Underwriter
two signed copies of the Registration Statement as originally filed and of all
amendments thereto, whether filed before or after the Registration Statement
becomes effective, two copies of all exhibits filed therewith and two signed
copies of all consents and certificates of experts.
(d) The Company will comply with the Act, the
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder so as to permit the continuance
of sales of and dealings in the Offered Shares and in any Optional Shares which
may be issued and sold. If, at any time when a prospectus relating to the Shares
is required to be delivered under the Act, any event occurs as a result of which
the Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it shall be necessary to amend or
supplement the Registration Statement and Prospectus to comply with the Act or
the regulations thereunder, the Company will promptly file with the Commission,
subject to Section 5(a) hereof, an amendment or supplement which will correct
such statement or omission or which will effect such compliance.
(e) The Company will furnish such proper informa-
tion as may be required and otherwise cooperate in qualifying the Shares for
offering and sale under the securities or Blue Sky laws relating to the offering
in such jurisdictions as the Underwriter may reasonably designate, provided that
no such qualification will be required in any jurisdiction where, solely as a
result thereof, the Company would be subject to service of general process or to
taxation or qualification as a foreign corporation doing business in such
jurisdiction.
-13-
(f) The Company will make generally available to its
security holders, in the manner specified in Rule 158(b) under the Act, and
deliver to the Underwriter and Underwriter's Counsel as soon as practicable and
in any event not later than 45 days after the end of its fiscal quarter in which
the first anniversary date of the effective date of the Registration Statement
occurs, an earning statement meeting the requirements of Rule 158(a) under the
Act covering a period of at least 12 consecutive months beginning after the
effective date of the Registration Statement.
(g) For a period of five years from the Effective
Date, the Company will deliver to the Underwriter and to Underwriter's Counsel
on a timely basis (i) a copy of each report or document, including, without
limitation, reports on Forms 8-K, 10-C, 10-K (or 10-K SB), 10-Q (or 10-Q SB) and
10-C and exhibits thereto, filed or furnished to the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. (the "NASD") on
the date each such report or document is so filed or furnished; (ii) as soon as
practicable, copies of any reports or communications (financial or other) of the
Company mailed to its security holders; (iii) as soon as practicable, a copy of
any Schedule 13D, 13G, 14D-1 or 13E-3 received or prepared by the Company from
time to time; (iv) monthly statements setting forth such information regarding
the Company's results of operations and financial position (including balance
sheet, profit and loss statements and data regarding outstanding purchase
orders) as is regularly prepared by management of the Company; and (v) such
additional information concerning the business and financial condition of the
Company as the Underwriter may from time to time reasonably request and which
can be prepared or obtained by the Company without unreasonable effort or
expense. The Company will furnish to its shareholders annual reports containing
audited financial statements and such other periodic reports as it may determine
to be appropriate or as may be required by law.
(h) Neither the Company nor any person that con-
trols, is controlled by or is under common control with the Company will take
any action designed to or which might be reasonably expected to cause or result
in the stabilization or manipulation of the price of the Common Shares.
(i) If the transactions contemplated by this
Agreement are consummated, the Underwriter shall retain the $50,000 previously
paid to it, and the Company will pay or cause to be paid the following: all
costs and expenses incident to the performance of the obligations of the Company
under this Agreement, including, but not limited to, the fees and expenses of
accountants and counsel for the Company; the preparation, printing, mailing and
filing of the Registration Statement (including financial statements and
exhibits), Preliminary Prospectuses and the Prospectus, and any amendments or
supplements thereto; the printing and mailing of the Selected Dealer Agreement,
the issuance and delivery of the Shares to the Underwriter; all taxes, if any,
on
-14-
the issuance of the Shares; the fees, expenses and other costs of qualifying the
Shares for sale under the Blue Sky or securities laws of those states in which
the Shares are to be offered or sold, including fees and disbursements of
counsel in connection therewith, and including those of such local counsel as
may have been retained for such purpose; the filing fees incident to securing
any required review by the NASD and either the Boston Stock Exchange or Pacific
Stock Exchange; the cost of printing and mailing the "Blue Sky Survey", the cost
of furnishing to the Underwriter copies of the Registration Statement,
Preliminary Prospectuses and the Prospectus as herein provided; the costs of
placing "tombstone advertisements" in any publications which may be selected by
the Underwriter; and all other costs and expenses incident to the performance of
the Company's obligations hereunder which are not otherwise specifically
provided for in this Section 5(i).
In addition, at the Closing Date or the Option
Closing Date, as the case may be, the Underwriter will deduct from the payment
for the Offered Shares or any Optional Shares three percent (3%) of the gross
proceeds of the offering (less the sum of $50,000 previously paid to the
Underwriter), as payment for the Underwriter's nonaccountable expense allowance
relating to the transactions contemplated hereby, which amount will include the
fees and expenses of Underwriter's Counsel (other than the fees and expenses of
Underwriter's Counsel relating to Blue Sky qualifications and registrations,
which, as provided for above, shall be in addition to the three percent (3%)
nonaccountable expense allowance and shall be payable directly by the Company to
Underwriter's Counsel on or prior to the Closing Date).
(j) If the transactions contemplated by this
Agreement or related hereto because the Company decides not to proceed with the
offering for any reason or because the Underwriter decides not to proceed with
the offering as a result of a breach by the Company of its representations,
warranties or covenants in the Agreement or as a result of adverse changes in
the affairs of the Company, then the Company will be obligated to reimburse the
Underwriter for its accountable out-of-pocket expenses up to the sum of $75,000,
inclusive of $50,000 previously paid to the Underwriter by the Company. In all
cases other than those set forth in the preceding sentence, if the Company or
the Underwriter decide not to proceed with the offering, the Company will only
be obligated to reimburse the Underwriter for its accountable out-of-pocket
expenses up to $50,000, and inclusive of $50,000 previously paid to the
Underwriter by the Company. In no event, however, will the Underwriter, in the
event the offering is terminated, be entitled to retain or receive more than an
amount equal to its actual accountable out-of-pocket expenses.
(k) The Company intends to apply the net proceeds
from the sale of the Shares for the purposes set forth in the Pro- spectus. The
Company will file with the Commission all required
-15-
reports on Form S-R in accordance with the provisions of Rule 463 promulgated
under the Act and will provide a copy of each such report to the Underwriter and
its counsel.
(l) During the period of twelve (12) months from the
Effective Date, (i) neither the Company nor any of its officers, directors or
securityholders will offer for sale or sell or otherwise dispose of, directly or
indirectly, any securities of the Company, in any manner whatsoever, whether
pursuant to Rule 144 of the Regulations or otherwise (the "Lock-Up Period"),
except that, notwithstanding the foregoing, a group of securityholders, each of
which securityholders beneficially owns less than one percent (1%) of the
outstanding Common Shares and all of which securityholders, in the aggregate,
beneficially own less than five percent (5%) of the outstanding Common Shares
(such shareholders being referred to herein as the "Minority Securityholders")
may be excluded from the provisions of this clause, and (ii) no holder of
registration rights relating to securities of the Company will exercise any such
registration rights, in either case, without the prior written consent of the
Underwriter. In addition, for a period of twelve (12) months following the
Lock-Up Period, no officer, director or securityholder beneficially owning 5% or
more of the outstanding Common Shares of the Company (calculated in accordance
with Rule 13d-3(d)(1) under the Exchange Act) (each, a "Principal Shareholder")
may, without the Underwriter's prior written consent, sell any of its Common
Shares during any three (3) month period in excess of the amount that the
Principal Shareholder would be allowed to sell if it were deemed an "affiliate"
of the Company and its shares were deemed "restricted," as those terms are
defined in Rule 144 promulgated under the Act, i.e., in general, no more than
the greater of (a) 1% of the then outstanding Common Shares, and (b) the average
weekly trading volume of the Common Shares during the four calendar weeks
preceding such sale. The Company will deliver to the Underwriter the foregoing
agreements of its officers, directors, securityholders (other than the Minority
Securityholders) and registration rights holders to such effect prior to the
Closing Date.
(m) The Company will not file any registration
statement relating to the offer or sale of any of the Company's securities,
including any registration statement on Form S-8, during the twelve (12) months
from the Effective Date, without the Underwriter's prior written consent.
(n) The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
-16-
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(o) For a period of five (5) years from the Effective
Date, the Company will, unless and until the holders of a majority of the Common
Shares following the consummation of the Company's initial public offering of
securities vote otherwise, use its best efforts to maintain the listing of the
Shares on NASDAQ and, if so qualified, list the Shares, and maintain such
listing for so long as qualified, on the NASDAQ National Market System.
(p) The Company will, concurrently with the Effective
Date, register the class of equity securities of which the Shares are a part
under Section 12(g) of the Exchange Act and the Company will maintain such
registration for a minimum of five (5) years from the Effective Date.
(q) Subject to the sale of the Offered Shares, the
Underwriter and its successors will have the right to designate a nominee for
election, at its or their option, either as a member of or a non-voting advisor
to the Board of Directors of the Company (which Board, during such period, shall
be comprised of five (5), seven (7) or nine (9) persons, a majority of the
members of which Board must, during such period, be persons not otherwise
affiliated with the Company, its management or its founders), and the Company
will use its best efforts to cause such nominee to be elected and continued in
office as a director of the Company or as such advisor until the expiration of
three (3) years from the Effective Date. Following the election of such nominee
as a director or advisor, such person shall receive no more or less compensation
than is paid to other non-officer directors of the Company for attendance at
meetings of the Board of Directors of the Company and shall be entitled to
receive reimbursement for all reasonable costs incurred in attending such
meetings including, but not limited to, food, lodging and transportation. The
Company agrees to indemnify and hold such director or advisor harmless, to the
maximum extent permitted by law, against any and all claims, actions, awards and
judgments arising out of his service as a director or advisor and, in the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, to include such director or advisor as an
insured under such policy. The rights and benefits of such indemnification and
the benefits of such insurance shall, to the extent possible, extend to the
Underwriter insofar as it may be or may be alleged to be responsible for such
director or advisor.
If the Underwriter does not exercise its option to
designate a member of or advisor to the Company's Board of Directors, the
Underwriter shall nonetheless have the right to send a representative (who need
not be the same individual from meeting to meeting) to observe each meeting of
the Board of Directors. The Company agrees to give the Underwriter notice of
each such meeting
-17-
and to provide the Underwriter with an agenda and minutes of the meeting no
later than it gives such notice and provides such items to the directors.
(r) The Company agrees to employ the Underwriter or a
designee of the Underwriter as a financial consultant on a non-exclusive basis
for a period of two (2) years from the Closing Date, pursuant to a separate
written consulting agreement between the Company and the Underwriter and/or such
designee (the "Consulting Agreement"), at an annual rate of Thirty Thousand
Dollars ($30,000) (exclusive of any accountable out-of-pocket expenses) payable
in full, in advance on the Closing Date. In addition, the Consulting Agreement
shall provide that the Company will pay the Underwriter a finder's fee in the
event that the Underwriter originates a financing, merger, acquisition, joint
venture or other transaction to which the Company is a party. The Company
further agrees to deliver a duly and validly executed copy of said Consulting
Agreement, in form and substance acceptable to the Underwriter, on the Closing
Date.
(s) The Company shall retain a transfer agent for the
Common Shares, reasonably acceptable to the Underwriter, for a period of three
(3) years from the Effective Date. In addition, for a period of three (3) years
from the Effective Date, the Company, at its own expense, shall cause such
transfer agent to provide the Underwriter, if so requested in writing, with
copies of the Company's daily transfer sheets, and, when requested by the
Underwriter, a current list of the Company's securityholders, including a list
of the beneficial owners of securities held by a depository trust company and
other nominees.
(t) The Company hereby agrees, at its sole cost and
expense, to supply and deliver to the Underwriter and Underwriter's Counsel,
within a reasonable period from the date hereof, four bound volumes, including
the Registration Statement, as amended or supplemented, all exhibits to the
Registration Statement, the Prospectus and all other underwriting documents.
(u) The Company shall, as of the date hereof, have
applied for listing in Standard & Poor's Corporation Records Service (including
annual report information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial
Manual not being sufficient for these purposes) and shall use its best efforts
to have the Company listed in such manual and shall maintain such listing for a
period of five years from the Effective Date.
(v) For a period of five (5) years from the Effective
Date, the Company shall provide the Underwriter, on a not less than annual
basis, with internal forecasts setting forth projected results of operations for
each quarterly and annual period in the two (2) fiscal years following the
respective dates of such forecasts. Such forecasts shall be provided to the
Underwriter more frequently than annually if prepared more
-18-
frequently by management, and revised forecasts shall be prepared and provided
to the Underwriter when required to reflect more current information, revised
assumptions or actual results that differ materially from those set forth in the
forecasts.
(w) For a period of five (5) years from the Effective
Date, or until such earlier time as the Common Shares are listed on the New York
Stock Exchange or the American Stock Exchange, the Company shall cause its legal
counsel to provide the Underwriter with a list, to be updated at least annually,
of those states in which the Common Shares may be traded in non-issuer
transactions under the Blue Sky laws of the 50 states.
(x) For a period of three (3) years from the
Effective Date, the Company shall continue to retain Xxxxx Xxxxxxxx LLP (or such
other nationally recognized accounting firm acceptable to the Underwriter) as
the Company's independent public accountants.
(y) For a period of three (3) years from the
Effective Date, the Company, at its expense, shall cause its then independent
certified public accountants, as described in Section 5(x) above, to review (but
not audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q (or 10-QSB) quarterly report (or other equivalent
report) and the mailing of quarterly financial information to shareholders.
(z) For a period of twenty-five (25) days from the
Effective Date, the Company will not issue press releases or engage in any other
publicity without the Underwriter's prior written consent, other than normal and
customary releases issued in the ordinary course of the Company's business or
those releases required by law.
(aa) The Company will not increase or authorize an
increase in the compensation of its five (5) most highly paid (determined as of
the Effective Date) employees greater than those increases provided for in their
employment agreements with the Company in effect as of the Effective Date and
disclosed in the Registration Statement without the prior written consent of the
Underwriter, for a period of three (3) years from the Effective Date.
(ab) For a period of three (3) years from the
Effective Date, the Company will promptly submit to the Underwriter copies of
accountant's management reports and similar correspondence between the Company's
accountants and the Company.
(ac) For a period of three (3) years from the
Effective Date, the Company will not offer or sell any of its
-19-
securities pursuant to Regulation S promulgated under the Act without the prior
written consent of the Underwriter.
(ad) For a period of three (3) years from the
Effective Date, the Company will provide to the Underwriter ten day's written
notice prior to any issuance by the Company or its subsidiaries of any equity
securities or securities exchangeable for or convertible into equity securities
of the Company, except for (i) shares of Common Stock issuable upon exercise of
currently outstanding options and warrants or conversion of currently
outstanding convertible securities, (ii) options available for future grant
pursuant to any stock option plan in effect on the Effective Date and the
issuance of shares of Common Stock upon the exercise of such options and (iii)
securities issuable upon exercise or conversion of securities for which notice
pursuant to this Paragraph 5(ad) was previously given to the Underwriter.
(ae) Prior to the Effective Date and for a period of
three (3) years thereafter, the Company will retain a financial public relations
firm reasonably acceptable to the Underwriter.
(af) For a period of three (3) years from the
Effective Date, the Company will cause its Board of Directors to meet, either in
person or telephonically, a minimum of four (4) times per year and will hold a
shareholder's meeting at least once per annum.
(ag) Prior to the Effective Date, the Company shall
have obtained directors' and officers' insurance naming the Underwriter as an
additional insured party, in an amount equal to twenty-five percent (25%) of the
gross proceeds of the offering, and the Company will maintain such insurance for
a period of at least three (3) years from the Closing Date.
6. Conditions of the Underwriter's Obligation to Purchase
Shares from the Company. The obligation of the Underwriter to purchase and pay
for the Offered Shares which it has agreed to purchase from the Company is
subject (as of the date hereof and the Closing Date) to the accuracy of and
compliance in all material respects with the representations and warranties of
the Company herein, to the accuracy of the statements of the Company or its
officers made pursuant hereto, to the performance in all material respects by
the Company of its obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement will have become
effective not later than .M., New York City time, on the day following the date
of this Agreement, or at such later time or on such later date as the
Underwriter may agree to in writing; prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement will have been issued
and no proceedings for that purpose will have been initiated or will be pending
or, to the best of the Underwriter's or the Company's knowledge, will be
-20-
contemplated by the Commission; and any request on the part of the Commission
for additional information will have been complied with to the satisfaction of
Underwriter's Counsel.
(b) At the time that this Agreement is executed and
at the Closing Date, there will have been delivered to the Underwriter a signed
opinion of Troop Xxxxxxxxx Xxxxxxx & Xxxxxx, LLP, counsel for the Company
("Company Counsel"), dated as of the date hereof or the Closing Date, as the
case may be (and any other opinions of counsel referred to in such opinion of
Company Counsel or relied upon by Company Counsel in rendering their opinion),
reasonably satisfactory to Underwriter's Counsel, to the effect that:
(i) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full power and authority, corporate and other, and with all
Permits necessary to own or lease, as the case may be, and operate its
properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement. The Company is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
wherein such qualification is necessary and failure so to qualify could have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company. To the best of Company Counsel's
knowledge, other than the Subsidiaries, the Company has no subsidiaries and no
equity interests in any entity other than the Subsidiaries.
Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the state of
California, with full power and authority, corporate or other, to own or lease
and operate, as the case may be, its respective properties, whether tangible or
intangible, and to conduct its respective business as described in the
Registration Statement. Each Subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure to so qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of such Subsidiary.
The Company owns all of the issued and
outstanding shares of capital stock of each Subsidiary, free and clear of any
security interests, liens, encumbrances, claims and charges, and all of such
shares have been duly authorized and validly issued and are fully paid and
nonassessable.
(ii) The Company has full power and
authority, corporate and other, to execute, deliver and perform this Agreement,
the Consulting Agreement and the Underwriter's Warrant Agreement and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement, the Consulting Agreement and the
Underwriter's
-21-
Warrant Agreement by the Company, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms of this Agreement, the Consulting Agreement and the Underwriter's
Warrant Agreement have been duly authorized by all necessary corporate action,
and this Agreement [Note: for Closing Date opinion add:] [and each of the
Consulting Agreement and the Underwriter's Warrant Agreement] has been duly
executed and delivered by the Company. This Agreement is (assuming for the
purposes of this opinion that it is valid and binding upon the other party
thereto) and, when executed and delivered by the Company on the Closing Date,
each of the Consulting Agreement and] the Underwriter's Warrant Agreement will
be, valid and binding obligations of the Company, enforceable in accordance with
their respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting the
rights of creditors generally and the discretion of courts in granting equitable
remedies and except that enforceability of the indemnification provisions set
forth in Section 7 hereof and the contribution provisions set forth in Section 8
hereof may be limited by the federal securities laws or public policy underlying
such laws.
(iii) The execution, delivery and perfor-
xxxxx of this Agreement, the Consulting Agreement and the Underwriter's Warrant
Agreement by the Company, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
of this Agreement, the Consulting Agreement and the Underwriter's Warrant
Agreement do not, and will not, with or without the giving of notice or the
lapse of time, or both, (A) result in a violation of the Certificate of
Incorporation or By-Laws, each as amended, of the Company or any Subsidiary, (B)
result in a breach of or conflict with any terms or provisions of, or constitute
a default under, or result in the modification or termination of, or result in
the creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any Subsidiary pursuant
to any indenture, mortgage, note, contract, commitment or other material
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of the Company's or any Subsidiary's
properties or assets are or may be bound or affected; (C) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or
any Subsidiary or any of the Company's or any Subsidiary's properties or
business; or (D) have any effect on any Permit necessary for the Company or any
Subsidiary to own or lease and operate its their respective properties or
conduct their businesses or the ability of the Company to make use thereof.
(iv) To the best of Company Counsel's
knowledge, no Permits of any court or governmental agency or body (other than
under the Act, the Regulations and applicable state
-22-
securities or Blue Sky laws) are required for the valid authorization, issuance,
sale and delivery of the Shares or the Underwriter's Warrants to the
Underwriter, and the consummation by the Company of the transactions
contemplated by this Agreement, the Consulting Agreement or the Underwriter's
Warrant Agreement.
(v) The Registration Statement has become
effective under the Act; to the best of Company Counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has been
issued, and no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under the Act or applicable state securities laws.
(vi) The Registration Statement and the
Prospectus, as of the Effective Date, and each amendment or supplement thereto
as of its effective or issue date (except for the financial statements and other
financial data included therein or omitted therefrom, as to which Company
Counsel need not express an opinion) comply as to form in all material respects
with the requirements of the Act and Regulations and the conditions for use of a
registration statement on Form SB-2 have been satisfied by the Company.
(vii) The descriptions in the Registration
Statement and the Prospectus of statutes, regulations, government
classifications, contracts and other documents (including opinions of such
counsel); and the response to Item 13 of Form SB-2 have been reviewed by Company
Counsel, and, based upon such review, are accurate in all material respects and
present fairly the information required to be disclosed, and there are no
material statutes, regulations or government classifications, or, to the best of
Company Counsel's knowledge, material contracts or documents, of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement, which are not so described
or filed as required.
None of the material provisions of the
contracts or instruments described above violates any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court
having jurisdiction over the Company or any Subsidiary or any of their assets or
businesses, including, without limitation, those promulgated by the Federal
Trade Commission, including, without limitation, the Federal Telephone Consumer
Protection Act of 1991 and the Federal Telemarketing and Consumer Fraud and
Abuse Prevention Act of 1994 and the rules and regulations promulgated
thereunder.
(viii) The outstanding Common Shares and
Preferred Shares and outstanding options and warrants to purchase Common Shares
have been duly authorized and validly issued. The outstanding Common Shares and
Preferred Shares are fully paid and nonassessable. The outstanding options and
warrants to purchase
-23-
Common Shares constitute the valid and binding obligations of the Company,
enforceable in accordance with their terms. None of the outstanding Common
Shares, Preferred Shares or options or warrants to purchase Common Shares has
been issued in violation of the preemptive rights of any stockholder of the
Company. None of the holders of the outstanding Common Shares or Preferred
Shares is subject to personal liability solely by reason of being such a holder.
The offers and sales of the outstanding Common Shares and Preferred Shares and
outstanding options and warrants to purchase Common Shares were at all relevant
times either registered under the Act and the applicable state securities or
Blue Sky laws or exempt from such registration requirements. The authorized
Common Shares and Preferred Shares and outstanding options and warrants to
purchase Common Shares conform to the descriptions thereof contained in the
Registration Statement and Prospectus. To the best of Company Counsel's
knowledge, except as set forth in the Prospectus, no holders of any of the
Company's securities has any rights, "demand", "piggyback" or otherwise, to have
such securities registered under the Act.
(ix) The issuance and sale of the Shares
have been duly authorized and, when the Shares have been issued and duly
delivered against payment therefor as contemplated by this Agreement, the Shares
will be validly issued, fully paid and nonassessable, and the holders thereof
will not be subject to personal liability solely by reason of being such
holders. The Shares are not subject to preemptive rights of any shareholder of
the Company. The certificates representing the Shares are in proper legal form.
(x) The issuance and sale of the Common
Shares issuable upon exercise of the Underwriter's Warrants have been duly
authorized and, when such Common Shares have been duly delivered against payment
therefor, as contemplated by the Underwriter's Warrant Agreement, such Common
Shares will be validly issued, fully paid and nonassessable. Holders of Common
Shares issuable upon exercise of the Underwriter's Warrants will not be subject
to personal liability solely by reason of being such holders. Neither the
Underwriter's Warrants nor the Common Shares issuable upon exercise thereof will
be subject to preemptive rights of any shareholder of the Company. The Warrant
Shares issuable upon exercise of the Underwriter's Warrants have been duly
reserved for issuance upon exercise of the Underwriter's Warrants in accordance
with the provisions of the Underwriter's Warrant Agreement. The Underwriter's
Warrants conform to the descriptions thereof in the Registration Statement and
Prospectus.
(xi) Upon delivery of the Offered Shares to
the Underwriter against payment therefor as provided in this Agreement, the
Underwriter (assuming it is a bona fide purchaser within the meaning of the
Uniform Commercial Code) will acquire good title to the Offered Shares, free and
clear of all liens, encumbrances, equities, security interests and claims.
-24-
(xii) Assuming that the Underwriter exer-
cises the over-allotment option to purchase any of the Optional Shares and makes
payment therefor in accordance with the terms of this Agreement, upon delivery
of the Optional Shares to the Underwriter hereunder, the Underwriter (assuming
it is a bona fide purchaser within the meaning of the Uniform Commercial Code)
will acquire good title to such Optional Shares, free and clear of any liens,
encumbrances, equities, security interests and claims.
(xiii) To the best of Company Counsel's
knowledge, there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any governmental agency, court or tribunal,
foreign or domestic, or before any private arbitration tribunal, pending or
threatened against the Company or any Subsidiary, or involving the Company's or
any Subsidiary's properties or businesses, other than as described in the
Prospectus, such description being accurate, and other than litigation incident
to the kind of business conducted by the Company which, individually and in the
aggregate, is not material.
(xiv) The Company and each Subsidiary each
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, service marks, copyrights, rights, trade secrets,
confidential information, processes and formulations used or proposed to be used
in the conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of Company Counsel's knowledge, neither the Company
nor any Subsidiary has infringed nor is infringing with the rights of others
with respect to the Intangibles; and, to the best of Company Counsel's
knowledge, neither the Company nor any Subsidiary has received any notice that
it has or may have infringed, is infringing upon or is conflicting with the
asserted rights of others with respect to the Intangibles which might, singly or
in the aggregate, materially adversely affect its business, results of
operations or financial condition and such counsel is not aware of any licenses
with respect to the Intangibles which are required to be obtained by the
Company. The opinions described in this Section 6(b)(xiv) may be given by
Company Counsel in reliance on the opinion of an attorney, reasonably acceptable
to Underwriter's Counsel, practicing in the patent area.
(xv) Company Counsel has participated in
reviews and discussions in connection with the preparation of the Registration
Statement and the Prospectus, and in the course of such reviews and discussions
and such other investigation as Company Counsel deemed necessary, no facts came
to its attention which lead it to believe that (A) the Registration Statement
(except as to the financial statements and other financial data contained
therein, as to which Company Counsel need not express an opinion), on the
Effective Date, contained any untrue statement of a material fact required to be
stated therein or omitted to state any material fact required to be stated
therein or necessary to
-25-
make the statements therein, in light of the circumstances under which they were
made, not misleading, or that (B) the Prospectus (except as to the financial
statements and other financial data contained therein, as to which Company
Counsel need not express an opinion) contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering its opinion pursuant to this
Section 6(b), Company Counsel may rely upon the certificates of government
officials and officers of the Company as to matters of fact, provided that
Company Counsel shall state that they have no reason to believe, and do not
believe, that they are not justified in relying upon such opinions or such
certificates of government officials and officers of the Company as to matters
of fact, as the case may be.
The opinion letter delivered pursuant to
this Section 6(b) shall state that any opinion given therein qualified by the
phrase "to the best of our knowledge" is being given by Company Counsel after
due investigation of the matters therein discussed.
(c) At the Closing Date, there will have been
delivered to the Underwriter a signed opinion of Underwriter's Counsel, dated as
of the Closing Date, to the effect that the opinions delivered pursuant to
Section 6(b) hereof appear on their face to be appropriately responsive to the
requirements of this Agreement, except to the extent waived by the Underwriter,
specifying the same, and with respect to such related matters as the Underwriter
may require.
(d) At the Closing Date (i) the Registration State-
ment and the Prospectus and any amendments or supplements thereto will contain
all material statements which are required to be stated therein in accordance
with the Act and the Regulations and will conform in all material respects to
the requirements of the Act and the Regulations, and 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; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or general affairs of
the Company from that set forth or contemplated in the Registration Statement
and the Prospectus, except changes which the Registration Statement and the
Prospectus indicate might occur after the Effective Date; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no material transaction, contract
-26-
or agreement entered into by the Company, other than in the ordinary course of
business, which would be required to be set forth in the Registration Statement
and the Prospectus, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the Company's
knowledge, threatened against the Company which is required to be set forth in
the Registration Statement and the Prospectus, other than as set forth therein,
and no proceedings will be pending or, to the best of the Company's knowledge,
threatened against the Company before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding would materially adversely affect the business, property,
financial condition or results of operations of the Company, other than as set
forth in the Registration Statement and the Prospectus. At the Closing Date,
there will be delivered to the Underwriter a certificate signed by the Chairman
of the Board or the President or a Vice President of the Company, dated the
Closing Date, evidencing compliance with the provisions of this Section 6(d) and
stating that the representations and warranties of the Company set forth in
Section 4 hereof were accurate and complete in all material respects when made
on the date hereof and are accurate and complete in all material respects on the
Closing Date as if then made; that the Company has performed all covenants and
complied with all conditions required by this Agreement to be performed or
complied with by the Company prior to or as of the Closing Date; and that, as of
the Closing Date, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or, to the best of his knowledge, are contemplated or threatened. In
addition, the Underwriter will have received such other and further certificates
of officers of the Company as the Underwriter or Underwriter's Counsel may
reasonably request.
(e) At the time that this Agreement is executed and
at the Closing Date, the Underwriter will have received a signed letter from
Xxxxx Xxxxxxxx LLP, dated the date such letter is to be received by the
Underwriter and addressed to it, confirming that it is a firm of independent
public accountants within the meaning of the Act and Regulations and stating
that: (i) insofar as reported on by them, in their opinion, the financial
statements of the Company included in the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration Statement
and Prospectus, inquiries of officers of the Company responsible for financial
and accounting matters as to the transactions and events subsequent to the date
of the latest audited financial statements of the Company, and a reading of the
-27-
minutes of meetings of the shareholders, the Board of Directors of the Company
and any committees of the Board of Directors, as set forth in the minute books
of the Company, nothing has come to their attention which, in their judgment,
would indicate that (A) during the period from the date of the latest financial
statements of the Company appearing in the Registration Statement and Prospectus
to a specified date not more than three business days prior to the date of such
letter, there have been any decreases in net current assets or net assets as
compared with amounts shown in such financial statements or decreases in net
sales or decreases [increases] in total or per share net income [loss] compared
with the corresponding period in the preceding year or any change in the
capitalization or long-term debt of the Company, except in all cases as set
forth in or contemplated by the Registration Statement and the Prospectus, and
(B) the unaudited interim financial statements of the Company, if any, appearing
in the Registration Statement and the Prospectus, do not comply as to form in
all material respects with the applicable accounting requirements of the Act and
the Regulations or are not fairly presented in conformity with generally
accepted accounting principles and practices on a basis substantially consistent
with the audited financial statements included in the Registration Statement or
the Prospectus; and (iii) they have compared specific dollar amounts, numbers of
shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and other
financial information contained in the Prospectus, to the extent that such
amounts, numbers, percentages and information may be derived from the general
accounting records 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.
(f) There shall have been duly tendered to the
Underwriter certificates representing the Offered Shares to be sold on the
Closing Date.
(g) The NASD shall have indicated that it has no
objection to the underwriting arrangements pertaining to the sale of the Shares
by the Underwriter.
(h) No action shall have been taken by the Commission
or the NASD the effect of which would make it improper, at any time prior to the
Closing Date or the Option Closing Date, as the case may be, for any member firm
of the NASD to execute transactions (as principal or as agent) in the Shares,
and no proceedings for the purpose of taking such action shall have been
instituted or shall be pending, or, to the best of the Underwriter's or the
Company's knowledge, shall be contemplated by the
-28-
Commission or the NASD. The Company represents at the date hereof, and shall
represent as of the Closing Date or Option Closing Date, as the case may be,
that it has no knowledge that any such action is in fact contemplated by the
Commission or the NASD.
(i) The Company meets the current and any existing
and proposed criteria for inclusion of the Shares in Nasdaq.
(j) All proceedings taken at or prior to the Closing
Date or the Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares shall be reasonably satisfactory
in form and substance to the Underwriter and to Underwriter's Counsel, and such
counsel shall have been furnished with all such documents, certificates and
opinions as they may request for the purpose of enabling them to pass upon the
matters referred to in Section 6(c) hereof and in order to evidence the accuracy
and completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company, or the compliance by
the Company with any of the conditions herein contained.
(k) As of the date hereof, the Company will have
delivered to the Underwriter the written undertakings of its officers, directors
and securityholders and/or registration rights holders, as the case may be, to
the effect of the matters set forth in Sections 5(l).
If any of the conditions specified in this Section
6 have not been fulfilled, this Agreement may be terminated by the Underwriter
on notice to the Company.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Underwriter, each officer, director, partner, employee and agent of the
Underwriter, and each person, if any, who controls the Underwriter 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 in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Underwriter
and each such person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in the Registration Statement, in any Preliminary Prospectus or in the
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented) or (ii) in any application or other document executed
by the Company, or based upon written information furnished by or
-29-
on behalf of the Company, filed in any jurisdiction in order to qualify the
Shares under the securities laws thereof (hereinafter "application"), or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances under which
they were made, unless such untrue statement or omission was made in such
Registration Statement, Preliminary Prospectus, Prospectus or application in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by the Underwriter or any such person through
the Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 7(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 7(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares which are the subject thereof from the
Underwriter or other indemnified person; (B) the Underwriter or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person; and (C) the Prospectus did not contain any untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
cause, claim, damage, expense or liability.
(b) The Underwriter agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company 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 in respect thereof), to which they or
any of them may become subject under the Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse the
Company and each such director, officer or controlling person for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application (including any application for registration of the Shares under
state securities or Blue Sky laws), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by the Underwriter expressly for use therein.
-30-
(c) Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought against
any indemnifying party under this Section 7, the indemnified party will notify
the indemnifying party in writing of the commencement thereof, and the
indemnifying party will, subject to the provisions hereinafter stated, assume
the defense of such action (including the employment of counsel satisfactory to
the indemnified party and the payment of expenses) insofar as such action
relates to an alleged liability in respect of which indemnity may be sought
against the indemnifying party. After notice from the indemnifying party of its
election to assume the defense of such claim or action, the indemnifying party
shall no longer be liable to the indemnified party under this Section 7 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable judgment of the
indemnified party or parties, it is advisable for the indemnified party or
parties to be represented by separate counsel, the indemnified party or parties
shall have the right to employ a single counsel to represent the indemnified
parties who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified parties thereof against the
indemnifying party, in which event the fees and expenses of such separate
counsel shall be borne by the indemnifying party. Any party against whom
indemnification may be sought under this Section 7 shall not be liable to
indemnify any person that might otherwise be indemnified pursuant hereto for any
settlement of any action effected without such indemnifying party's consent,
which consent shall not be unreasonably withheld.
8. Contribution. To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 7 hereof (subject to the limitations thereof) and it is
finally determined, by a judgment, order or decree not subject to further
appeal, that such claim for indemnification may not be enforced, even though
this Agreement expressly provides for indemnification in such case; or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the Exchange
Act, or otherwise, then the Company (including, for this purpose, any
contribution made by or on behalf of any director of the Company, any officer of
the Company who signed the Registration Statement and any controlling person of
the Company) as one entity and the Underwriter (including, for this purpose, any
contribution by or on behalf of each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and each officer, director, partner, employee and agent of the
Underwriter) as a second entity, shall contribute to the losses, liabilities,
claims, damages and expenses whatsoever to which any of them may be subject, so
that the Underwriter is responsible for the proportion thereof equal to the
percentage which the underwriting discount per Share set forth on the cover page
of the Prospectus represents of the initial public offering price per Share set
forth on the cover page of the
-31-
Prospectus and the Company is responsible for the remaining portion; provided,
however, that if applicable law does not permit such allocation, then, if
applicable law permits, other relevant equitable considerations such as the
relative fault of the Company and the Underwriter in connection with the facts
which resulted in such losses, liabilities, claims, damages and expenses shall
also be considered. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission or
alleged omission relates to information supplied by the Company or by the
Underwriter, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement, alleged statement,
omission or alleged omission. The Company and the Underwriter agree that it
would be unjust and inequitable if the respective obligations of the Company and
the Underwriter for contribution were determined by pro rata or per capita
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method of allocation that does not reflect the equitable
considerations referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and each officer, director, partner, employee and
agent of the Underwriter will have the same rights to contribution as the
Under-writer, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who has signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Underwriter contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of the
Underwriter, the Company or any of its directors and officers, or any
controlling person referred to in said Sections, and shall survive the delivery
of, and payment for, the Shares.
-32-
10. Termination of Agreement.
(a) The Company, by written or telegraphic notice to
the Underwriter, or the Underwriter, by written or telegraphic notice to the
Company, may terminate this Agreement prior to the earlier of (i) 11:00 A.M.,
New York City time, on the first full business day after the Effective Date; or
(ii) the time when the Underwriter, after the Registration Statement becomes
effective, releases the Offered Shares for public offering. The time when the
Underwriter "releases the Offered Shares for public offering" for the purposes
of this Section 10 means the time when the Underwriter releases for publication
the first newspaper advertisement, which is subsequently published, relating to
the Offered Shares, or the time when the Underwriter releases for delivery to
members of a selling group copies of the Prospectus and an offering letter or an
offering telegram relating to the Offered Shares, whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Shares and the obligation to purchase the Optional
Shares after exercise of the option referred to in Section 3 hereof, are subject
to termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Offered Shares or such
Optional Shares, as the case may be, if, prior to such time, any of the
following shall have occurred: (i) the Company withdraws the Registration
Statement from the Commission or the Company does not or cannot expeditiously
proceed with the public offering; (ii) the representations and warranties in
Section 4 hereof are not materially correct or cannot be complied with; (iii)
trading in securities generally on the New York Stock Exchange or the American
Stock Exchange will have been suspended; (iv) limited or minimum prices will
have been established on either such Exchange; (v) a banking moratorium will
have been declared either by federal or New York State authorities; (vi) any
other restrictions on transactions in securities materially affecting the free
market for securities or the payment for such securities, including the Offered
Shares or the Optional Shares, will be established by either of such Exchanges,
by the Commission, by any other federal or state agency, by action of the
Congress or by Executive Order; (vii) trading in any securities of the Company
shall have been suspended or halted by any national securities exchange, the
NASD or the Commission; (viii) there has been a materially adverse change in the
condition (financial or otherwise), prospects or obligations of the Company;
(ix) the Company will have sustained a material loss, whether or not insured, by
reason of fire, flood, accident or other calamity; (x) any action has been taken
by the government of the United States or any department or agency thereof
which, in the judgment of the Underwriter, has had a material adverse effect
upon the market or potential market for securities in general; or (xi) the
market for securities in general or political, financial or economic conditions
will have so materially adversely changed that, in the judgment of the
Underwriter, it will be impracticable to
-33-
offer for sale, or to enforce contracts made by the Underwriter for the resale
of, the Offered Shares or the Optional Shares, as the case may be.
(c) If this Agreement is terminated pursuant to
Section 6 hereof or this Section 10 or if the purchases provided for herein are
not consummated because any condition of the Underwriter's obligations hereunder
is not satisfied or because of any refusal, inability or failure on the part of
the Company to comply with any of the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company shall be unable to or does
not perform all of its obligations under this Agreement, the Company will not be
liable to the Underwriter for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 5(j), 7, 8 and 9 of this
Agreement.
11. Information Furnished by the Underwriter to the Company.
It is hereby acknowledged and agreed by the parties hereto that for the purposes
of this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and
8 hereof, the only information given by the Underwriter to the Company for use
in the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement appearing in the last paragraph on
page __ with respect to stabilizing the market price of Shares, the information
in the __ paragraph on page __ with respect to concessions and reallowances, and
the information in the ___ paragraph on page ___ with respect to the
determination of the public offering price, as such information appears in any
Preliminary Prospectus and in the Prospectus.
12. Notices and Governing Law. All communications hereunder
will be in writing and, except as otherwise provided, will be delivered at, or
mailed by certified mail, return receipt requested, or telegraphed to, the
following addresses: if to the Underwriter, to Whale Securities Co., L.P.,
Attention: Xxxxxxx X. Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, with
a copy to Xxxxxx Xxxxxxxxxx LLP, Attention: Xxxxxx X. Xxxxxxx, Esq., 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; if to the Company, addressed to it
at Xxxx Xxxxxx Golf, Inc., Attention: Xxxxxx X. Xxxxx, President and Chief
Executive Officer, 0000 Xxxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000, with a
copy to Troop Xxxxxxxxx Xxxxxxx & Xxxxxx, LLP, Attention: Xxxx X. Xxxxx, Esq.,
00000 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
This Agreement shall be deemed to have been made and
delivered in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
New York State Supreme Court, County of New York, or in the United
-00-
Xxxxxx Xxxxxxxx Xxxxx for the Southern District of New York, (2) waives any
objection which the Company may have now or hereafter to the venue of any such
suit, action or proceeding, and (3) irrevocably consents to the jurisdiction of
the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company mailed by certified mail to the Company's address shall
be deemed in every respect effective service of process upon the Company, in any
such suit, action or proceeding.
13. Parties in Interest. This Agreement is made solely for the
benefit of the Underwriter, the Company and, to the extent expressed, any person
controlling the Company or the Underwriter, each officer, director, partner,
employee and agent of the Underwriter, the directors of the Company, its
officers who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and, no other person will
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" will not include any purchaser of the Shares from the
Underwriter, as such purchaser.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
XXXX XXXXXX GOLF, INC.
By: ______________________________
Name:
Title:
Confirmed and accepted in New York, N.Y., as of the date first above written:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By: _______________________________
Name:
Title:
-35-
SCHEDULE A
(Subsidiaries of the Company)
1. Rhino Marketing, Inc.
c/o Xxxx Xxxxxx Golf, Inc.
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
(000) 000-0000
2. Gran Prix Marketing, Inc.
c/o Xxxx Xxxxxx Golf, Inc.
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
(000) 000-0000
