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EXHIBIT 1.0
1,500,000 SHARES OF COMMON STOCK
TEAM COMMUNICATIONS GROUP, INC.
UNDERWRITING AGREEMENT
June ___, 1998
National Securities Corporation
Representatives of the Several Underwriters
on Schedule A hereto
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
TEAM COMMUNICATIONS GROUP, INC., a California corporation (the "Company"),
hereby agrees with National Securities Corporation ("National") and Xxxxxxx and
Company Securities, Inc. ("Xxxxxxx") and each of the underwriters named in
Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 11), for
whom National and Xxxxxxx are acting as representatives (in such capacity,
National and Xxxxxxx shall hereinafter be referred to as "you" or the
"Representatives") with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective amount of
shares set forth in said Schedule A of the Company's common stock, no par value
per share (the "Common Stock") which aggregate 1,500,000 shares (the "Shares").
Upon your request, as provided in Section 2(b) of this Agreement, the Company
shall also issue and sell to the Underwriters, acting severally and not jointly,
up to an additional aggregate of 225,000 shares of Common Stock for the purpose
of covering over-allotments, if any. Such shares of Common Stock are hereinafter
referred to as the "Option Shares." Notwithstanding the foregoing, the
Underwriters shall purchase the first 30,000 Option Shares on a pro rata basis
from Xxx Xxxxx, an existing shareholder of the Company (such Shares are
hereinafter referred to as the "Cayre Over- Allotment Shares"). The Company also
proposes to issue and sell to you warrants (the "Representatives' Warrants")
pursuant to that certain Representatives' Warrant Agreement dated June __, 1998
between the Company and you (the "Representatives' Warrant Agreement") for the
purchase of an additional 150,000 shares of Common Stock. The shares of Common
Stock issuable upon exercise of the Representatives' Warrants are hereinafter
referred to as the "Representatives' Shares." The Shares, Option Shares, the
Representatives' Warrants, and the
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Representatives' Shares are more fully described in the Registration Statement
and the Prospectus referred to below.
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (Registration No. 333-26307)
including related preliminary prospectuses ("Preliminary Prospectuses"), for the
registration of the Shares, the Option Shares, the Cayre Over-Allotment Shares,
the Representatives' Warrants, the Representatives' Shares and 800,000 Shares of
Common Stock issuable upon exercise of currently outstanding warrants
("Warrants") issued by the Company as described in the Preliminary Prospectus
(the "Warrant Shares") (collectively, hereinafter referred to as the "Registered
Securities") under the Securities Act of 1933, as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the Regulations (as
defined below) of the Commission under the Act. The Warrants and Warrants shares
will not be purchased by the Underwriters. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement," and the form
of prospectus in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations, is hereinafter called the "Prospectus." For purposes
hereof, "Regulations" mean the rules and regulations adopted by the Commission
under either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority, to
the best of the Company's knowledge, has issued any order preventing or
suspending the use of any Preliminary Prospectus, the Registration Statement or
the Prospectus and no proceedings for a stop order suspending the effectiveness
of the Registration Statement have been instituted, or, to the Company's
knowledge, are threatened. Each of the Preliminary Prospectuses (see above), the
Registration Statement and the Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Act and
Regulations, and neither the Preliminary Prospectuses, the Registration
Statement nor the Prospectus at the time of filing thereof contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein and necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements made in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by or on behalf of the Underwriters expressly for use in
such Preliminary Prospectuses, Registration Statement or Prospectus. The
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Company agrees that the only such information supplied by the Underwriters is
included in the "Underwriting" Section and the "Legal Matters" Section with
respect to the identity of the Underwriters' legal counsel of Prospectus,
Registration Statement and Preliminary Prospectuses.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined in Section 2(c)
hereof) and each Option Closing Date (as defined in Section 2(b) hereof), if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus, as amended or supplemented as
required, will contain all statements which are required to be stated therein in
accordance with the Act and the Regulations, and will conform in all material
respects to the requirements of the Act and the Regulations; neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
conformity with information furnished to the Company in writing by or on behalf
of any Underwriter expressly for use in the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the state of California. The
Company does not own or control, directly or indirectly, any corporation,
partnership, trust, joint venture or other business entity other than the
subsidiaries listed in Exhibit 2.1 of the Registration Statement, if any. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of any
properties or the character of its operations require such qualification or
licensing and where the failure to do so qualify or be licensed could have a
material adverse effect on the financial condition, results of operations or
business of the Company. The Company has all requisite power and authority
(corporate and other), and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters), to
own or lease its properties and conduct its business as described in the
Prospectus, except where the failure to do so would not have a material adverse
effect on the financial condition, results of operations or business of the
Company; to the best of the Company's knowledge, the Company has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; and the Company has not received any notice
of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the business affairs, operations, properties, or
results of operations of the Company. The
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disclosures in the Registration Statement concerning the effects of federal,
state, local, and foreign laws, rules and regulations on the Company's business
as currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances in which they
were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Securities" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the Prospectus. The
Registered Securities and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform, in all material respects to
all statements with respect thereto contained in the Registration Statement and
the Prospectus. Except as disclosed in or contemplated by the Prospectus and the
financial statements of the Company and the related notes thereto included in
the Prospectus, the Company does not have outstanding any options to purchase,
or any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder as set forth in the Prospectus
conforms in all material respects with the requirements of the Act. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, and the holders thereof have no
rights of rescission with respect thereto and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company.
(f) The Registered Securities are not and will not be subject to
any preemptive or other similar rights of any shareholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and will conform
in all material respects to the description thereof contained in the Prospectus;
the holders thereof will not be subject to any liability solely by reason of
being holders; all corporate action required to be taken for the authorization,
issue and sale of the Registered Securities has been duly and validly taken; and
the certificates representing the Registered Securities will be in due and
proper form. Upon the issuance and delivery of the Registered Securities to be
sold by the Company hereunder, pursuant to the terms hereof, the Underwriters or
the Representatives (assuming they are bona fide purchasers within the meaning
of the Uniform Commercial Code), as the case may be, will acquire good and
marketable title to such Registered Securities free and clear of any lien,
charge, claim, encumbrance, pledge, security interest, defect, or other
restriction or equity of any kind whatsoever. No shareholder
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of the Company has any right which has not been waived in writing to require the
Company to register the sale of any shares owned by such shareholder under the
Act in the public offering contemplated by this Agreement. No further approval
or authority of the shareholders or the Board of Directors of the Company will
be required for the issuance and sale of the Shares, the Option Shares and the
Representatives' Warrants to be sold by the Company as contemplated herein.
(g) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, changes in shareholders' equity and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Regulations, consistently
applied throughout the periods involved. Except as otherwise set forth in or
contemplated by the Prospectus, there has been no material adverse change or
development involving a material prospective change in the condition, financial
or otherwise, or in the business, affairs, operations, properties, or results of
operation of the Company whether or not arising in the ordinary course of
business since the date of the financial statements included in the Registration
Statement and the Prospectus and the outstanding debt, the property, both
tangible and intangible, and the business of the Company conform in all material
respects to the descriptions thereof contained in the Registration Statement and
the Prospectus. Financial information set forth in the Prospectus under the
headings "Prospectus Summary - Selected Financial Data," "Capitalization," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly present, on the basis stated in the Prospectus, the
information set forth therein and have been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(h) The Company (i) has paid all federal, state, local, franchise,
and foreign taxes for which it is liable, including, but not limited to,
withholding taxes and amounts payable under of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information returns it is
required to furnish pursuant to the Code, (ii) has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(i) No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Registered Securities to be sold by the Company, (ii) the
purchase by the Underwriters of the Registered Securities from the Company and
the purchase by the Representatives of the Representatives' Warrants from the
Company, (iii) the consummation by the Company of any of its obligations under
this Agreement, or (iv) resales of the Registered Securities in connection with
the initial distribution contemplated hereby.
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(j) There is no action, suit, proceeding, inquiry, arbitration,
mediation, investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or, to the best of the Company's
knowledge, threatened against (or circumstances that may give rise to the same),
or involving the properties or businesses of, the Company which (i) questions
the validity of the capital stock of the Company, this Agreement, the Financial
Advisory Agreement or the Representatives' Warrant Agreement, or any action
taken or to be taken by the Company pursuant to or in connection with this
Agreement, the Financial Advisory Agreement or the Representatives' Warrant
Agreement, (ii) is required to be disclosed in the Registration Statement which
is not so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects), or (iii) might
materially and adversely affect the condition, financial or otherwise, or the
business, affairs, position, shareholders' equity, operation, properties, or
results of operations of the Company and its subsidiaries taken as a whole.
(k) The Company has the corporate power and authority to enter
into this Agreement, the Financial Advisory Agreement and the Representatives'
Warrant Agreement, and to consummate the transactions provided for in such
agreements; and this Agreement, the Financial Advisory Agreement and the
Representatives' Warrant Agreement have each been duly and properly authorized,
executed, and delivered by the Company. Each of this Agreement, the Financial
Advisory Agreement and the Representatives' Warrant Agreement constitutes a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its respective terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law), and none of the Company's
issue and sale of the Registered Securities (except for the Warrants and Warrant
Shares, which will not be purchased by the Underwriters pursuant to this
Agreement or distributed in connection with the Company's initial public
offering), execution, delivery or performance of this Agreement, the Financial
Advisory Agreement and the Representatives' Warrant Agreement, its consummation
of the transactions contemplated herein and therein, or the conduct of its
businesses as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant to
the terms of: (i) the articles of incorporation or by-laws of the Company, as
amended and restated: (ii) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, shareholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a party
or by which it is or may be bound or to which its properties or assets (tangible
or intangible) is or may be subject, or any
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indebtedness, except for any such breach, violation or default which would not
have a material adverse effect on the Company; or (iii) any statute, judgment,
decree, order, rule or regulation applicable to the Company of any arbitrator,
court, regulatory body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having jurisdiction over
the Company of any of their activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Registered Securities pursuant to
the Prospectus and the Registration Statement, the performance of this
Agreement, the Representatives' Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Registered Securities, except such as have
been or may be obtained under the Act and the regulations, may be required under
state securities or Blue Sky laws or may be required by the NASD in connection
with the Underwriters' purchase and distribution of the Registered Securities to
be sold by the Company hereunder (except for the Warrants and Warrant Shares,
which will not be purchased by the Underwriters pursuant to this Agreement or
distributed in connection with the Company's initial public offering).
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it may be
bound or to which its assets, properties or businesses may be subject have been
duly and validly authorized, executed and delivered by the Company and
constitute the legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws of general
application relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable law).
The descriptions in the Registration Statement of such agreements, contracts and
other documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by Form SB-2, and there
are no contracts or other documents which are required by the Act to be
described in the Registration Statement or filed as exhibits to the Registration
Statement which are not described or filed as required, and the exhibits which
have been filed are complete and correct copies of the documents of which they
purport to be copies.
(n) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus (i) the Company has not incurred any
material liabilities or obligations, indirect, direct or contingent, or entered
into any material verbal or written agreement or other transaction which is not
in the ordinary course of business or which could result in a material
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reduction in the future earnings of the Company; (ii) the Company has not
sustained any material loss or interference with its business or properties from
fire, flood, windstorm, earthquake, accident or other calamity, whether or not
covered by insurance; (iii) the Company has not paid or declared any dividends
or other distributions with respect to its capital stock, and the Company is not
in default in the payment of principal or interest on any outstanding debt
obligations; (iv) there has not been any change in the capital stock (other than
upon the sale of the Shares, the Option Shares, the Representatives' Shares
hereunder and the exercise of the Warrant shares by the holders thereof and upon
the exercise of options and warrants described in the Registration Statement)
of, or indebtedness material to, the Company (other than in the ordinary course
of business); (v) the Company has not issued any securities or incurred any
liability or obligation (which is not in the ordinary course of business),
primary or contingent, for borrowed money; and (vi) there has not been any
material adverse change in the condition (financial or otherwise), business,
properties, results of operations, or prospects of the Company.
(o) Except as disclosed in or specifically contemplated by the
Prospectus, (i) the Company has sufficient trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations to
conduct its business as now conducted; (ii) the expiration of any trademarks,
trade names, patent rights, copyrights, licenses, approvals or governmental
authorizations would not have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company; (iii) the Company has no knowledge of any infringement by it or its
subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) the Company
has no notice of any claim being made against the Company regarding trademark,
trade name, patent, copyright, license, trade secret or other infringement which
could have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company.
(p) The Company is not, nor has the Company received notice that
another party is, in default of the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, installment
sale agreement, lease, deed of trust, voting trust agreement, shareholders
agreement, note, loan or credit agreement, or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which the property or assets (tangible or intangible) of the
Company is subject or affected, other than any defaults which would not have a
material adverse effect on the Company.
(q) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or to
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its knowledge threatened against or involving the Company. To the Company's
knowledge, no representation question exists respecting the employees of the
Company. No collective bargaining agreement, or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or to its knowledge is imminent.
(r) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute to a
defined benefit plan, as defined in Section 3(35) of ERISA.
(s) None of the Company, nor any of its employees, directors,
shareholders, or affiliates (within the meaning of the Regulations) of any of
the foregoing has taken or will take directly or indirectly, any action designed
to or which has constituted or which might be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Registered Securities.
(t) The Company does not own any real property. The Company has
good title to all items of personal property stated in the Prospectus to be
owned or leased by it, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, or other restrictions or equities of
any kind whatsoever other than those referred to in the Prospectus, those which
do not materially affect the value or transferability of such property and do
not interfere with the use of such property by the Company and liens for taxes
not yet due and payable.
(u) Each of Stonefield Xxxxxxxxx, Inc. ("Stonefield"), and Price
Waterhouse LLP ("Price"), whose reports are filed with the Commission as a part
of the Registration Statement, are independent certified public accountants as
required by the Act and the Regulations.
(v) The Company has caused to be duly executed legally binding and
enforceable agreements pursuant to which all persons or entities that directly
or beneficially own Common Stock, as of the effective date of the Registration
Statement, have agreed not to, directly or indirectly, offer, offer to sell,
sell, grant any option for the sale of, transfer, assign, pledge, hypothecate or
otherwise encumber or dispose of any shares of Common Stock or securities
convertible into Common Stock, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Regulations or otherwise) or dispose of any interest therein
for a period from the date of the Prospectus until thirteen (13) months
following the date that the Registration Statement becomes effective, without
the prior written consent of National (the "Lock-up Agreements"); provided,
however, that such restriction shall not apply to the Cayre Over-Allotment
Shares. The
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Company has caused to be duly executed legally binding and enforceable
agreements pursuant to which all persons or entities that directly or
beneficially own Warrants, as of the effective date of the Registration
Statement, have agreed not to, directly or indirectly, offer, offer to sell,
sell, grant any option for the sale of, transfer, assign, pledge, hypothecate or
otherwise encumber or dispose of any Warrant Shares (either pursuant to Rule 144
of the Regulations or otherwise) or dispose of any interest therein for a period
from the date of the Prospectus until twelve (12) months following the date that
the Registration Statement becomes effective, without the prior written consent
of National (the "Warrant Lock-up Agreements").The Company will cause the
Transfer Agent (as defined herein) to place "stop transfer" orders on the
Company's stock ledgers in order to effect the Lock-up Agreements and the
Warrant Lock-up Agreements.
(w) Neither the Company nor any of the its officers, directors,
shareholders, employees or affiliates are a party to any claims, arrangements or
understandings, whether oral or written, nor has the Company or any such person
made any payments, for services in the nature of a finder's or origination fee
with respect to the sale of the Registered Securities hereunder that may affect
the Underwriters' compensation as determined by the National Association of
Securities Dealers, Inc. (the "NASD").
(x) The Common Stock has been approved for quotation on the Nasdaq
Small-Cap Market System.
(y) Neither the Company nor any of its officers, employees, agents
or any other person acting on behalf of the Company has, directly or indirectly,
given or agreed to give any money, gift or similar benefit to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency (domestic or foreign) or instrumentality of any
government (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist the Company in connection
with any actual or proposed transaction) which might subject the Company or any
other such person to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign). The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(z) Except as set forth in the Prospectus, no officer, director or
shareholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Regulations) of any of the
foregoing persons or entities has or has had, either directly or indirectly, (i)
an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected. Except as
set forth in the Prospectus there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements,
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arrangements, understandings or transactions, between or among the Company, and
any officer, director, principal shareholder (as such term is used in the
Prospectus) of the Company, or any affiliate or associate of any of the
foregoing persons or entities which is required to be disclosed in accordance
with Regulation S-B promulgated under the Act.
(aa) The Company is not, and does not intend to conduct its
business in a manner in which it would become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(ab) Any certificate signed by any officer of the Company and
delivered to the Underwriters or to the Representatives' Counsel (as defined in
Section 4(d) herein) shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(ac) The minute books of the Company have been made available to
the Underwriters and contain a complete summary of all meetings and actions of
the directors and shareholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(ad) The Company has not distributed and will not distribute prior
to the Closing Date any offering material in connection with the offering and
sale of the Shares in this offering other than the Prospectus, the Registration
Statement and the other materials permitted by the Act. Except as described in
the Prospectus, no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company as part of the
Registration Statement or to require the Company to file a registration
statement under the Act and no person or entity holds any anti-dilution rights
with respect to any securities of the Company.
(ae) The Company maintains insurance, directly or indirectly, by
insurers of recognized financial responsibility of the types and in the amounts
as are prudent, customary and adequate for the business in which it is engaged,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect. The Company has no reason to believe that
it will not be able to renew existing insurance coverage with respect to the
Company as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business, in either case,
at a cost that would not have a material adverse effect on the financial
condition, operations, business, assets or properties of the Company. The
Company has not failed to file any material claims, has no material disputes
with its insurance companies regarding any material claims submitted under its
insurance policies, and has complied with all material provisions contained in
its insurance policies.
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2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly agrees to purchase from the Company, at a price equal
to $_________ per share (that being the initial public offering price per Share
minus an underwriting discount to the Underwriters of 9% per Share), that number
of Shares set forth in Schedule A opposite the name of such Underwriter, subject
to such adjustment as the Representatives in their discretion shall make to
eliminate any sales or purchases of fractional shares, plus any additional
numbers of Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements, herein contained, but subject to the terms and
conditions herein set forth, the Underwriters, severally and not jointly, are
hereby granted an option to purchase all or any part of the Option Shares at a
price equal to $________ per share (that being the initial public offering price
per Share minus and underwriting discount to the Underwriters of 9% per Share).
The option granted hereby will expire 45 days after (i) the date the
Registration Statement becomes effective, if the Company has elected not to rely
on Rule 430A under the Regulations, or (ii) the date of this Agreement if the
Company has elected to rely upon Rule 430A under the Regulations, and may be
exercised in whole or in part from time to time (but not on more than two (2)
occasions) only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Shares upon notice by the
Representatives to counsel for the Company (at the address for copies of notices
as set forth in Section 13 below), setting forth the number of Option Shares as
to which the several Underwriters are then exercising the option and the time
and date of payment and delivery for any such Option Shares. Any such time and
date of delivery (an "Option Closing Date") shall be determined by the
Representatives, but shall not be sooner than three (3) business days, nor later
than five (5) business days, after the exercise of said option, nor in any event
prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon
by the Representatives and the Company. Notwithstanding the foregoing, the
Underwriters shall purchase the first 30,000 Option Shares from Xxxxxx Xxxxx, an
existing shareholder of the Company, and Cayre, by signing this Agreement,
hereby grants the Underwriters option to purchase such shares on the same terms
as described above. Nothing herein contained shall obligate the Underwriters to
exercise the over-allotment option described above. No Option Shares shall be
delivered unless the Shares shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the offices of Xxxxxx, Xxxxxxx &
Xxxxx LLP ("Representative's Counsel") at 000 Xxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx
00000 or at such other place as shall be agreed upon by the Representatives and
the Company. Such delivery and payment shall be made at 10:00 a.m. (New York
time) on _________, 1998, or at such other time and date as shall be agreed upon
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by Representatives and the Company, but no more than five (5) business days
after the date hereof (such time and date of payment and delivery being herein
called the "Closing Date"). In addition, in the event that any or all of the
Option Shares are purchased by the Underwriters, payment of the purchase price
for, and delivery of certificates for, such Option Shares shall be made at the
above mentioned offices of Representative's Counsel or at such other place as
shall be agreed upon by the Representatives and the Company on each Option
Closing Date as specified in the notice from the Representatives to the Company.
Delivery of the certificates for the Shares and the Option Shares, if any, shall
be made to the Underwriters against payment by the Underwriters, of the purchase
price for the Shares to the order of the Company and of the Option Shares, if
any, to the order of the Company, by wire transfer of same day funds. In the
event such option is exercised, each of the Underwriters, acting severally and
not jointly, shall purchase that proportion of the total number of Option Shares
then being purchased which the number of Shares set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Shares,
subject in each case to such adjustments as the Representatives in their
discretion shall make to eliminate any sales or purchases of fractional shares,
provided that the first 30,000 of such Shares shall be purchased by the
Underwriters from Xxxxxx Xxxxx on a pro rata basis, an existing shareholder of
the Company. Certificates for the Shares and the Option Shares, if any, shall be
in definitive, fully registered form, shall bear no restrictive legends and
shall be in such denominations and registered in such names as the Underwriters
may request in writing at least three (3) business days prior to Closing Date or
the relevant Option Closing Date, as the case may be. The certificates for the
Shares and the Option Shares, if any, shall be made available to the
Representatives at such office or such other place as the Representatives may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representatives Representatives' Warrants at a purchase price of $0.001 per
warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 150,000 shares of Common Stock. The aggregate purchase price of the
Representative's Warrants shall be $15. The Representatives' Warrants shall
expire five (5) years after the effective date of the Registration Statement and
shall be exercisable for a period of four (4) years commencing one (1) year from
the effective date of the Registration Statement at a price equaling 120% of the
initial public offering price of the Shares. The Representatives' Warrant
Agreement and form of Warrant Certificate shall be substantially in the form
filed as Exhibit 4.2 to the Registration Statement. Payment for the
Representatives' Warrants shall be made on the Closing Date.
3. Public Offering of the Shares. As soon after the Registration
Statement becomes effective as the Representatives deem advisable, the
Underwriters shall make a public offering of the Shares (other than to residents
of or in any jurisdiction in which qualification of the Shares is required and
has not become effective) at the price and upon the other terms set forth in the
Prospectus. The Representatives may from time to time, after the initial public
offering,
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increase or decrease the public offering price after distribution of the Shares
has been completed to such extent as the Representatives, in their sole
discretion deem advisable; provided, however, that the foregoing shall not
effect the per share purchase price from the Company set forth in Section 2(a)
above. The Underwriters may enter into one or more agreements as the
Underwriters, in each of their sole discretion, deem advisable with one or more
broker-dealers who shall act as dealers in connection with such public offering.
4. Covenants of the Company. The Company covenants and agrees with each
of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before completion of the initial distribution of
the offering of the Shares by the Underwriters of which the Representatives
shall not previously have been advised and furnished with a copy, or to which
the Representatives shall have objected or which is not in compliance with the
Act, the Exchange Act or the Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representatives and confirm the notice in
writing, (i) when the Registration Statement becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Prospectus, or
any amendment or supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Registered Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (iv) of the
receipt of any comments from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission or
any state securities commission authority shall enter a stop order or suspend
such qualification at any time, the Company will use its best efforts to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representatives) in accordance with the requirements of the
Act.
(d) The Company will give the Representatives notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the
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Company proposes for use by the Underwriters in connection with the offering of
the Registered Securities (except for the Warrants and Warrant Shares, which
will not be purchased by the Underwriters pursuant to this Agreement or
distributed in connection with the Company's initial public offering) which
differs from the corresponding prospectus on file with the Commission at the
time the Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the Regulations),
and will furnish the Representatives with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such amendment or supplement to which the
Representatives or Representatives' Counsel shall reasonably object.
(e) The Company shall endeavor in good faith, in cooperation with
the Representatives, at or prior to the time the Registration Statement becomes
effective, to qualify the Registered Securities for offering and sale under the
securities laws of such jurisdictions as the Representatives may reasonably
designate to permit the continuance of sales and dealings therein for as long as
may be necessary to complete the distribution, and shall make such applications,
file such documents and furnish such information as may be required for such
purpose; provided, however, the Company shall not be required to qualify as a
foreign corporation or become subject to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representatives agree that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered
under the Act, the Company shall use its best efforts to comply with all
requirements imposed upon it by the Act, as now and hereafter amended, and by
the Regulations, as from time to time in force, so far as necessary to permit
the continuance of sales of or dealings in the Registered Securities in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the Registered
Securities is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of counsel for the Company or
Representatives' Counsel, the Prospectus, as then amended or supplemented,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
if it is necessary at any time to amend or supplement the Prospectus to comply
with the Act, the Company will notify the Representatives promptly and prepare
and, subject to Section 4(a) hereof, file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act, each such
amendment or supplement to be satisfactory to Representatives' Counsel, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may request.
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(g) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representatives, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(h) During a period of three (3) years after the date hereof, the
Company will furnish to its shareholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
will make available to its shareholders unaudited quarterly reports of earnings,
and will deliver to the Representatives:
(i) concurrently with furnishing such quarterly reports to
its shareholders, statements of income of the Company for each
quarter in the form furnished to the Company's shareholders;
(ii) concurrently with furnishing such annual reports to its
shareholders, a copy of such annual report;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;
(iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
Nasdaq Small-Cap Market or any securities exchange on which the
Shares are listed;
(v) every press release and every material news item or
article of interest to the financial community in respect of the
Company or its affairs which was released or prepared by or on
behalf of the Company; and
(vi) any additional information of a public nature concerning
the Company (and any future subsidiaries) or its businesses which
the Representatives may reasonably request.
During such three-year period, if the Company has active subsidiaries, the
foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its subsidiaries are consolidated.
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(i) The Company will maintain a transfer agent (the "Transfer
Agent") and, if necessary under the jurisdiction of incorporation of the
Company, a registrar (which may be the same entity as the transfer agent) for
the Common Stock.
(j) The Company will furnish to the Representatives or on the
Representatives' order, without charge, at such place as the Representatives may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto, each Preliminary
Prospectus, the Prospectus, and all amendments and supplements thereto,
including any prospectus prepared after the effective date of the Registration
Statement, in each case as soon as available and in such quantities as the
Representatives may reasonably request.
(k) On or before the effective date of the Registration Statement,
the Company shall provide the Representatives with true copies of duly executed
Lock-up Agreements and Warrant Lock-up Agreements. On or before the Closing
Date, the Company shall deliver instructions to the Transfer Agent authorizing
it to place appropriate stop transfer orders on the Company's ledgers.
(l) The Company shall use its best efforts to cause its officers,
directors, shareholders or affiliates (within the meaning of the Regulations)
not to take, directly or indirectly, any action designed to, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company during the initial
distribution of the offering of the Shares.
(m) The Company shall apply the net proceeds from the sale of the
Shares substantially in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Regulations, and all such reports, forms and documents filed will comply
as to form and substance with the applicable requirements under the Act, the
Exchange Act, and the Regulations.
(o) The Company shall cause the Common Stock to be quoted on the
Nasdaq Small-Cap Market, and for a period of five (5) years from the date hereof
shall use its best efforts to maintain the quotation of the Common Stock on the
Nasdaq Small-Cap Market to the extent outstanding and to the extent so
qualified.
(p) For a period of two (2) years from the Closing Date, the
Company shall cause its transfer agent to furnish to the Representatives, if so
requested in writing, at the Company's sole expense, daily consolidated transfer
sheets relating to the Common Stock.
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(q) For a period of five (5) years after the effective date of the
Registration Statement the Company shall, at the Company's sole expense, take
all necessary and appropriate actions to further qualify the Company's
securities in all jurisdictions of the United States in order to permit
secondary sales of such securities pursuant to the Blue-Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing for
the registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to take all necessary and appropriate
actions to be included in Standard and Poor's Corporation Descriptions and
Xxxxx'x OTC Manual and to continue such inclusion for a period of not less than
five (5) years.
(s) The Company agrees that for a period of thirteen (13) months
following the effective date of the Registration Statement it will not, without
the prior written consent of National, offer, issue, sell, contract to sell,
grant any option for the sale of or otherwise dispose of any Common Stock, or
securities convertible into Common Stock, except for Common Stock issuable upon
exercise of the Representatives' Warrants, and shares of Common Stock issued
upon the exercise of currently outstanding Warrants or options issued under any
stock option plan in effect on the Closing Date, shares of Common Stock
automatically granted pursuant to any stock option plan in effect on the Closing
Date, shares of Common Stock issued pursuant to any employee stock purchase plan
in effect on the Closing Date or the Conversion Shares.
(t) For a period of twenty-five (25) days from the effective date
of the Registration Statement, the Company shall not without the prior written
consent of National or Representatives' Counsel, issue, directly or indirectly
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering contemplated hereby,
other than trade releases issued in the Company's business consistent with past
practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) seven (7) years from
the date hereof, and (ii) the sale to the public of the Representatives' Shares,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Form SB-2 (or other appropriate form) for the registration
under the Act of the Representatives' Shares.
(v) The Company agrees to allow one (1) designee of National to
attend all meetings of the Company's Board of Directors for a period of five (5)
years following the Closing. Such person shall receive all notices and other
correspondence and communications sent by the Company to members of the Board of
Directors. The Company shall reimburse such person for his/her out-of-pocket
expenses incurred in connection with his/her attendance at such meetings.
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(w) The Company agrees that within one hundred twenty (120) days
after the Closing it shall retain a public relations firm which is reasonably
acceptable to the Representatives. The Company shall keep such public relations
firm, or any replacement, for a period of two (2) years from the Closing. Any
replacement public relations firm shall be retained only with the consent of the
Representatives.
(x) The Company agrees that any and all future transactions
between the Company and its officers, directors, principal shareholders and the
affiliates of the foregoing persons will be on terms no less favorable to the
Company than could reasonably be obtained in arm's length transactions with
independent third parties, and that any such transactions requiring a payment of
more than $10,000 will be approved by a majority of the Company's outside
independent directors disinterested in the transaction.
(y) The Company shall prepare and deliver to the Representatives,
at the Company's sole expense, four bound volumes containing all correspondence
with regulatory officials, agreements, documents and all other materials
prepared in connection with this offering.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date
and each Option Closing Date (to the extent not previously paid) all expenses
and fees (other than fees of Representatives' Counsel, except as provided in
(iv) below) incident to the performance of the obligations of the Company under
this Agreement, the Financial Advisory Agreement and the Representatives'
Warrant Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred in
connection with the preparation, duplication, printing, filing, delivery and
mailing (including the payment of postage with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the duplication, mailing (including the payment of postage with
respect thereto) and delivery of this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreements, the Powers of Attorney, and
related documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the certificates representing the
Registered Securities, (iv) the qualification of the Registered Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum," the "Final Blue Sky Memorandum" and "Legal Investments Survey," if
any, and including reasonable disbursements and fees of counsel in connection
therewith, (v) expense of tombstone advertisements and other advertising costs
and expenses (not to exceed $10,000 in the aggregate), (vi) costs and expenses
in connection with the "road show," (limited to $10,000 for domestic road show
expenses and $3,000 for European road show expenses), (vii)
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costs and expenses of any independent counsel or consultant retained (provided
that the Company approves in writing of the retention of such independent
counsel or consultants in advance), (viii) fees and expenses of the transfer
agent and registrar, (ix) the fees payable to the Commission and the NASD and
(x) the fees and expenses incurred in connection with the listing of the
Registered Securities on the Nasdaq Stock Market and any other market or
exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 12, the
Company shall reimburse and indemnify the Representatives for all of their
actual out-of-pocket expenses including the fees and disbursements of
Representatives' Counsel, less any amounts already paid pursuant to Section 5(c)
hereof. In no event, however, will the Representatives, in the event the
offering is terminated, be entitled to retain or receive more than an amount
equal to their actual accountable out-of-pocket expenditures.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
Representatives on the Closing Date by certified or bank cashier's check or, at
the election of the Representatives, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to two
percent (2%) of the gross proceeds received by the Company from the sale of the
Shares, less $____ which has been paid to date. In the event the Representatives
elect to exercise the over-allotment option described in Section 2(b) hereof,
the Company further agrees to pay to the Representatives on the Option Closing
Date (by certified or bank cashier's check or, at the Representatives' election,
by deduction from the proceeds of the offering of the Option Shares) a
non-accountable expense allowance equal to two percent (2%) of the gross
proceeds received by the Company from the sale of the Option Shares.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, as the
case may be, if any, of the statements of officers of the Company made pursuant
to the provisions hereof; and the performance by the Company on and as of the
Closing Date and each Option Closing Date, if any, of its covenants and
obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York City time, on the date prior to the date of this
Agreement or such later date and time as shall be consented to in writing by the
Representatives, and, at Closing Date and each Option Closing Date, if any, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending or contemplated by the Commission and any request on the part
of the Commission for
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additional information shall have been complied with to the reasonable
satisfaction of Representatives' Counsel. If the Company has elected to rely
upon Rule 430A of the Regulations, the price of the Shares and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) of the Regulations within the prescribed time
period, and prior to Closing Date the Company shall have provided evidence
satisfactory to the Representatives of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A of the Regulations.
(b) The Representatives shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the opinion of Representatives' Counsel, is
material, or omits to state a fact which, in the opinion of Representatives'
Counsel, is material and is required to be stated therein or is necessary to
make the statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact which, in the
reasonable opinion of Representatives' Counsel, is material, or omits to state a
fact which, in the reasonable opinion of Representatives' Counsel, is material
and is required to be stated therein or is necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) On or prior to the Closing Date, the Underwriters shall have
received from Representatives' Counsel such opinion or opinions with respect to
the organization of the Company, the validity of the Registered Securities, the
Registration Statement, the Prospectus and other related matters as the
Representatives may request.
(d) At the Closing Date, the Underwriters shall have received the
opinions of Kelly, Lytton, Xxxxx & Xxxx ("KLMV"), counsel to the Company, dated
the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Representatives' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of
California, (B) is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership
or leasing of any properties or the character of its operations
requires such qualification or licensing, and (C) to the best of
such counsel's knowledge, has all requisite corporate power and
authority and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of
and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties
and conduct its business as described in the Prospectus.
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(ii) except as described in the Prospectus, and to such
counsel's knowledge after reasonable investigation, the Company does
not own an interest in any corporation, limited liability company,
partnership, joint venture, trust or other business entity;
(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization" and
"Description of Securities," and to the best knowledge of such
counsel, the Company is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for
this Agreement, the Representatives' Warrant Agreement, the Warrants
and as described in the Prospectus. The Registered Securities and
all other securities issued or issuable by the Company conform in
all material respects to the statements with respect thereto
contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable;
the holders thereof are not subject to personal liability by reason
of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of
the Company. The Registered Securities to be sold by the Company
hereunder and under the Representatives' Warrant Agreement are not
and will not be subject to any preemptive or other similar rights of
any shareholder, have been duly authorized and, when issued, paid
for and delivered in accordance with their terms, will be validly
issued, fully paid and non-assessable and conform in all material
respects to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the
authorization, issue and sale of the Registered Securities has been
duly and validly taken; and the certificates representing the
Registered Securities are in due and proper form. The
Representatives' Warrants constitute valid and binding obligations
of the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called
for thereby (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting
enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights
to indemnity or contribution may be limited by applicable law). Upon
the issuance and delivery pursuant to this Agreement of the
Registered Securities to be sold by the Company, the Company will
convey, against payment therefor as provided herein, to the
Underwriters and the Representatives, respectively, good and
marketable title to the Registered Securities to be purchased by the
Representatives free and clear of all liens and other encumbrances;
(iv) the Registration Statement is effective under the Act,
and, if applicable, filing of all pricing information has been
timely made in the appropriate form under Rule 430A, and no stop
order suspending the use of the Preliminary Prospectus, the
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Registration Statement or Prospectus or any part of any thereof or
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or
are pending or, to the best of such counsel's knowledge, threatened
or contemplated under the Act;
(v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and
statistical data included therein as to which no opinion need be
rendered) comply as to form in all material respects with the
requirements of the Act and the Regulations. Such counsel shall
state that such counsel has participated in conferences with
officers and other representatives of the Company and the
Representatives and representatives of the independent public
accountants for the Company, at which conferences the contents of
the Preliminary Prospectus, the Registration Statement, the
Prospectus, and any amendments or supplements thereto were
discussed, and, although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Preliminary Prospectus,
the Registration Statement and Prospectus, and any amendments or
supplements thereto, on the basis of the foregoing, no facts have
come to the attention of such counsel which lead them to believe
that either the Registration Statement or any amendment thereto, at
the time such Registration Statement or amendment became effective
or the Preliminary Prospectus or Prospectus or amendment or
supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial
statements and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration Statement
or Prospectus, and any amendments or supplements thereto);
(vi) to the best of such counsel's knowledge after reasonable
investigation, (A) there are no agreements, contracts or other
documents required by the Act to be described in the Registration
Statement and the Prospectus and filed as exhibits to the
Registration Statement other than those described in the
Registration Statement and the Prospectus and filed as exhibits
thereto; (B) the descriptions in the Registration Statement and the
Prospectus and any supplement or amendment thereto of contracts and
other documents to which the Company is a party or by which it is
bound are accurate in all material respects and fairly represent the
information required to be shown by Form SB-2; (C) there is not
pending or threatened against the Company any action, arbitration,
suit, proceeding, litigation, governmental or other proceeding
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending or
threatened against the Company which (x) is required to be disclosed
in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately
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summarized in all material respects), (y) questions the validity of
the capital stock of the Company or this Agreement, the Financial
Advisory Agreement or the Representatives' Warrant Agreement, or of
any action taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; and (D) there is no action,
suit or proceeding pending or threatened against the Company before
any court or arbitrator or governmental body, agency or official in
which there is a reasonable possibility of an adverse decision which
may result in a material adverse change in the financial condition,
business, affairs, shareholders' equity, operations, properties,
business or results of operations of the Company, which could
adversely affect the present or prospective ability of the Company
to perform its obligations under this Agreement, the Financial
Advisory Agreement or the Representatives' Warrant Agreement or
which in any manner draws into question the validity or
enforceability of this Agreement, the Financial Advisory Agreement
or the Representatives' Warrant Agreement;
(vii) the Company has the corporate power and authority to
enter into each of this Agreement, the Financial Advisory Agreement
and the Representatives' Warrant Agreement and to consummate the
transactions provided for therein; and each of this Agreement, the
Financial Advisory Agreement and the Representatives' Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement, the Financial Advisory Agreement
and the Representatives' Warrant Agreement, assuming due
authorization, execution and delivery by each other party thereto,
constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms (except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law), and none of the
Company's execution, delivery or performance of this Agreement, the
Financial Advisory Agreement and the Representatives' Warrant
Agreement, its consummation of the transactions contemplated herein
or therein, or the conduct of its business as described in the
Registration Statement, the Prospectus, and any amendments or
supplements thereto conflicts with or results in any breach or
violation of any of the terms or provisions of, or constitutes a
default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant
to the terms of (A) the Articles of Incorporation or By-laws of the
Company, as amended, (B) any license, contract, indenture, mortgage,
deed of trust, voting trust agreement, shareholders' agreement,
note, loan or credit agreement or any other agreement or instrument
known to such counsel to which the Company is a party or by which it
is bound, or (C) any federal, state or local statute, rule or
regulation applicable to the Company or any judgment, decree or
order
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known to such counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body
(including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its activities or
properties;
(viii) no consent, approval, authorization or order, and no
filing with, any court, regulatory body, government agency or other
body (other than such as may be required under federal securities or
Blue Sky laws, as to which no opinion need be rendered) is required
in connection with the issuance of the Registered Securities
pursuant to the Prospectus, and the Registration Statement, the
performance of this Agreement and the Representatives' Warrant
Agreement, and the transactions contemplated hereby and thereby;
(ix) to the best of such counsel's knowledge after reasonable
investigation, the properties and business of the Company conform in
all material respects to the description thereof contained in the
Registration Statement and the Prospectus;
(x) to the best knowledge of such counsel, and except as
disclosed in Registration Statement and the Prospectus, the Company
is not in breach of, or in default under, any term or provision of
any license, contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement,
shareholders' agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party
or by which the Company is bound or to which the property or assets
(tangible or intangible) of the Company is subject; and the Company
is not in violation of any term or provision of its Articles of
Incorporation or By-laws, as amended, and to the best of such
counsel's knowledge after reasonable investigation, not in violation
of any franchise, license, permit, judgment, decree, order, statute,
rule or regulation;
(xi) the statements in the Prospectus under "Dividend
Policy," "Description of Securities," and "Shares Eligible for
Future Sale" have been reviewed by such counsel, and insofar as they
refer to statements of law, descriptions of statutes, licenses,
rules or regulations or legal conclusions, are correct in all
material respects;
(xii) the Common Stock has been accepted for quotation on the
Nasdaq Small-Cap Market;
(xiii) to the best of such counsel's knowledge and based upon
a review of the outstanding securities and the contracts furnished
to such counsel by the Company, no person, corporation, trust,
partnership, association or other entity has the right to include
and/or register any securities of the Company in the Registration
Statement,
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require the Company to file any registration statement or, if filed,
to include any security in such registration statement;
(xiv) assuming due execution by the parties thereto other than
the Company, each Lock-up Agreement and Warrant Lock-up Agreement is
a legal, valid and binding obligation of the party thereto,
enforceable against the party and any subsequent holder of the
securities subject thereto in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law);
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws, rules and regulations of
the United States and the laws, rules and regulations of the State of
California, to the extent such counsel deems proper and to the extent specified
in such opinion, if at all, upon an opinion or opinions (in form and substance
satisfactory to Representatives' Counsel) of other counsel acceptable to
Representatives' Counsel, familiar with the applicable laws; (B) as to matters
of fact, to the extent they deem proper, on certificates and written statements
of responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to Representatives' Counsel and be reasonably acceptable to Representatives'
Counsel, if requested. The opinion of such counsel shall state that knowledge
shall not include the knowledge of a director or officer of the Company who is
affiliated with such firm in his or her capacity as an officer or director of
the Company. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriters shall have received
the favorable opinion of KLMV, counsel to the Company, dated the Option Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
Representatives' Counsel confirming as of such Option Closing Date the
statements made by KLMV in their opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option Closing
Date, if any, Representatives' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company or herein contained.
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(f) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, shareholders' equity or the business activities of the
Company, whether or not in the business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of its business,
entered into by the Company, from the latest date as of which the financial
condition of the Company is set forth in the Registration Statement and
Prospectus which is adverse to the Company; (iii) the Company shall not be in
default under any provision of any instrument relating to any outstanding
indebtedness which default has not been waived or which would not have a
material adverse effect on the Company; (iv) the Company shall not have issued
any securities (other than the Registered Securities and the Conversion Shares)
or declared or paid any dividend or made any distribution in respect of its
capital stock of any class and there has not been any change in the capital
stock, or any material increase in the debt (long or short term) or liabilities
or obligations (other than any increase in its short-term borrowings in the
ordinary course of business) of the Company (contingent or otherwise); (v) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been pending
or threatened (or circumstances giving rise to same) against the Company, or
affecting any of its respective properties or businesses before or by any court
or federal, state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may materially adversely
affect the business, operations, prospects or financial condition or income of
the Company, except as set forth in the Registration Statement and Prospectus;
and (vii) no stop order shall have been issued under the Act and no proceedings
therefor shall have been initiated, threatened or contemplated by the
Commission.
(g) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed on
behalf of the Company by the principal executive officer of the Company, dated
the Closing Date or Option Closing Date, as the case may be, to the effect that
such executive has carefully examined the Registration Statement, the Prospectus
and this Agreement, and that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and satisfied
all conditions (unless waived) contained in this Agreement on its
part to be performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been
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instituted or are pending or, to the best of each of such person's
knowledge after due inquiry, are contemplated or threatened under
the Act;
(iii) The Registration Statement and the Prospectus and, if
any, each amendment and each supplement thereto, contain all
statements and information required by the Act to be included
therein, and none of the Registration Statement, the Prospectus nor
any post-effective amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading and neither the Preliminary
Prospectus or any supplement thereto, as of their respective dates,
included any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and including the
Closing Date or the Option Closing Date, as the case may be, other
than in the ordinary course of its business, any material
liabilities or obligations, direct or contingent; (b) the Company
has not paid or declared any dividends or other distributions on its
capital stock; (c) the Company has not entered into any transactions
not in the ordinary course of its business; (d) there has not been
any change in the capital stock or material increase in long-term
debt or any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary course of
business) of the Company, (e) the Company has not sustained any
material loss or damage to its property or assets, whether or not
insured, (f) there is no litigation which is pending or, to the best
of each of such person's knowledge, threatened (or circumstances
giving rise to same) against the Company or any affiliated party of
any of the foregoing which is required to be set forth in an amended
or supplemented Prospectus which has not been set forth, and (g)
there has occurred no event required to be set forth in an amended
or supplemented Prospectus which has not been set forth.
(h) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters.
(i) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters in form
and substance satisfactory in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) to the
Underwriters and Representatives' Counsel, from Stonefield:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the
Act and the applicable Rules and Regulations;
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(ii) stating that it is their opinion that the financial
statements (and supporting schedules, if any) of the Company
included in the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the
Act and the Regulations thereunder and that the Representatives may
rely upon the opinion of Stonefield with respect to the financial
statements (and supporting schedules, if any) included in the
Registration Statement;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
financial statements of the Company (with an indication of the date
of the latest available unaudited interim financial statements), a
reading of the latest available minutes of the shareholders and
Board of Directors and the various committees of the Board of
Directors of the Company, consultations with officers and other
employees of the Company responsible for financial and accounting
matters and other specified procedures and inquiries, nothing has
come to their attention which would lead them to believe that (A)
the unaudited financial statements and supporting schedules of the
Company included in the Registration Statement, if any, do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the
Registration Statement, or (B) at a specified date not more than
five (5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock or
material increase in long-term debt of the Company, or any material
decrease in the shareholders' equity or net current assets or net
assets of the Company as compared with amounts shown in the March
31, 1998, balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration
Statement, or, if there was any change or decrease, setting forth
the amount of such change or decrease.
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company set forth
in the Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may be derived from
the general accounting records, including work sheets, of the
Company and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in accordance
with generally accepted auditing standards) set forth in the letter
and found them to be in agreement; and
(v) statements as to such other material matters incident to
the transaction contemplated hereby as the Representatives may
reasonably request.
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(j) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Stonefield a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect that
they reaffirm that statements made in the letter furnished pursuant to
Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of Subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial information
as specified by the Representatives and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(k) On each of Closing Date and Option Closing Date, if any, there
shall have been duly tendered to the Representatives for the several
Underwriters' accounts the appropriate number of Shares.
(l) No order suspending the sale of the Shares in any jurisdiction
designated by the Representatives pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Option Closing Date, if
any, and no proceedings for that purpose shall have been instituted or shall be
contemplated.
(m) On or before the Closing Date, the Company shall have executed
and delivered to the Representatives, (i) the Representatives' Warrant
Agreement, substantially in the form filed as Exhibit 4.2, to the Registration
Statement, in final form and substance satisfactory to the Representatives, and
(ii) the Representatives' Warrants in such denominations and to such designees
as shall have been provided to the Company in writing.
(n) On or before Closing Date, the Common Stock shall have been
duly approved for quotation on the Nasdaq Small-Cap Market.
(o) On or before Closing Date, there shall have been delivered to
the Representatives all of the Lock-up Agreements and Warrant Lock-up Agreements
in final form and substance satisfactory to Representatives' Counsel.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representatives may terminate this
Agreement or, if the Representatives so elect, they may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
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7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7 "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented); or
(B) in any application or other document or communication (in this Section 7
collectively called "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company in any
jurisdiction in order to qualify the Registered Securities under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, the Nasdaq Small-Cap Market or any securities exchange; or any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be; or (ii) any breach of any material representation, warranty, covenant or
agreement of the Company contained in this Agreement. The indemnity agreement in
this subsection (a) shall be in addition to any liability which the Company may
have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company, within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter or the Representatives expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any such application, provided
that such
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written information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Registered Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters or the Representatives for inclusion
in the Prospectus. Notwithstanding the foregoing, the liability of any
Underwriter in this Section 7(b) shall not exceed the amount paid to such
Underwriter in the form of selling commissions.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to so notify an indemnifying party shall not relieve it from any
liability which it may have otherwise or which it may have under this Section 7,
except to the extent that it has been prejudiced in any material respect by such
failure). In case any such action is brought against any indemnified party, and
it notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties and that it is a conflict of
interest for the indemnified party or parties to be represented by such counsel
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the reasonable fees and expenses of one additional counsel shall be
borne by the indemnifying parties. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
unreasonably withheld.
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(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 7, but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Registered Securities or (B) if the allocation provided by clause (A) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any case
where the Company is a contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Registered
Securities (before deducting expenses other than underwriting discounts and
commissions) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover Page
of the Prospectus. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Registered Securities
purchased by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect to which a claim for contribution may be made
against another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the
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omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have hereunder or otherwise than under this subparagraph (d), or to the extent
that such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements of the Company
at the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, any controlling person of any of
the Underwriters or the Company, and shall survive termination of this Agreement
or the issuance and delivery of the Registered Securities to the Underwriters
and the Representatives, as the case may be.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m., New York
City time, on the date hereof. For purposes of this Section 9, the Shares to be
purchased hereunder shall be deemed to have been so released upon the earlier of
dispatch by the Representatives of telegrams to securities dealers releasing
such shares for offering or the release by the Representatives for publication
of the first newspaper advertisement which is subsequently published relating to
the Shares.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representatives shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Representatives' reasonable opinion will in the immediate future disrupt the
financial markets; or (ii) any material adverse change in the financial markets
shall have occurred; or (iii) if trading on the New York Stock Exchange, the
Nasdaq Small-Cap Market, or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iv) if the United States shall
have become involved in a war or major hostilities, or if there shall have been
an escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; or (vi) if the Company shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not
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such loss shall have been insured, will, in the Representatives' reasonable
opinion, make it inadvisable to proceed with the delivery of the Shares; or
(vii) if there shall have been such a material adverse change in the prospects
or conditions of the Company, or such material adverse change in the general
market, political or economic conditions, in the United States or elsewhere as
in the Representatives' reasonable judgment would make it inadvisable to proceed
with the offering, sale and/or delivery of the Shares.
(b) If this Agreement is terminated by the Representatives in
accordance with any of the provisions of Section 6, Section 10(a), or Section
12, the Company shall promptly reimburse and indemnify the Underwriters pursuant
to Section 5(b) hereof. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 10, 11 and 12 hereof),
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 and Section 7 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Registered Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representatives shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Representatives shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 5% of
the total number of Shares to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 5% of the total
number of Shares, this Agreement shall terminate without liability on the part
of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representatives shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
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12. Default by the Company. If the Company shall fail at the Closing
Date or any Option Closing Date, as applicable, to sell and deliver the number
of Registered Securities which it is obligated to sell hereunder on such date,
then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Shares to be purchased on an Option Closing Date, the
Underwriters may at the Representatives' option, by notice from the
Representatives to the Company, terminate the Underwriters' obligation to
purchase Option Shares from the Company on such date) without any liability on
the part of any non-defaulting party other than pursuant to Section 5, Section 7
and Section 10 hereof. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representatives, c/o National Securities Corporation, 0000 Xxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx Xxxxxxxxxx 00000, Attention: President, with a copy, to Xxxxxx,
Xxxxxxx & Xxxxx LLP, 000 Xxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxx X. Xxxxxxx, Esq. Notices to the Company shall be directed to
the Company at 00000 Xxxxxxxx Xxxx., Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx,
Attention: CEO, with a copy, to Kelly, Lytton, Xxxxx & Xxxx, 0000 Xxxxxx xx xxx
Xxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx, Attention: Xxxxx X. Xxxx, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Registered Securities from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement, the Financial Advisory
Agreement and the Representatives' Warrant Agreement constitute the entire
agreement of the parties hereto and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing, signed by the
Representatives and the Company.
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If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
TEAM COMMUNICATIONS GROUP, INC.
By:______________________________________
Name:
Title:
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By:__________________________________________________
Name:
Title:
By:__________________________________________________
Name:
Title:
For themselves and as Representatives of the Underwriters named in Schedule A
hereto.
FOR PURPOSES OF SECTION 2(b) ONLY:
________________________________
Xxxxxx Xxxxx
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SCHEDULE A
Number of
Shares to be
Name of Underwriters Purchased
-------------------- ------------
National Securities Corporation
Xxxxxxx and Company, Inc.
TOTAL........................................ ____________
1,500,000
