Exhibit 1.2
DISCAS, INC.
800,000 Shares of Common Stock
and
800,000 Redeemable Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
___________ __, 1997
Roan Capital Partners L.P.
As Representative of the several Underwriters
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Discas, Inc., a Delaware corporation (the "Company"), hereby confirms
its agreement with the Underwriters named in Schedule A of this Underwriting
Agreement (the "Agreement") (the "Underwriters"), for whom you are acting as
representative (the "Representative"), as follows:
1. Description of the Securities.
The Company proposes to issue and sell to the Underwriters an
aggregate of 800,000 shares of common stock, $.0001 par value per share (the
"Common Stock"), and 800,000 redeemable common stock purchase warrants of the
Company (the "Warrants," and collectively with the Common Stock, the
"Securities") in the amounts set forth on Schedule A hereto. Each Warrant shall
entitle the holder to purchase one share of Common Stock for $5.00, subject to
adjustment. The Company proposes to grant to the Underwriters (or to the
Representative, individually) an option to purchase up to 120,000 additional
shares of Common Stock and up to an additional 120,000 Warrants (the
"Additional Securities"). The offering of Securities and Additional Securities
contemplated hereby may sometimes be referred to as the "Offering."
(a) The Warrants.
The Warrants are exercisable beginning thirteen (13) months from the
effective date of the Registration Statement, as defined
in Paragraph 2(a) (the "Effective Date"), and expire five years and one month
after the Effective Date, subject to prior redemption by the Company. The
shares of Common Stock issuable upon the exercise of the Warrants are
hereinafter referred to as the "Warrant Shares."
The Warrants will be redeemable at a price of $.10 per Warrant,
commencing thirteen (13) months after the Effective Date upon at least 30 days
prior written notice provided that the closing bid price of the Common Stock
(or closing sales price if listed on an exchange or on a reporting system that
provides last sales prices) for 20 consecutive trading days ending on the
fifteenth day immediately prior to the date on which notice of redemption is
given shall exceed 150% ($7.50 per share) of the current Warrant exercise price
(subject to adjustment), subject to the right of the holder to exercise his
purchase rights thereunder until redemption.
(b) Representative's Warrants.
The Company will sell to the Representative, for $10, a warrant to
purchase one share of Common Stock and one Warrant for each ten shares of
Common Stock and ten Warrants sold in this Offering excluding the Additional
Securities (a maximum of 800,000 shares of Common Stock and 800,000 Warrants)
at a price equal to $6.75 per share of Common Stock and $.14 per Warrant (the
"Representative's Warrants," and collectively with the Securities underlying
the Representative's Warrants, the "Representative's Securities"). The Warrants
underlying the Representative's Warrants shall be exercisable at a price of
$5.00 per Warrant. The Representative's Warrants shall be non-transferable
(other than to (i) officers of the Underwriters, and (ii) members of the
selling group and their officers or partners) for a period of 12 months
following the Effective Date. Thereafter, they are transferable for a period of
four years. If the Warrants underwriting the Representative's Warrants are not
exercised during their term, they shall, by their terms, automatically expire.
The Representative's Securities shall be registered for sale to the public and
shall be included in the Registration Statement filed in connection with the
Offering.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriters that:
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(a) The Company has filed with the Securities and Exchange
Commission (the "Commission"), a registration statement on Form SB-2 (File No.
333-______), including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities under the Securities Act
of 1933 (the "Act"). The Company will file further amendments to said
registration statement in the form to be delivered to you and will not, before
the registration statement becomes effective, file any other amendment thereto
to which you shall have objected in writing after having been furnished with a
copy thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
exhibits and all other documents filed as a part thereof or incorporated
therein), is hereinafter called the "Registration Statement", and the
prospectus, in the form filed with the Commission pursuant to Rule 424(b) of
the General Rules and Regulations of the Commission under the Act (the "
Regulations") or, if no such filing is made, the definitive prospectus used in
the Offering, is hereinafter called the "Prospectus". The Company has delivered
to you copies of each Preliminary Prospectus as filed with the Commission and
has consented to the use of such copies for purposes permitted by the Act.
(b) The Commission has not issued any orders preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects with the requirements of the
Act and has not 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, subject to the provisions set forth below and except as such
untrue statement or omission has been cured in the a subsequent preliminary
prospectus or in the final prospectus.
(c) When the Registration Statement becomes effective under the Act
and at all times subsequent thereto including the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined) and for such longer
periods as in the opinion of counsel for the Underwriters, a Prospectus is
required to be delivered in connection with the sale of the Securities by the
Underwriters, the Registration Statement and Prospectus, and any
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amendment thereof or supplement thereto, will contain all material statements
which are required to be stated therein in accordance with the Act and the
Regulations, and will in all material respects conform to the requirements of
the Act and the Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, 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 or omissions
made in reliance upon and in conformity with written information furnished to
the Company by you, for use in connection with the preparation of the
Registration Statement or Prospectus, or in any amendment thereof or supplement
thereto. It is understood that the statements set forth under the heading
"Underwriting" in the Prospectus with respect to (i) the amounts of the selling
concession and reallowance; (ii) the identity of counsel to the Underwriters
under the heading "Legal Matters"; and (iii) the information concerning the
NASD affiliation of the Underwriters constitute for purposes of this Section
the only information furnished in writing by or on behalf of the Underwriters
for inclusion in the Registration Statement and Prospectus, as the case may be.
(d) The Company and each of its subsidiaries (each a "Subsidiary")
are, and at the Closing Date and the Option Closing Date will be, corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation. The Company and each of its Subsidiaries
are duly qualified or licensed and in good standing as foreign corporations in
each jurisdiction in which their ownership or leasing of any properties or the
character of their operations requires such qualification or licensing, except
those jurisdictions in which the failure to so qualify would not have a
material adverse effect. The Company and each of its Subsidiaries have all
requisite corporate powers and authority, and, except as set forth in the
Registration Statement, the Company and each of its Subsidiaries and their
employees' have all material and necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies to own or lease their properties and conduct their
businesses as described in the Prospectus, and the Company and each of its
Subsidiaries are doing business and have been doing business during the period
described in the Registration Statement in compliance with all such material
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authorizations, approvals, orders, licenses, certificates and permits and all
material federal, state and local laws, rules and regulations concerning the
businesses in which the Company or its Subsidiaries are engaged. The
disclosures in the Registration Statement concerning the effects of federal,
state and local regulation on the Company's or its Subsidiaries' businesses as
currently conducted and as contemplated are correct in all material respects
and do not omit to state a material fact. The Company has all corporate power
and authority to enter into this Agreement and carry out the provisions and
conditions hereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained or will have been obtained
prior to the Closing Date.
(e) This Agreement has been duly and validly authorized and
executed by the Company. The Securities (including the Common Stock and the
Warrants), the Warrant Shares, the Representative's Warrants to be issued and
sold by the Company pursuant to this Agreement, the Securities issuable upon
exercise of the Representative's Warrants and payment therefor, and the Common
Stock and Warrant Shares underlying such Representative's Warrants, have been
duly authorized (and, in the case of the Common Stock and the Warrant Shares,
have been duly reserved for issuance) and, when issued and paid for in
accordance with this Agreement (and, in the case of the Warrant Shares, upon
exercise of the Warrants and payment to the Company of the exercise price
therefor), the Common Stock and Warrant Shares will be validly issued, fully
paid and non-assessable; the Common Stock, Warrants, Warrant Shares,
Representative's Warrants, Additional Securities and Representative's Warrants
Shares are not and will not be subject to the preemptive rights of any
stockholder of the Company and conform and at all times up to and including
their issuance will conform in all material respects to all statements with
regard thereto contained in the Registration Statement and Prospectus; and all
corporate action required to be taken for the authorization, issuance and sale
of the Common Stock, Warrants, Warrant Shares and Representative's Warrants has
been taken, and this Agreement constitutes a valid and binding obligation of
the Company, enforceable in accordance with its terms, to issue and sell, upon
exercise in accordance with the terms thereof, the number and kind of
securities called for thereby.
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof will not
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result in a breach or violation of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation, as amended, or
Bylaws of the Company or any of its Subsidiaries or of any evidence of
indebtedness, lease, contract or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their properties is bound, or under any applicable
law, rule, regulation, judgment, order or decree of any government,
professional advisory body, administrative agency or court, domestic or
foreign, having jurisdiction over the Company or any of its Subsidiaries or
their properties, or result in the creation or imposition of any lien, charge
or encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries; and no consent, approval, authorization or order of any court
or governmental or other regulatory agency or body is required for the
consummation by the Company or any of its Subsidiaries of the transactions on
their part herein contemplated, except such as may be required under the Act or
under state securities or blue sky laws, except where a breach, violation or
failure to obtain such consent would not have a material adverse effect upon
the business or operation of the Company or its Subsidiaries.
(g) Subsequent to the date hereof, and prior to the Closing Date
and the Option Closing Date, the Company will not issue or acquire any equity
securities except that the Company may make short-term investments as
contemplated in the "Use of Proceeds" section of the Prospectus. Except as
described in the Registration Statement, the Company does not have, and at the
Closing Date and at the Option Closing Date will not have, outstanding any
options to purchase or rights or warrants to subscribe for, or any securities
or obligations convertible into, or any contracts or commitments to issue or
sell shares of its Preferred Stock, Common Stock or any such options, warrants,
convertible securities or obligations.
(h) The financial statements and notes thereto included in the
Registration Statement and the Prospectus fairly present the financial position
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,
consistently applied throughout the periods involved.
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(i) Except as set forth in the Registration Statement, the Company
and each Subsidiary are not, and at the Closing Date and at the Option Closing
Date will not be, in violation or breach of, or default in, the due performance
and observance of any term, covenant or condition of any indenture, mortgage,
deed of trust, 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 or any of its Subsidiaries are a party or by
which the Company or any of its Subsidiaries may be bound or to which any of
the property or assets of the Company or any of its Subsidiaries are subject,
which violations, breaches, default or defaults, singularly or in the
aggregate, would have a material adverse effect on the Company or any of its
Subsidiaries. The Company and each of its Subsidiaries have not and will not
have taken any action in material violation of the provisions of the
Certificate of Incorporation, as amended, or the Bylaws of the Company or its
Subsidiaries or any statute or any order, rule or regulation of any court or
regulatory authority or governmental body having jurisdiction over or
application to the Company or its Subsidiaries, their businesses or properties.
(j) The Company and each of its Subsidiaries have, and at the
Closing Date and at the Option Closing Date will have, good and marketable
title to all properties and assets described in the Prospectus as owned by
them, free and clear of all liens, charges, encumbrances, claims, security
interests, restrictions and defects of any material nature whatsoever, except
such as are described or referred to in the Prospectus and liens for taxes not
yet due and payable. All of the material leases and subleases under which the
Company or any of its Subsidiaries are the lessor or sublessor of properties or
assets or under which the Company or any of its Subsidiaries hold properties or
assets as lessee as described in the Prospectus are, and will on the Closing
Date and the Option Closing Date be, in full force and effect, and except as
described in the Prospectus, the Company and its Subsidiaries are not and will
not be in default in respect to any of the terms or provisions of any of such
leases or subleases (which would have a material adverse effect on the
business, business prospects or operations of the Company or any of its
Subsidiaries taken as a whole), and no claim has been asserted by anyone
adverse to rights of the Company or any of its Subsidiaries as lessor,
sublessor, lessee or
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sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company or any of its Subsidiaries to continue
possession of the leased or subleased premises or assets under any such lease
or sublease except as described or referred to in the Prospectus, and the
Company and each of its Subsidiaries owns or leases all such properties as are
necessary to its operations as now conducted and, except as otherwise stated in
the Prospectus, as proposed to be conducted set forth in the Prospectus (which
would have a material adverse effect on the business, business prospects or
operations of the Company or any of its Subsidiaries taken as a whole).
(k) The authorized, issued and outstanding capital stock
of the Company as of , 1997 and as of the date of the Prospectus is as set
forth in the Prospectus under "Capitalization"; the shares of issued and
outstanding capital stock of the Company set forth thereunder have been duly
authorized, validly issued and are fully paid and non-assessable; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any shares of capital stock of the Company have
been granted or entered into by the Company; and the Common Stock, the Warrants
and all such options and warrants conform in all material respects, to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(l) Except as described in the Prospectus, the Company does not own
or control any capital stock or securities of, or have any proprietary interest
in, or otherwise participate in any other corporation, partnership, joint
venture, firm, association or business organization; provided, however, that
this provision shall not be applicable to the investment, if any, of the net
proceeds from the sale of the Securities sold by the Company in certificates of
deposits, savings deposits, short-term obligations of the United States
Government, money market instruments or other short-term investments.
(m) Jump, Green, Xxxxxx & Company, who have given their reports on
certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are incorporated in the Prospectus,
are with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, the Company has not (i) issued
any securities or incurred
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any liability or obligation, direct or contingent, for borrowed money; or (ii)
entered into any transaction other than in the ordinary course of business; or
(iii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
(o) There is no litigation or governmental proceeding pending or to
the knowledge of the Company or any Subsidiary threatened against, or involving
the properties or business of the Company or any Subsidiary which might
materially adversely affect the value, assets or the operation of the
properties or the business of the Company or any Subsidiary, except as referred
to in the Prospectus. Further, except as referred to in the Prospectus, there
are no pending actions, suits or proceedings related to environmental matters
or related to discrimination on the basis of age, sex, religion or race, nor is
the Company or any Subsidiary charged with or, to its knowledge, under
investigation with respect to any violation of any statutes or regulations of
any regulatory authority having jurisdiction over its business or operations,
and no labor disturbances by the employees of the Company or any Subsidiary
exist or, to the knowledge of the Company or any Subsidiary, have been
threatened.
(p) The Company has, and at the Closing Date and at the Option
Closing Date will have, filed all necessary federal, state and foreign income
and franchise tax returns or has requested extensions thereof (except in any
case where the failure to so file would not have a material adverse effect on
the Company), and has paid all taxes which it believes in good faith were
required to be paid by it except for any such tax that currently is being
contested in good faith or as described in the Prospectus.
(q) The Company has not at any time (i) made any contribution to
any candidate for political office, or failed to disclose fully any such
contribution, in violation of law, or (ii) made any payment to any state,
federal, foreign governmental or professional regulatory agency, officer or
official or other person charged with similar public, quasi-public or
professional regulatory duties, other than payments or contributions required
or allowed by applicable law.
(r) Except as set forth in the Registration Statement, to the
knowledge of the Company, neither the Company nor any of officer, director,
employee or agent of the Company has made any
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payment or transfer of any funds or assets of the Company or conferred any
personal benefit by use of the Company's assets or received any funds, assets
or personal benefit in violation of any law, rule or regulation, which is
required to be stated in the Registration Statement or necessary to make the
statements therein not misleading.
(s) On the Closing Date and on the Option Closing Date, all
transfer or other taxes, if any (other than income tax) which are required to
be paid, and are due and payable, in connection with the sale and transfer of
the Securities by the Company to the Underwriters will have been fully paid or
provided for by the Company as the case may be, and all laws imposing such
taxes will have been fully complied with in all material respects.
(t) There are no contracts or other documents of the Company which
are of a character required to be described in the Registration Statement or
Prospectus or filed as exhibits to the Registration Statement which have not
been so described or filed.
(u) The Company will apply the net proceeds from the sale of the
Securities sold by it for the purposes and in the manner set forth in the
Registration Statement and Prospectus under the heading "Use of Proceeds."
(v) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are executed
in accordance with management's general or specified authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (3) access to assets is permitted only in
accordance with management's general or specific authorizations; and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(w) Except as set forth in the Prospectus, no holder of any
securities of the Company has the right to require registration of any
securities because of the filing or effectiveness of the Registration
Statement.
(x) The Company has not taken and at the Closing Date will not have
taken, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock or the Warrants
to facilitate the sale or resale of such securities.
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(y) To the Company's knowledge, there are no claims for services in
the nature of a finder's origination fee with respect to the sale of the
Securities hereunder, except as set forth in the Prospectus.
(z) Other than the right of first refusal granted by the Company to
the Representative (as set forth in Section 3(aa) hereof), no right of first
refusal exists with respect to any sale of securities by the Company.
(aa) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to Underwriters was, when made, or as of the
Closing Date or as of the Option Closing Date will be materially inaccurate,
untrue or incorrect.
3. Covenants of the Company.
The Company covenants and agrees that:
(a) It will deliver to the Representative, without charge, two
conformed copies of each Registration Statement and of each amendment or
supplement thereto, including all financial statements and exhibits.
(b) The Company has delivered to each of the Underwriters, and each
of the Selected Dealers (as hereinafter defined) without charge, as many copies
as have been requested of each Preliminary Prospectus heretofore filed with the
Commission in accordance with and pursuant to the Commission's Rule 430 under
the Act and will deliver to the Underwriters and to others whose names and
addresses are furnished by the Underwriters or a Selected Dealer, without
charge, on the Effective Date of the Registration Statement, and thereafter
from time to time during such reasonable period as you may request if, in the
opinion of counsel for the Underwriters, the Prospectus is required by law to
be delivered in connection with sales by the Underwriters or a dealer, as many
copies of the Prospectus (and, in the event of any amendment of or supplement
to the Prospectus, of such amended or supplemented Prospectus) as the
Underwriters may request for the purposes contemplated by the Act. The Company
will take all necessary actions to furnish to whomever directed by the
Underwriters, when and as requested by the Underwriters, all necessary
documents, exhibits, information, applications, instruments and papers as may
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be reasonably required or, in the opinion of counsel to the Underwriters
desirable, in order to permit or facilitate the sale of the Securities.
(c) The Company has authorized the Underwriters to use, and make
available for use by prospective dealers, the Preliminary Prospectus, and
authorizes the Underwriters, all dealers selected by you in connection with the
distribution of the Securities (the "Selected Dealers") to be purchased by the
Underwriters and all dealers to whom any of such Securities may be sold by the
Underwriters or by any Selected Dealer, to use the Prospectus, as from time to
time amended or supplemented, in connection with the sale of the Securities in
accordance with the applicable provisions of the Act, the applicable
Regulations and applicable state law, until completion of the distribution of
the Securities and for such longer period as you may request if the Prospectus
is required under the Act, the applicable Regulations or applicable state law
to be delivered in connection with sales of the Securities by the Underwriters
or the Selected Dealers.
(d) The Company will use its best efforts to cause the Registration
Statement to become effective and will notify the Representative immediately,
and confirm the notice in writing: (i) when the Registration Statement or any
post-effective amendment thereto becomes effective; (ii) of the issuance by the
Commission of any stop order or of the initiation, or to the best of the
Company's knowledge, the threatening, of any proceedings for that purpose;
(iii) the suspension of the qualification of the Securities and the
Representative's Warrants, or underlying securities, for offering or sale in
any jurisdiction or of the initiating, or to the best of the Company's
knowledge the threatening, of any proceeding for that purpose; and (iv) of the
receipt of any comments from the Commission. If the Commission shall enter a
stop order at any time, the Company will make every reasonable effort to obtain
the lifting of such order at the earliest possible moment.
(e) During the time when a prospectus is required to be
delivered under the Act, the Company will comply with all requirements imposed
upon it by the Act and the Securities Exchange Act of 1934 (the "Exchange
Act"), as now and hereafter amended and by the Regulations, as from time to
time in force, as necessary to permit the continuance of sales of or dealings
in the Securities in accordance with the provisions hereof and the Prospectus.
If at any
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time when a prospectus relating to the Securities is required to be delivered
under the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or counsel for the Underwriters, the
Prospectus as then amended or supplemented includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time
to amend the Prospectus to comply with the Act, the Company will notify you
promptly and prepare and file with the Commission an appropriate amendment or
supplement in accordance with Section 10 of the Act and will furnish to you
copies thereof.
(f) The Company will endeavor in good faith, in cooperation with
you, at or prior to the time the Registration Statement becomes effective, to
qualify the Securities for offering and sale under the securities laws or blue
sky laws of such jurisdictions as you may reasonably designate. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction.
(g) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than the first day of
the fifteenth full calendar month following the Effective Date of the
Registration Statement, an earnings statement of the Company, which will be in
reasonable detail but which need not be audited, covering a period of at least
twelve months beginning after the Effective Date of the Registration Statement,
which earnings statements shall satisfy the requirements of Section 11(a) of
the Act and the Regulations as then in effect. The Company may discharge this
obligation in accordance with Rule 158 of the Regulations.
(h) During the period of five years commencing on the Effective
Date of the Registration Statement, the Company will furnish to its
stockholders an annual report (including financial statements audited by its
independent public accountants), in reasonable detail, and, at its expense,
furnish each of the Underwriters (i) within 90 days after the end of each
fiscal year of the Company, a consolidated balance sheet of the Company and its
consolidated subsidiaries and a separate balance sheet of each
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subsidiary of the Company the accounts of which are not included in such
consolidated balance sheet as of the end of such fiscal year, and consolidated
statements of operations, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries and separate statements of operations,
stockholders' equity and cash flows of each of the subsidiaries of the Company
the accounts of which are not included in such consolidated statements, for the
fiscal year then ended all in reasonable detail and all certified by
independent accountants (within the meaning of the Act and the Regulations),
(ii) within 45 days after the end of each of the first three fiscal quarters of
each fiscal year, similar balance sheets as of the end of such fiscal quarter
and similar statements of operations, stockholders' equity and cash flows for
the fiscal quarter then ended, all in reasonable detail, and subject to year
end adjustment, all certified by the Company's principal financial officer or
the Company's principal accounting officer as having been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, (iii) as soon as available, each report furnished to or filed
with the Commission or any securities exchange and each report and financial
statement furnished to the Company's shareholders generally and (iv) as soon as
available, such other material as the Representative may from time to time
reasonably request regarding the financial condition and operations of the
Company.
(i) For a period of eighteen months from the Closing Date, the
Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit), the Company's financial
statements for each of the first three quarters prior to the announcement of
quarterly financial information, the filing of the Company's 10-Q quarterly
report and the mailing of quarterly financial information to stockholders.
(j) Prior to the Closing Date or the Option Closing Date, the
Company will not issue, directly or indirectly, without your prior written
consent and that of counsel for the Representative, any press release or other
public announcement or hold any press conference with respect to the Company or
its activities with respect to this Offering.
(k) The Company will deliver to you prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date of the Registration Statement and will not file any
such amendment or supplement to
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which you shall reasonably object after being furnished such copy.
(l) During the period of 120 days commencing on the date hereof,
the Company will not at any time take, directly or indirectly, any action
designed to, or which will constitute or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Securities
to facilitate the sale or resale of any of the Securities.
(m) The Company will apply the net proceeds from the Offering
received by it in the manner set forth under "Use of Proceeds" in the
Prospectus.
(n) Counsel for the Company, the Company's accountants, and the
officers and directors of the Company will, respectively, furnish the opinions,
the letters and the certificates referred to in subsections of Paragraph 9
hereof, and, in the event that the Company shall file any amendment to the
Registration Statement relating to the offering of the Securities or any
amendment or supplement to the Prospectus relating to the offering of the
Securities subsequent to the Effective Date of the Registration Statement, such
counsel, such accountants, such officers and directors, respectively, will, at
the time of such filing or at such subsequent time as you shall specify, so
long as securities being registered by such amendment or supplement are being
underwritten by the Underwriters, furnish to you such opinions, letters and
certificates, each dated the date of its delivery, of the same nature as the
opinions, the letters and the certificates referred to in said Paragraph 9, as
you may reasonably request, or, if any such opinion or letter or certificate
cannot be furnished by reason of the fact that such counsel or such accountants
or any such officer or director believes that the same would be inaccurate,
such counsel or such accountants or such officer or director will furnish an
accurate opinion or letter or certificate with respect to the same subject
matter.
(o) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement in all material respects.
(p) The Company will reserve and keep available for issuance that
maximum number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Warrants and issuable upon exercise of the
Representative's Warrants
15
(including the underlying securities) outstanding from time to time.
(q) Following the Effective Date and from time to time thereafter,
so long as the Warrants are outstanding, the Company will timely prepare and
file at its sole cost and expense one or more post-effective amendments to the
Registration Statement or a new registration statement as required by law as
will permit Warrant holders to be furnished with a current prospectus in the
event Warrants are exercised, and to use its best efforts and due diligence to
have same be declared effective. The Company will deliver a draft of each such
post-effective amendment or new registration statement to the Underwriter at
least ten days prior to the filing of such post-effective amendment or
registration statement.
(r) Following the Effective Date and from time to time thereafter
so long as any of the Warrants remain outstanding, the Company will timely
deliver and supply to its warrant agent sufficient copies of the Company's
current Prospectus, as will enable such Warrant Agent to deliver a copy of such
Prospectus to any Warrant or other holder where such Prospectus delivery is by
law required to be made.
(s) So long as any of the Warrants remain outstanding, the Company
shall continue to employ the services of a firm of independent certified public
accountants reasonably acceptable to the Representative in connection with the
preparation of the financial statements to be included in any registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto (it being understood that Jump,Green, Xxxxxx and Company is acceptable
to the Representative). During the same period, the Company shall employ the
services of a law firm(s) acceptable to the Representative in connection with
all legal work of the Company, including the preparation of a registration
statement to be filed by the Company hereunder, or any amendment or supplement
thereto.
(t) So long as any of the Warrants remain outstanding, the Company
shall continue to appoint a Warrant Agent for the Warrants, who shall be
reasonably acceptable to the Representative.
(u) The Company agrees that it will, upon the Closing Date, for a
period of no less than three (3) years, engage a designee of the Representative
as an advisor (the "Advisor") to its
16
Board of Directors where such Advisor shall attend meetings of the Board,
receive all notices and other correspondence and communications sent by the
Company to members of its Board of Directors and shall be entitled to receive
compensation therefor equal to the entitlement of all non-employee directors.
Such Advisor shall also be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings including, but not limited to, food,
lodging, and transportation. The Company further agrees that during said three
(3) year period, it shall schedule no less than four (4) formal and "in person"
meetings of its Board of Directors in each such year and thirty (30) days
advance notice of such meetings shall be given to the Advisor. Further, during
such five (5) year period, the Company shall give notice to the Representative
with respect to any proposed acquisitions, mergers, reorganizations or other
similar transactions. In lieu of the Representative's right to designate an
Advisor, the Representative shall have the right during such five-year period,
in its sole discretion, to designate one person for election as a Director of
the Company and the Company will utilize its best efforts to obtain the
election of such person who shall be entitled to receive the same compensation,
expense reimbursements and other benefits set forth above.
The Company agrees to indemnify and hold the Underwriters and such
Advisor or Director harmless against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of your designee at any such meeting described herein. In the
event the Company maintains a liability insurance policy affording coverage for
the acts of its of officers and directors, it agrees, if possible, to include
the Representative's designee as an insured under such policy.
(v) Upon the Closing Date, the Company shall have entered into a
two year agreement with the Representative in form reasonably satisfactory to
the Representative (the "Consulting Agreement"), pursuant to which the
Representative will be retained as a management and financial consultant and
will be paid an aggregate fee of $85,400 all of which shall be paid upon the
Closing Date.
(w) The Company's Common Stock and Warrants shall be listed on the
Nasdaq SmallCap Market ("Nasdaq"), and on the Boston Stock Exchange ("BSE"),
not later than the Effective Date. Prior to the Effective Date, the Company
will make all filings required,
17
including registration under the Exchange Act, to obtain the listing of the
Common Stock and Warrants on Nasdaq and the BSE, and will effect and use its
best efforts to maintain such listings (unless the Company is acquired) for at
least five years from the date of this Agreement.
(x) The Company will apply for listing in Standard and Poors
Corporation Reports or Moodys OTC Guide and shall use its best efforts to have
the Company included in such publications for at least five years from the
Closing Date.
(y) For a period of twenty-four (24) months from the Closing Date,
no officer, director or holder of any securities of the Company prior to the
Offering will, directly or indirectly, offer, sell (including any short sale),
grant any option for the sale of, acquire any option to dispose of, or
otherwise dispose of any shares of Common Stock, including shares of Common
Stock issuable upon exercise of options, warrants or any convertible securities
of the Company, without the prior written consent of the Representative, other
than as set forth in the Registration Statement. In order to enforce this
covenant, the Company shall impose stop-transfer instructions with respect to
the securities owned by every stockholder prior to the Offering until the end
of such period (subject to any exceptions to such limitation on transferability
set forth in the Registration Statement). If necessary to comply with any
applicable Blue-sky Law, the shares held by such stockholders will be escrowed
with counsel for the Company or otherwise as required.
(z) Except for the issuance of shares of capital stock by the
Company in connection with a dividend, recapitalization, reorganization or
similar transactions or as result of the exercise of warrants or options
disclosed in or issued or granted pursuant to plans disclosed in the
Registration Statement, the Company shall not, for a period of twenty-four (24)
months following the Closing Date, directly or indirectly, offer, sell, issue
or transfer any shares of its capital stock, or any security exchangeable or
exercisable for, or convertible into, shares of the capital stock or register
any of its capital stock (under any form of registration statement, including
Form S-8), without the prior written consent of the Representative. Options
granted pursuant to plans must be exercisable at the fair market value on the
date of grant.
18
(aa) During the three-year period from the Effective Date, Roan
Capital Partners, L.P., individually, and not as Representative of the
Underwriters, shall have a right of first refusal to act as underwriter or
agent of any and all public or private offerings of the securities of the
Company, or any successor to or subsidiary of the Company or any other entity
in which the Company has an equity interest (collectively referred to herein as
the "Company"), by the Company or any secondary offering of the Company's
securities by any of its officers, directors and 5% or greater stockholders
("Principal Stockholders"). The Company has caused such Principal Stockholders
to deliver to the Representative on or before the date of this Agreement, an
agreement to this effect, as it relates to any proposed secondary offering by
such Principal Stockholders, in form and substance satisfactory to the
Representative and to counsel for the Representative.
(bb) For so long as any of the Warrants remain outstanding, the
Company shall maintain key person life insurance payable to the Company on the
life of Xxxxxxx X. XxXxxxx, its Chief Executive, in the amount of $1,000,000,
unless his employment with the Company is earlier terminated. In such event,
the Company will obtain a comparable policy on the life of his successor for
the balance of such period.
(cc) The Company will use its best efforts to obtain, as soon after
the Closing Date as is reasonably possible, liability insurance covering its
officers and directors.
(dd) The Company agrees that any conflict of interest arising
between a member of the Company's Board of Directors and the Company in
connection with such Director's dealing with, or obligations to, the Company,
shall be resolved by a vote of the majority of the independent members of the
Board of Directors.
(ee) The Company agrees that it will employ the services of a
financial public relations firm acceptable to the Representative for a period
of at least twelve months following the Effective Date.
4. Sale, Purchase and Delivery of Securities: Closing Date.
(a) The Company agrees to sell to the Underwriters, and the
Underwriters, on the basis of the warranties, representations
19
and agreements of the Company herein, and subject to the terms and conditions
herein, agree to purchase the Securities from the Company at a price of $5.00
per share of Common Stock and $.10 per Warrant, less an underwriting discount
of ten percent (10%) of the offering price for each security. The Underwriters
may allow a concession not exceeding $ per share of Common Stock and
$ per Warrant to Selected Dealers who are members of the National
Association of Securities Dealers, Inc ("NASD"), and to certain foreign
dealers, and such dealers may reallow to NASD members and to certain foreign
dealers a concession not exceeding $ per share of Common Stock and
$ per Warrant.
(b) Delivery of the Securities and payment therefor shall be made
at 10:00 A.M., New York time on the Closing Date, as hereinafter defined, at
the offices of the Representative or such other location as may be agreed upon
by you and the Company. Delivery of certificates for the Common Stock and
Warrants (in definitive form and registered in such names and in such
denominations as you shall request by written notice to the Company delivered
at least two business days' prior to the Closing Date), shall be made to you
for the account of the Underwriters against payment of the purchase price
therefor by certified or bank check or wire transfer payable in New York
Clearing House funds to the order of the Company. The Company will make such
certificates available for inspection at least two business days prior to the
Closing Date at such place as you shall designate.
(c) The "Closing Date" shall be , 1997, or such other date not
later than the sixth business day following the effective date of the
Registration Statement as you shall determine and advise the Company by at
least three full business days' notice, confirmed in writing.
(d) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Securities by the Company to the
Underwriters shall be borne by the Company. The Company will pay and hold the
Underwriters, and any subsequent holder of the Securities, harmless from any
and all liabilities with respect to or resulting from any failure or delay in
paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance
20
or sale to the Underwriters of the Securities or any portions thereof.
5. Sale Purchase and Delivery of Additional Securities: Option
Closing Date.
(a) The Company agrees to sell to the Underwriters, and upon the
basis of the representations, warranties and agreements of the Company herein
contained, subject to the satisfaction of all the terms and conditions of this
Agreement, the Underwriters shall have the option (the "Option") to purchase
the Additional Securities from the Company, at the same price per Security as
set forth in Paragraph 4(a) above. Additional Securities may be purchased
solely for the purpose of covering over-allotments made in connection with the
distribution and sale of the Securities.
(b) The Option to purchase all or part of the Additional Securities
covered thereby is exercisable by you at any time and from time to time before
the expiration of a period of 45 calendar days from the date of the Effective
Date of the Registration Statement (the "Option Period") by written notice to
the Company setting forth the number of Additional Securities for which the
Option is being exercised, the name or names in which the certificates for such
Additional Securities are to be registered and the denominations of such
certificates. Upon each exercise of the Option, the Company shall sell to the
Underwriters the aggregate number of Additional Securities specified in the
notice exercising such Option.
(c) Delivery of the Additional Securities with respect to which
Options shall have been exercised and payment therefor shall be made at 10:00
A.M., New York time on the Option Closing Date, as hereinafter defined, at the
offices of the Representative or at such other locations as may be agreed upon
by you and the Company. Delivery of certificates for Additional Securities
shall be made to you for the account of the Underwriters against payment of the
purchase price therefor by certified or bank check or wire transfer in New York
Clearing House Funds to the order of the Company. The Company will make
certificates for Additional Securities to be purchased at the Option Closing
Date available for inspection at least two business days prior to such Option
Closing Date at such place as you shall designate.
(d) The "Option Closing Date" shall be the date not
21
later than five business days after the end of the Option Period as you shall
determine and advise the Company by at lease three full business days' notice,
unless some other time is agreed upon between you and the Company.
(e) The obligations of the Underwriters to purchase and pay for
Additional Securities at such Option Closing Date shall be subject to
compliance as of such date with all the conditions specified in Paragraph 2
herein and the delivery to you of opinions, certificates and letters, each
dated such Option Closing Date, substantially similar in scope to those
specified in Paragraph 9 herein.
(f) The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Additional Securities by the Company to
the Underwriters shall be borne by the Company. The Company will pay and hold
the Underwriters, and any subsequent holder of Additional Securities, harmless
from any and all liabilities with respect to or resulting from any failure or
delay in paying federal and state stamp taxes, if any, which may be payable or
determined to be payable in connection with the original issuance or sale to
the Underwriters of the Additional Securities or any portion thereof.
6. Warrant Solicitation Fee.
The Company agrees to pay Roan Capital Partners L.P. ("Roan"), in its
individual capacity and not as representative of the underwriters, a fee of
seven percent (7%) of the aggregate exercise price of the Warrants if: (i) the
market price of the Common Stock is greater than the exercise price of the
Warrants on the date of exercise; (ii) the exercise of the Warrants are
solicited by a member of the NASD; (iii) the Warrants are not held in a
discretionary account; (iv) the disclosure of compensation arrangements was
made both at the tie of the Offering and at the time of the exercise of the
Warrant; and (v) the solicitation of the Warrant is not in violation of
Regulation M promulgated under the Exchange Act. The Company agrees not to
solicit the exercise of any Warrants other than through Roan and will not
authorize any other dealer to engage in such solicitation without the prior
written consent of the Representative which will not be unreasonably withheld.
The Warrant solicitation fee will not be paid in a non-solicited transaction.
No Warrant solicitation by Roan will occur prior to one year from the Effective
Date.
22
7. Representations and Warranties of the Underwriters.
The Underwriters represent and warrant to the Company that:
(a) The Underwriters are each members in good standing of the
National Association of Securities Dealers, Inc., and have complied with all
NASD requirements concerning net capital and compensation to be received in
connection with the Offering.
(b) To the Underwriters' knowledge, there are no claims for
services in the nature of a finder's origination fee with respect to the sale
of the Securities hereunder to which the Company is, or may become, obligated
to pay.
8. Payment of Expenses.
(a) The Company will pay and bear all costs, fees, taxes and
expenses incident to and in connection with: (i) the issuance, offer, sale and
delivery of the Securities, including all expenses and fees incident to the
preparation, printing, filing and mailing (including the payment of postage
with respect to such mailing) of the Registration Statement (including all
exhibits thereto), each Preliminary Prospectus, the Prospectus, and amendments
and post-effective amendments thereof and supplements thereto, and this
Agreement and related documents, Preliminary and Final Blue Sky Memoranda,
including the cost of preparing and copying all copies thereof in quantities
deemed necessary by the Underwriters; (ii) the costs of preparing and printing
all "Tombstone" and other appropriate advertisements; (iii) the printing,
engraving, issuance and delivery of the Common Stock, Warrants, Warrant Shares,
Additional Securities, Underwriters' Warrants and the securities underlying the
Underwriters' Warrant, including any transfer or other taxes payable thereon in
connection with the original issuance thereof; (iv) the qualification of the
Common Stock and Warrants under the state or foreign securities or "Blue Sky"
laws selected by the Underwriters and the Company, and disbursements and
reasonable fees of counsel for the Underwriters in connection therewith (not to
exceed $35,000) plus the filing fees for such states; (v) fees and
disbursements of counsel and accountants for the Company; (vi) other expenses
and disbursements incurred on behalf of the Company (vii) the filing fees
payable to the Commission and the National Association of Securities Dealers,
Inc. ("NASD"); (viii) any listing of the Common Stock and Warrants on a
securities exchange or on NASDAQ.
(b) In addition to the expenses to be paid and borne by the Company
referred to in Paragraph 8(a) above, the Company shall reimburse you at closing
for expenses incurred by you in connection with the Offering (for which you
need not make any accounting), in
23
the amount of 3% of the price to the public of the Securities and Additional
Securities sold in the Offering. This 3% non-accountable expense allowance
shall cover the fees of your legal counsel, but shall not include any expenses
for which the Company is responsible under Paragraph 8(a) above, including the
reasonable fees and disbursements of your legal counsel with respect to Blue
Sky matters. As of the date hereof, $ _________ has been advanced by the
Company to the Underwriters with respect to such non-accountable expense
allowance.
(c) In the event that the Company does not or cannot, for any
reason whatsoever other than a default by the Underwriters, expeditiously
proceed with the Offering, or if any of the representations, warranties or
covenants contained in this Agreement are not materially correct or cannot be
complied with by the Company, or business prospects or obligations of the
Company are adversely affected and the Company does not commence or continue
with the Offering at any time or terminates the proposed transaction prior to
the Closing Date, the Company shall reimburse the Underwriters on an
accountable basis for all out-of-pocket expenses actually incurred in
connection with the Underwriting, this Agreement and all of the transactions
hereby contemplated, including, without limitation, your legal fees and
expenses, up to an aggregate total of $100,000 less such sums which have
already been paid.
9. Conditions of Underwriters' Obligations.
The obligations of the Underwriters to consummate the transactions
contemplated by this Agreement shall be subject to the continuing accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of the Closing Date, the accuracy of the statements of the
Company and its officers and directors made pursuant to the provisions hereof,
and to the performance by the Company of its covenants and agreements hereunder
and under each certificate, opinion and document contemplated hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you and, on or prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement or the qualification or
registration of the
24
Securities under the securities laws of any jurisdiction shall have been issued
and no proceedings for that purpose shall have been instituted or shall be
pending or to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission or any such authorities of any jurisdiction and
any request on the part of the Commission or any such authorities for
additional information shall have been complied with to the reasonable
satisfaction of the Commission or such authorities and counsel to the
Underwriters and after the date hereof no amendment or supplement shall have
been filed to the Registration Statement or Prospectus without your prior
consent.
(b) The Registration Statement or the Prospectus or any amendment
thereof or supplement thereto shall not contain an untrue statement of a fact
which is material, or omit to state a fact which 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) Between the time of the execution and delivery of this
Agreement and the Closing Date, there shall be no litigation instituted against
the Company or any of its officers or directors and between such dates there
shall be no proceeding instituted or, to the Company's knowledge, threatened
against the Company or any of its officers or directors before or by any
federal, state or county commission, regulatory body, administrative agency or
other governmental body, domestic or foreign, in which litigation or proceeding
an unfavorable ruling, decision or finding would have a material adverse effect
on the Company or its business, business prospects or properties, or have a
material adverse effect on the financial condition or results of operation of
the Company.
(d) Each of the representations and warranties of the Company
contained herein and each certificate and document contemplated under this
Agreement to be delivered to you shall be true and correct at the Closing Date
as if made at the Closing Date, and all covenants and agreements contained
herein and in each such certificate and document to be performed on the part of
the Company, and all conditions contained herein and in each such certificate
and document to be fulfilled or complied with by the Company at or prior to the
Closing Date shall be fulfilled or complied with.
(e) At the Closing Date, you shall have received the
25
opinion of Xxxxxxx Xxxxxx & Green, P.C., counsel to the Company, dated as of
such Closing Date, addressed to the Underwriters and in form and substance
satisfactory to counsel to the Underwriters, to the effect that:
(i) The Company and each of its Subsidiaries are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation with full corporate power and authority,
and all licenses, permits, certifications, registrations, approvals, consents
and franchises to own or lease and operate their properties and to conduct
their businesses as described in the Registration Statement. The Company and
each of its Subsidiaries are duly qualified to do business as foreign
corporations and are in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company and each of its Subsidiaries;
(ii) The Company has full corporate power and authority to
execute, deliver and perform the Underwriting Agreement, the Consulting
Agreement, the Warrant Agreement and the Representative's Warrants and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Underwriting Agreement, the Consulting Agreement, the
Warrant Agreement and the Representative's Warrants by the Company, the
consummation by the Company of the transactions therein contemplated and the
compliance by the Company with the terms of the Underwriting Agreement, the
Consulting Agreement, the Warrant Agreement and the Representative's Warrants
have been duly authorized by all necessary corporate action, and each of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Representative's Warrants have been duly executed and delivered by the Company.
Each of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Representative's Warrants is a valid and binding obligation
of the Company, enforceable in accordance with their respective terms, subject,
as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the discretion of courts in granting equitable remedies and
except that enforceability of the indemnification provisions and the
contribution provisions set forth in the Underwriting Agreement may be limited
by the federal securities laws or public policy underlying such laws;
26
(iii) The execution, delivery and performance of the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement and the
Representative's Warrants by the Company, the consummation by the Company of
the transactions therein contemplated and the compliance by the Company with
the terms of the Underwriting Agreement, the Consulting Agreement, the Warrant
Agreement and the Representative's Warrants do not, and will not, with or
without the giving of notice or the lapse of time, or both, (A) result in a
violation of the Certificate of Incorporation, as the same may be amended, or
Bylaws of the Company or any of its Subsidiaries, (B) to the best of our
knowledge, result in a breach of, or conflict with, any terms or provisions of
or constitute a default under, or result in the modification or termination of,
or result in the creation or imposition of any lien, security interest, charge
or encumbrance upon any of the properties or assets of the Company or any of
its Subsidiaries pursuant to, any indenture, mortgage, note, contract,
commitment or other material agreement or instrument to which the Company or
any of its Subsidiaries are a party or by which the Company or any of its
Subsidiaries or any of their properties or assets are or may be bound or
affected, except where any of the foregoing would not result in a material
adverse effect upon the Company's or any Subsidiaries business or operations;
(C) to the best of our knowledge, violate any existing applicable law, rule or
regulation or judgment, order or decree known to us of any governmental agency
or court, domestic or foreign, having jurisdiction over the Company or any of
its Subsidiaries or any of their properties or businesses; or (D) to the best
of our knowledge, have any effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company or any of its
Subsidiaries to own or lease and operate their properties and to conduct their
business or the ability of the Company or any of its Subsidiaries to make use
thereof;
(iv) To the best of our knowledge, no authorization, approval,
consent, order, registration, license or permit of any court or governmental
agency or body (other than under the Act, the Regulations and applicable state
securities or Blue Sky laws) is required for the valid authorization, issuance,
sale and delivery of the Securities, the Additional Securities, the Common
Stock, the Warrants, the Warrant Shares, or the Representative's Warrants, and
the consummation by the Company of the transactions contemplated by the
Underwriting Agreement, the Consulting Agreement, the Warrant Agreement or the
Representative's
27
Warrants;
(v) The Registration Statement was declared effective under the
Act on __________ __, 1997; to the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued, and
no proceedings for that purpose have been instituted or are pending, threatened
or contemplated under the Act or applicable state securities laws;
(vi) The Registration Statement and the Prospectus, as of the
Effective Date (except for the financial statements and other financial data
included therein or omitted therefrom, as to which we express no opinion),
comply as to form in all material respects with the requirements of the Act and
Regulations and the conditions for use of a registration statement on Form SB-2
have been satisfied by the Company;
(vii) The description in the Registration Statement and the
Prospectus of statutes, regulations, contracts and other documents have been
reviewed by us, and, based upon such review, are accurate in all material
respects and present fairly the information required to be disclosed, and to
the best of our knowledge, there are no material statutes or regulations, or,
to the best of our knowledge, material contracts or documents, of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement, which are not so described
or filed as required.
To the best of our knowledge, none of the material provisions
of the contracts or instruments described above violates any existing
applicable law, rule or regulation or judgment, order or decree known to us of
any United States governmental agency or court having jurisdiction over the
Company or any of its assets or businesses;
(viii) The outstanding Common Stock and Warrants have been duly
authorized and validly issued. The outstanding Common stock is fully paid an
nonassessable. To the best of our knowledge, none of the outstanding Common
Stock has been issued in violation of the preemptive rights of any stockholder
of the Company. None of the holders of the outstanding Common Stock is subject
to personal liability solely by reason of being such a holder. The authorized
Common Stock conforms to the description thereof contained in the Registration
Statement and Prospectus. To
28
the best of our knowledge, except as set forth in the Prospectus, no holders of
any of the Company's securities has any rights, "demand," "piggyback" or
otherwise, to have such securities registered under the Act;
(ix) The issuance and sale of the Securities, the Additional
Securities, the Common Stock, the Warrants, the Warrant Shares and the
Representative's Warrants have been duly authorized and when issued will be
validly issued, fully paid and nonassessable, and the holders thereof will not
be subject to personal liability solely by reason of being such holders.
Neither the Securities, the Additional Securities, nor the Common Stock are
subject to preemptive rights of any stockholder of the Company. The
certificates representing the Securities are in proper legal form;
(x) The issuance and sale of the Warrant Shares and the
Representative's Warrants have been duly authorized and, when paid for, issued
and delivered pursuant to the terms of the Underwriters' Agreement or the
Representative's Warrants, as the case may be, the Warrants, the Warrant Shares
and the Representative's Warrants will constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms, to
issue and sell the Warrants, the Warrant Shares and/or Representative's
Warrants. All corporate action required to be taken for the authorization,
issuance and sale of the securities has been duly, validly and sufficiently
taken. The Common Stock and the Warrants have been duly authorized by the
Company to be offered in the form of the Securities. The Warrants, the Warrant
Shares and the Representative's Warrants conform to the descriptions thereof
contained in the Registration Statement and Prospectus;
(xi) The Underwriters have acquired good title to the
Securities, free and clear of all liens, encumbrances, equities, security
interests and claims, provided that the Underwriters are bona fide purchasers
as defined in ss.8-302 of the Uniform Commercial Code;
(xii) Assuming that the Underwriters exercise the
over-allotment option to purchase the Additional Securities and make payments
therefor in accordance with the terms of the Underwriting Agreement, upon
delivery of the Additional Securities to the Underwriters thereunder, the
Underwriters will acquire good title to the Additional Securities, free and
clear of any liens, encumbrances, equities, security interests and claims,
provided
28
that the Underwriters are bona fide purchasers as defined in ss.8-302 of the
Uniform Commercial Code;
(xiii) To the best of our knowledge, there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries before
any governmental agency, court or tribunal, foreign or domestic, or before any
private arbitration tribunal, pending or threatened against the Company or any
of its Subsidiaries or involving their properties or businesses, other than as
described in the Prospectus, such description being accurate, and other than
litigation incident to the kind of business conducted by the Company or any of
its Subsidiaries which, individually and in the aggregate, is not material,
and, except as otherwise disclosed in the Prospectus and the Registration
Statement, the Company and its Subsidiaries have complied with all federal and
state laws, statutes and regulations concerning its business;
(xiv) We have participated in reviews and discussions in
connection with the preparation of the Registration Statement and the
Prospectus. Although we are not passing upon and do not assume responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement, no facts came to our attention which lead us to believe
that (A) the Registration Statement (except as to the financial statements and
other financial data contained therein, as to which we express no opinion), on
the Effective Date, contained any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or that (B) the
Prospectus (except as to the financial statements and other financial data
contained therein, as to which we express no opinion) contains any untrue
statement or a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(f) On or prior to the Closing Date, counsel for the Underwriters
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review the matters
referred to in subparagraph (e) of this Paragraph 9, or in order to evidence
the accuracy, completeness or satisfaction of any of the representations,
warranties or conditions herein contained.
30
(g) Prior to the Closing Date:
(i) There shall have been no material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company 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, outside the ordinary
course of business, entered into by the Company from the latest date as of
which the financial condition of the Company is set forth in the Registration
Statement and Prospectus which is material to the Company, which is either (x)
required to be disclosed in the Prospectus or Registration Statement and is not
so disclosed, or (y) likely to have material adverse effect on the Company's
business or financial condition;
(iii) The Company shall not be in default under any material
provision of any instrument relating to any outstanding indebtedness, except as
described in the Prospectus;
(iv) No material amount of the assets of the Company shall have
been pledged, mortgaged or otherwise encumbered, except as set forth in the
Registration Statement and Prospectus;
(v) No action, suit or proceeding, at law or in equity, shall
have been pending or to its knowledge threatened against the Company or
affecting any of its properties or businesses before or by any court or federal
or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding would materially and adversely affect
the business, operations, prospects or financial condition or income of the
Company, taken as a whole, except as set forth in the Registration Statement
and Prospectus; and
(vi) No stop order shall have been issued under the Act and no
proceedings therefor shall have been initiated or, to the Company's knowledge,
threatened by the Commission.
(vii) Each of the representations and warranties of the Company
contained in this Agreement and in each certificate and document contemplated
under this Agreement to be delivered to you was, when originally made and is at
the time such certificate is dated, true and correct.
31
(h) Concurrently with the execution and delivery of this Agreement
and at the Closing Date, you shall have received a certificate of the Company
signed by the Chief Executive Officer of the Company and the principal
financial officer of the Company, dated as of the Closing Date, to the effect
that the conditions set forth in subparagraph (h) above have been satisfied and
that, as of the Closing Date, the representations and warranties of the Company
set forth in Paragraph 2 herein and the statements in the Registration
Statement and Prospectus were and are true and correct. Any certificate signed
by any of officer of the Company and delivered to you or for counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
the Underwriters as to the statements made therein.
(i) At the time this Agreement is executed, and at the Closing
Date, you shall have received a letter, addressed to the Underwriters and in
form and substance satisfactory in all respects to you and counsel for the
Underwriters, and including estimates of the Company's revenues and results of
operations for the period ending at the and of the month immediately preceding
the Effective Date and results of the comparable period during the prior fiscal
year, from Jump, Green, Xxxxxx and Company, dated as of the date of this
Agreement and as of the Closing Date.
(j) All proceedings taken in connection with the authorization,
issuance or sale of the Common Stock, Warrants, Warrant Shares, Additional
Securities, the Representative's Warrants and the Representative's Warrant
Shares as herein contemplated shall be satisfactory in form and substance to
you and to counsel to the Underwriters, and the Underwriters shall have
received from such counsel an opinion, dated as the Closing Date with respect
to such of these proceedings as you may reasonably require.
(k) The Company shall have furnished to you such certificates,
additional to those specifically mentioned herein, as you may have reasonably
requested in a timely manner as to the accuracy and completeness, at the
Closing Date, of any statement in the Registration Statement or the Prospectus,
as to the accuracy, at the Closing Date, of the representations and warranties
of the
32
Company herein and in each certificate and document contemplated under this
Agreement to be delivered to you, as to the performance by the Company of its
obligations hereunder and under each such certificate and document or as to the
fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(l) The obligation of the Underwriters to purchase Additional
Securities hereunder is subject to the accuracy of the representations and
warranties of the Company contained herein on and as of the Option Closing Date
and to the satisfaction on and as of the Option Closing Date of the conditions
set forth herein.
(m) On the Closing Date there shall have been duly tendered to you
for your account the appropriate number of shares of Common Stock and Warrants
constituting the Securities.
10. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless the Underwriters and each person, if any, who
controls the Underwriters ("controlling person") within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act, against any and all
losses, liabilities, claims, damages, actions and expenses or liability, joint
or several, whatsoever (including but not limited to any and all expense
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), joint or
several, to which it or such controlling persons may become subject under the
Act, the Exchange Act or under any other statute or at common law or otherwise
or under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any Preliminary Prospectus or the Prospectus (as from
time to time amended and supplemented); in any post-effective amendment or
amendments or any new registration statement and prospectus in which is
included the Warrant Shares of the Company issued or issuable upon exercise of
the Warrants, or Underwriters' Warrant Shares upon exercise of the
Underwriters' Warrants; or in any application or other document or written
communication (in this Paragraph 10 collectively called "application") executed
by the Company or based upon written information furnished by the Company filed
in any jurisdiction in order to qualify the Common Stock, Warrants, Warrant
Shares, Additional Securities, Underwriters'
33
Warrants and Underwriters' Warrant Shares (including the Shares issuable upon
exercise of the Warrants underlying the Underwriters' Warrants) under the
securities laws thereof or filed with the Commission or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in the light of the circumstances
under which they were made), unless such statement or omission was made in
reliance upon or 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 any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in application, as the
case may be. Notwithstanding the foregoing, the Company shall have no
liability under this Paragraph 10(a) if any such untrue statement or omission
made in a Preliminary Prospectus, is cured in the Prospectus and the
Underwriters failed to deliver to the person or persons alleging the liability
upon which indemnification is being sought, at or prior to the written
confirmation of such sale, a copy of the Prospectus. This indemnity will be in
addition to any liability which the Company may otherwise have.
(b) The Underwriters agree to indemnify and hold harmless the
Company and each of the officers and directors of the Company who have signed
the Registration Statement and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
the Underwriters in Paragraph 10(a), but only with respect to any untrue
statement or alleged untrue statement of any material fact contained in or any
omission or alleged omission to state a material fact required to be stated in
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or necessary to make the statements therein not
misleading or in any application made solely in reliance upon, and in
conformity with, written information furnished to the Company by you
specifically expressly for use in the preparation of such Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering.
This indemnity agreement will be in addition to any liability which the
Underwriters may otherwise
34
have. Notwithstanding the foregoing, the Underwriters shall have no liability
under this Paragraph 10(b) if any such untrue statement or omission made in a
Preliminary Prospectus is cured in the Prospectus, and the Prospectus is
delivered to the person or persons alleging the liability upon which
indemnification is being sought.
(c) If any action is brought against any indemnified party (the
"Indemnitee") in respect of which indemnity may be sought against another party
pursuant to the foregoing (the "Indemnitor"), the Indemnitor shall assume the
defense of the action, including the employment and fees of counsel (reasonably
satisfactory to the Indemnitee) and payment of expenses. Any Indemnitee 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 Indemnitee
unless the employment of such counsel shall have been authorized in writing by
the Indemnitor in connection with the defense of such action. If the Indemnitor
shall have employed counsel to have charge of the defense or shall previously
have assumed the defense of any such action or claim, the Indemnitor shall not
thereafter be liable to any Indemnitee in investigating, preparing or defending
any such action or claim. Each Indemnitee shall promptly notify the Indemnitor
of the commencement of any litigation or proceedings against the Indemnitee in
connection with the issue and sale of the Common Stock, Warrants, Warrants
Shares, Additional Securities, Underwriters' Securities or in connection with
the Registration Statement or Prospectus.
(d) In order to provide for just and equitable contribution under
the Act in any case in which: (i) the Underwriters make a claim for
indemnification pursuant to Paragraph 10 hereof, but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the time to appeal has expired or the last right of appeal has
been denied) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 10 provides for indemnification of
such case; or (ii) contribution under the Act may be required on the part of
the Underwriters in circumstances for which indemnification is provided under
this Paragraph 10, then, and in each such case, the Company and the
Underwriters shall
35
contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after any contribution from others) in such proportion so
that the Underwriters are responsible for the portion represented by dividing
the total compensation received by the Underwriters herein by the total
purchase price of all Securities sold in the public offering and the Company is
responsible for the remaining portion; provided, that in any such case, no
person guilty of a fraudulent misrepresentation (within the meaning of Section
11 (f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriters. As used in this Paragraph
10, the term "Underwriters" includes any officer, director, or other person who
controls the Underwriters within the meaning of Section 15 of the Act, and the
word "Company" includes any of officer, director or person who controls the
Company within the meaning of Section 15 of the Act. If the full amount of the
contribution specified in this paragraph is not permitted by law, then the
Underwriters and each person who controls the Underwriters shall be entitled to
contribution from the Company to the full extent permitted by law. No
contribution shall be requested with regard to the settlement of any matter
from any party who did not consent to the settlement.
(e) Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is made against another party (the "contributing party"), notify the
contributing party of the commencement thereof, but the omission so to notify
the contributing party will not relieve it from any liability it may have to
any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen (15)
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution without the written consent of such contributing
party. The indemnification provisions contained in this Paragraph 10 are in
addition to any other rights
36
or remedies which either party hereto may have with respect to the other or
hereunder.
11. Representations Warranties Agreements to Survive Delivery.
The respective indemnity and contribution agreements by the
Underwriters and the Company contained in Paragraph 10 hereof, and the
covenants, representations and warranties of the Company and the Underwriters
set forth in this Agreement, shall remain operative and in full force and
effect regardless of (i) any investigation made by the Underwriters or on its
behalf or by or on behalf of any person who controls the Underwriters, or by
the Company or any controlling person of the Company or any director or any of
officer of the Company, (ii) acceptance of any of the Securities and payment
therefor, or (iii) any termination of this Agreement, and shall survive the
delivery of the Securities and any successor of the Underwriters or the
Company, or of any person who controls you or the Company or any other
indemnified party, as the case may be, shall be entitled to the benefit of such
respective indemnity and contribution agreements. The respective indemnity and
contribution agreements by the Underwriters and the Company contained in this
Paragraph 11 shall be in addition to any liability which the Underwriters and
the Company may otherwise have.
12. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 10:00 A.M., New York
time, on the first full business day following the day on which you and the
Company receive notification that the Registration Statement became effective.
(b) This Agreement may be terminated by the Representative by
notifying the Company at any time on or before the Closing Date, if any
domestic or international event or act or occurrence has materially disrupted,
or in your opinion will in the immediate future materially disrupt, securities
markets; or if trading on the New York Stock Exchange, the American Stock
Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or NASDAQ or by order of the Commission or any other
governmental authority having
37
jurisdiction; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if the Company shall have
sustained a loss material or substantial to the Company taken as a whole by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in your opinion, make it inadvisable to proceed with the delivery of the
Securities; or if there shall have been a material adverse change in the
conditions of the securities market in general, as in your reasonable judgment
would make it inadvisable to proceed with the offering, sale and delivery of
the Securities; or if there shall have been a material adverse change in the
financial or securities markets, particularly in the over-the-counter market,
in the United States having occurred since the date of this Agreement.
(c) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Paragraph 12, the Company
shall be notified promptly by you by telephone or facsimile, confirmed by
letter.
(d) If this Agreement shall not become effective by reason of an
election of the Representative pursuant to this Paragraph 12 or if this
Agreement shall not be carried out within the time specified herein by reason
of any failure on the part of the Company to perform any undertaking, or to
satisfy any condition of this Agreement by it to be performed or satisfied, the
sole liability of the Company to the Underwriters, in addition to the
obligations assumed by the Company pursuant to Paragraph 8 herein, will be to
reimburse the Underwriters for the following: (i) Blue Sky counsel fees and
expenses to the extent set forth in Paragraph 8(a)(iv); (ii) Blue Sky filing
fees; and (iii) such reasonable out-of-pocket expenses of the Underwriters (
including the fees and disbursements of their counsel), to the extent set forth
in Paragraph 8(c), in connection with this Agreement and the proposed offering
of the Securities, but in no event to exceed the sum of $100,000 less such
amounts already paid.
Notwithstanding any contrary provision contained in this Agreement,
any election hereunder or any termination of this Agreement, and whether or not
this Agreement is otherwise carried out, the provisions of Paragraph 8 and 10
hereof shall not be in any way affected by such election or termination or
failure to
38
carry out the terms of this Agreement or any part hereof.
13. Notices.
All communications hereunder, except as herein otherwise specifically
provided, shall be in writing and, if sent to the Underwriters, shall be
mailed, delivered or telegraphed and confirmed to the Representative at Roan
Capital Partners L.P., 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxx Xxxx, with a copy thereof to Xxxxxxxxx Xxxxxxxxxxx, Esq.,
Gusrae Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and, if sent
to the Company, shall be mailed, delivered or telegraphed and confirmed to the
Company at 000-0 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000, Attention:
Xxxxxxx X. XxXxxxx, President, with a copy thereof to Xxxxxxx Xxxxxx & Green,
P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxx,
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 Paragraph 10 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 provision herein contained.
15. Construction.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York and shall supersede any
agreement or understanding, oral or in writing, express or implied, between the
Company and you relating to the sale of any of the Securities.
16. Jurisdiction and Venue.
The Company agrees that the courts of the State of New York shall have
jurisdiction over any litigation arising from this Agreement, and venue shall
be proper in the Southern District of New York.
17. Counterparts.
This agreement may be executed in counterparts.
If the foregoing correctly sets forth the under-
39
standing between you, the Selling Stockholders and the Company, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between us.
Very truly yours,
DISCAS, INC.
By:
-------------------------------
Xxxxxxx X. XxXxxxx, President
Accepted as of the date first
above written:
ROAN CAPITAL PARTNERS L.P.
By:
-------------------------------
SCHEDULE A
Number of Shares Number of
of Common Stock Warrants to
to be Purchased to be Purchased
--------------- ---------------
Underwriter
-----------
Roan Capital Partners L.P.
------- -------
Total: 800,000 800,000
======= =======
