1
EXHIBIT 1.1
1,300,000 Units
(each Unit consisting of (i) one share of Class A Common Stock;
(ii) one redeemable Class A warrant to purchase
one share of Class A Common Stock and one redeemable Class B warrant
and (iii) one redeemable Class B warrant)
ON'VILLAGE COMMUNICATIONS, INC.
UNDERWRITING AGREEMENT
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January __, 1997
▇.▇. ▇▇▇▇▇ Investment Banking Corp.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
On'Village Communications, Inc., a California corporation (the
"Company"), proposes to issue and sell to you, as underwriter (the
"Underwriters") pursuant to this Agreement (the "Agreement"), an aggregate of
1,300,000 Units, each unit being hereinafter referred to as a "Unit" and
consisting of (i) one share of Class A Common Stock, ("Shares"), (ii) one
redeemable Class A warrant ("Class A Warrants") to purchase one share of Class A
Common Stock and one redeemable Class B warrant ("Class B Warrant") at a price
of $6.50 from _______ __, 1997 to _______ __, 2002 and (iii) one redeemable
Class B Warrant to purchase one share of Class A Common Stock at a price of
$8.75 from _______ __, 1997 to _______ __, 2002. The Class A Warrants and Class
B Warrants are collectively referred to as the "Warrants". The Warrants are
subject to redemption, in certain instances commencing one year from the date of
this Agreement. In addition, the Company proposes to grant to the Underwriter
the option referred to in Section 2(b) to purchase all or any part of an
aggregate of 195,000 additional Units. Unless the context otherwise indicates,
the term "Units" shall include the 195,000 additional Units referred to above.
The aggregate of 1,300,000 Units to be sold by the Company,
together with all or any part of the 195,000 Units which the Underwriter has the
option to purchase, and the Shares and the Warrants comprising such Units, are
herein called the "Units." The Class A Common Stock of the Company to be
outstanding after giving effect to the sale of the Shares is herein called the
"Class A Common Stock." The Shares and Warrants included in the Units (including
the Units which the Underwriter have the option to purchase) are herein
collectively called the "Securities."
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You have advised the Company that you desire to purchase the
Units. The Company confirms the agreements made by it with respect to the
purchase of the Units you as follows:
1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, the Underwriter that:
(a) A registration statement (File No. 333- )
on Form SB-2 relating to the public offering of the Units, including a form of
prospectus subject to completion, copies of which have heretofore been delivered
to you, has been prepared by the Company in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, and has been filed with the Commission
under the Act and one or more amendments to such registration statement may have
been so filed. After the execution of this Agreement, the Company will file with
the Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (A) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Units that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b) under the
Act or (B) if the Company does not rely on Rule 434 under the Act a prospectus
in the form most recently included in an amendment to such registration
statement (or, if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule 430A under
the Act or permitted by Rule 424(b) under the Act and in the case of either
clause (i)(A) or (i)(B) of this sentence, as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment shall be furnished to
and approved by you prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement"
means such registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under the Act
and included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means (A) if the Company relies on Rule 434 under the Act, the Term
Sheet relating to the Shares and Warrants that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements; (B) if the Company does not rely on
Rule 434 under the Act, the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act or (C) if the Company does not rely on Rule 434
under the Act and if no prospectus is required to be filed pursuant to said Rule
424(b), such term means the prospectus included in the Registration
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Statement; except that if such registration statement or prospectus is amended
or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so supplemented, or both, as the case may be;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference to the "date" of a Prospectus that
includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus. At the time the
Registration Statement becomes effective and at all times subsequent thereto up
to and on the Closing Date (as hereinafter defined) or the Option Closing Date,
(as hereafter defined), as the case may be, (i) the Registration Statement and
Prospectus will in all respects conform to the requirements of the Act and the
Rules and Regulations; and (ii) neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make statements
therein not misleading; provided, however, that the Company makes no
representations, warranties or agreements as to information contained in or
omitted from the Registration Statement or Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
the Underwriter specifically for use in the preparation thereof. It is
understood that the statements set forth in the Prospectus on page 2 with
respect to stabilization, under the heading "Underwriting" and the identity of
counsel to the Underwriter under the heading "Legal Matters" constitute the only
information furnished in writing by or on behalf of the Underwriter for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect the Company's
business, properties or financial condition.
(d) The authorized, issued and outstanding
capital stock of the Company as of December 31, 1996 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 capital stock conforms to all statements
relating thereto contained in the Registration Statement and Prospectus.
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(e) The Units and the Shares are duly
authorized, and when issued and delivered pursuant to this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights of any security holder of the Company. Neither the filing of
the Registration Statement nor the offering or sale of the Units as contemplated
in this Agreement gives rise to any rights, other than those which have been
waived or satisfied, for or relating to the registration of any shares of Class
A Common Stock, except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Class A Common Stock
issuable upon exercise of the Warrants have been reserved for issuance upon the
exercise of the Warrants and when issued in accordance with the terms of the
Warrants and Warrant Agreement, will be duly and validly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights and no
personal liability will attach to the ownership thereof. The Warrant Agreement
has been duly authorized and, when executed and delivered pursuant to this
Agreement, will have been duly executed and delivered and will constitute the
valid and legally binding obligation of the Company enforceable in accordance
with its terms. The Warrants and the Warrant Agreement conform to the respective
descriptions thereof in the Registration Statement and Prospectus.
The Shares and the Warrants contained in the Unit Purchase
Option have been duly authorized and, when duly issued and delivered, such
Warrants will constitute valid and legally binding obligations of the Company
enforceable in accordance with their terms and entitled to the benefits provided
by the Unit Purchase Option. The Shares included in the Unit Purchase Option
(and the shares of Class A Common Stock issuable upon exercise of such Warrants)
when issued and sold, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
(f) This Agreement, the Unit Purchase Option,
the M/A Agreement (as defined herein), and the Escrow Agreement (as defined
herein) have been duly and validly authorized, executed and delivered by the
Company. The Company has full power and lawful authority to authorize, issue and
sell the Units to be sold by it hereunder on the terms and conditions set forth
herein, and no consent, approval, authorization or other order of any
governmental authority is required in connection with such authorization,
execution and delivery or with the authorization, issue and sale of the Units or
the Unit Purchase Option, except such as may be required under the Act or state
securities laws.
(g) Except as described in the Prospectus, the
Company is not in violation, breach or default of or under, and consummation of
the transactions herein
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contemplated and the fulfillment of the terms of this Agreement will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or assets
of the Company pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company is a party
or by which the Company may be bound or to which any of the property or assets
of the Company is subject, nor will such action result in any violation of the
provisions of the articles of incorporation or the by-laws of the Company, as
amended, or any statute or any order, rule or regulation applicable to the
Company of any court or of any regulatory authority or other governmental body
having jurisdiction over the Company.
(h) Subject to the qualifications stated in the
Prospectus, the Company has good and marketable title to all properties and
assets described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to its business; all of the material leases
and subleases under which the Company is the lessor or sublessor of properties
or assets or under which the Company holds properties or assets as lessee or
sublessee as described in the Prospectus are in full force and effect, and,
except as described in the Prospectus, the Company is not in default in any
material respect with respect to any of the terms or provisions of any of such
leases or subleases, and no claim has been asserted by anyone adverse to rights
of the Company as lessor, sublessor, lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the right of the
Company to continued 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 owns or leases all such properties described in the
Prospectus as are necessary to its operations as now conducted and, except as
otherwise stated in the Prospectus, as proposed to be conducted as set forth in
the Prospectus.
(i) BDO ▇▇▇▇▇▇▇ LLP, 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.
(j) The financial statements, together with
related notes, set forth in the Prospectus (or if the Prospectus is not in
existence, the most recent Preliminary Prospectus) or the Registration Statement
present fairly the financial position and results of operations and changes in
cash flow position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which they
apply. Said statements and Schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent during the periods involved. The information set forth under
the captions "Dilution", "Capitalization", and "Selected Financial Data" in the
Prospectus fairly present, on the basis stated in the Prospectus, the
information included therein. The pro forma financial information filed as part
of the Registration Statement or included in the Prospectus (or preliminary
prospectus) has been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and
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includes all adjustments necessary to present fairly the pro forma financial
condition and results of operations at the respective dates and for the
respective periods indicated and all assumptions used in preparing such pro
forma financial statements are reasonable.
(k) Subsequent to the respective dates as of
which information is given in the Registration Statement and Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus), the
Company has not incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and there has not been any change in the capital stock of, or any
incurrence of short-term or long-term debt by, the Company or any issuance of
options, warrants or other rights to purchase the capital stock of the Company
or any adverse change or any development involving, so far as the Company can
now reasonably foresee a prospective adverse change in the condition (financial
or other), net worth, results of operations, business, key personnel or
properties of it which would be material to the business or financial condition
of the Company and the Company has not become a party to, and neither the
business nor the property of the Company has become the subject of, any material
litigation whether or not in the ordinary course of business.
(l) Except as set forth in the Prospectus, there
is not now pending or, to the knowledge of the Company, threatened, any action,
suit or proceeding to which the Company is a party before or by any court or
governmental agency or body, which might result in any material adverse change
in the condition (financial or other), business prospects, net worth, or
properties of the Company, nor are there any actions, suits or proceedings
related to environmental matters or related to discrimination on the basis of
age, sex, religion or race; and no labor disputes involving the employees of the
Company exist or are imminent which might be expected to adversely affect the
conduct of the business, property or operations or the financial condition or
results of operations of the Company.
(m) Except as disclosed in the Prospectus, the
Company has filed all necessary federal, state and foreign income and franchise
tax returns and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been or to the knowledge of the Company might be asserted
against the Company.
(n) The Company has sufficient licenses, permits
and other governmental authorizations currently required for the conduct of its
business or the ownership of its properties as described in the Prospectus and
is in all material respects complying therewith and owns or possesses adequate
rights to use all material patents, patent applications, trademarks, service
marks, trade-names, trademark registrations, service ▇▇▇▇ registrations,
copyrights and licenses necessary for the conduct of such business and had not
received any notice of conflict with the asserted rights of others in respect
thereof. To the best knowledge of the Company, none of the activities or
business of the Company are in violation of, or cause the Company to violate,
any law, rule, regulation or order of the United States, any state, county or
locality, or of any agency or body of the United States or of any state, county
or locality, the
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violation of which would have a material adverse impact upon the condition
(financial or otherwise), business, property, prospective results of operations,
or net worth of the Company.
(o) The Company has not, directly or indirectly,
at any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(p) On the Closing Dates (hereinafter defined)
all transfer or other taxes, (including franchise, capital stock or other tax,
other than income taxes, imposed by any jurisdiction) if any, which are required
to be paid in connection with the sale and transfer of the Units to the
Underwriter hereunder will have been fully paid or provided for by the Company
and all laws imposing such taxes will have been fully complied with.
(q) All contracts and other documents of the
Company which are, under the Rules and Regulations, required to be filed as
exhibits to the Registration Statement have been so filed.
(r) The Company has not taken and will not take,
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 shares of Class A Common Stock
to facilitate the sale or resale of the Units hereby.
(s) The Company has no subsidiaries.
(t) The Company has not entered into any
agreement pursuant to which any person is entitled either directly or indirectly
to compensation from the Company for services as a finder in connection with the
proposed public offering.
(u) Except as previously disclosed in writing by
the Company to you, no officer, director or stockholder of the Company has any
affiliation or association with any member of the National Association of
Securities Dealers Inc. ("NASD").
(v) The Company is not, and upon receipt of the
proceeds from the sale of the Units will not be, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(w) The Company has not distributed and will not
distribute prior to the First Closing Date any offering material in connection
with the offering and sale of the Units other than the Preliminary Prospectus,
Prospectus, the Registration Statement or the other materials permitted by the
Act, if any.
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(x) The conditions for use of Form SB-2, as set
forth in the General Instructions thereto, have been satisfied.
(y) There are no business relationships or
related-party transactions of the nature described in Item 404 of Regulation S-B
involving the Company, the Subsidiaries and any person described in such Item
that are required to be disclosed in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) and that have not been
so disclosed.
(z) The Company has complied with all provisions
of Section 517.075 Florida Statutes relating to doing business with the
government of Cuba or with any person or affiliate located in Cuba.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties, and agreements
herein contained, the Company agrees to issue and sell to the Underwriter, and
Underwriter agrees to buy from the Company at $5.00 per Unit, at the place and
time hereinafter specified, 1,300,000 Units.
Delivery of the First Units against payment therefor
shall take place at the offices of ▇.▇. ▇▇▇▇▇ Investment Banking Corp., ▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. (or at such other place as may be designated by agreement
between you and the Company) at 10:00 a.m., New York time, on _______ __ , 1997,
or at such later time and date as you may designate, such time and date of
payment and delivery for the First Units being herein called the "First Closing
Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter to
purchase all or any part of an aggregate of an additional 195,000 Units at the
same price per Unit as the Underwriter shall pay for the First Units being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Units being referred to herein as the "Option Units"). This option may be
exercised within 30 days after the effective date of the Registration Statement
upon notice by you to the Company advising as to the amount of Option Units as
to which the option is being exercised, the names and denominations in which the
certificates for such Option Units are to be registered and the time and date
when such certificates are to be delivered. Such time and date shall be
determined by you but shall not be earlier than four nor later than ten full
business days after the exercise of said option, nor in any event prior to the
First Closing Date, and such time and date is referred to herein as the "Option
Closing Date." Delivery of the Option Units against payment therefor shall take
place at the offices of ▇.▇. ▇▇▇▇▇ Investment Banking Corp., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇.▇. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriter of First Units referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Class A Common Stock, whether in the form of
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cash, shares of Class A Common Stock or any other consideration, prior to the
Option Closing Date, such dividend or distribution shall also be paid on the
Option Units on the Option Closing Date.
(c) The Company will make the certificates for
the securities comprising the Units to be purchased by the Underwriter hereunder
available to you for checking at least two full business days prior to the First
Closing Date or the Option Closing Date (which are collectively referred to
herein as the "Closing Dates"). The certificates shall be in such names and
denominations as you may request, at least two full business days prior to the
Closing Dates. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Underwriter.
Definitive certificates in negotiable form for the
Units to be purchased by the Underwriter hereunder will be delivered by the
Company to you against payment of the purchase price by certified or bank
cashier's checks in New York Clearing House funds, payable to the order of the
Company.
In addition, in the event the Underwriter exercises
the option to purchase from the Company all or any portion of the Option Units
pursuant to the provisions of subsection (b) above, payment for such Units shall
be made to or upon the order of the Company by certified or bank cashier's
checks payable in New York Clearing House funds at the offices of ▇.▇. ▇▇▇▇▇
Investment Banking Corp., at the time and date of delivery of such Units as
required by the provisions of subsection (b) above, against receipt of the
certificates for such Units by the Underwriter for the account of the
Underwriter registered in such names and in such denominations as the
Underwriter may request.
It is understood that the Underwriter proposes to
offer the Units to be purchased hereunder to the public upon the terms and
conditions set forth in the Registration Statement, after the Registration
Statement becomes effective.
3. Covenants of the Company. The Company covenants and
agrees with the Underwriter that:
(a) The Company will use its best efforts to
cause the Registration Statement to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become effective, the Company will so advise you and
will not at any time, whether before or after the effective date, file the
Prospectus, Term Sheet or any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you or your counsel shall have objected in
writing or which is not in compliance with the Act and the Rules and
Regulations. At any time prior to the later of (A) the completion by the
Underwriter of the distribution of the Units contemplated
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hereby (but in no event more than nine months after the date on which the
Registration Statement shall have become or been declared effective) and (B) 25
days after the date on which the Registration Statement shall have become or
been declared effective, the Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which, in your opinion, may be necessary or advisable in
connection with the distribution of the Units.
As soon as the Company is advised thereof, the
cCompany will advise you, and confirm the advice in writing, of the receipt of
any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order or
threat thereof suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Units for offering in any jurisdiction,
or of the institution of any proceedings for any of such purposes, and will use
its best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes the Underwriter and dealers to use the Prospectus in
connection with the sale of the Units for such period as in the opinion of
counsel to the Underwriter the use thereof is required to comply with the
applicable provisions of the Act and the Rules and Regulations. In case of the
happening, at any time within such period as a Prospectus is required under the
Act to be delivered in connection with sales by an underwriter or dealer of any
event of which the Company has knowledge and which materially affects the
Company or the securities of the Company, or which in the opinion of counsel for
the Company or counsel for the Underwriter should be set forth in an amendment
of the Registration Statement or a supplement to the Prospectus in order to make
the statements therein not then misleading, in light of the circumstances
existing at the time the Prospectus is required to be delivered to a purchaser
of the Units or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the Rules and Regulations, the Company
will notify you promptly and forthwith prepare and furnish to you copies of such
amended Prospectus or of such supplement to be attached to the Prospectus, in
such quantities as you may reasonably request, in order that the Prospectus, as
so amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus or supplement
to be attached to the Prospectus shall be without expense to the Underwriter,
except that in case any Underwriter is required, in connection with the sale of
the Units to deliver a Prospectus nine months or more after the effective date
of the Registration Statement, the Company will upon request of and at
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the expense of the Underwriter, amend or supplement the Registration Statement
and Prospectus and furnish the Underwriter with reasonable quantities of
prospectuses complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 and the rules and
regulations thereunder in connection with the offering and issuance of the
Units.
(b) The Company will use its best efforts to
qualify to register the Units for sale under the securities or "blue sky" laws
of such jurisdictions as the Underwriter may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or to execute a
general consent of service of process in any jurisdiction in any action other
than one arising out of the offering or sale of the Units. The Company will,
from time to time, prepare and file such statements and reports as are or may be
required to continue such qualification in effect for so long a period as the
Underwriter may reasonably request.
(c) If the sale of the Units provided for herein
is not consummated for any reason caused by the Company, the Company shall pay
all costs and expenses incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in Section
8, including the actual accountable out-of-pocket expenses of the Underwriter.
(d) The Company will use its best efforts to (i)
cause a registration statement under the Securities Exchange Act of 1934 to be
declared effective concurrently with the completion of this offering and will
notify you in writing immediately upon the effectiveness of such registration
statement, and (ii) if requested by you, to obtain a listing on the Pacific
Stock Exchange and to obtain and keep current a listing in the Standard & Poors
or ▇▇▇▇▇'▇ Industrial OTC Manual.
(e) For so long as the Company is a reporting
company under either Section 12(g) or 15(d) of the Securities Exchange Act of
1934, the Company, at its expense, will furnish to its stockholders an annual
report (including financial statements audited by independent public
accountants), in reasonable detail and at its expense, will furnish to you
during the period ending five (5) years from the date hereof, (i) as soon as
practicable after the end of each fiscal year, a balance sheet of the Company
and any of its subsidiaries as at the end of such fiscal year, together with
statements of income, surplus and cash flow of the Company and any subsidiaries
for such fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, consolidated summary financial information of the Company for such
quarter in reasonable detail; (iii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iv) as soon as they
are available, a copy of all non-confidential reports and financial statements
furnished to or filed
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12
with the Commission or any securities exchange or automated quotation system on
which any class of securities of the Company is listed; and (v) such other
information as you may from time to time reasonably request.
(f) In the event the Company has an active
subsidiary or subsidiaries, such financial statements referred to in subsection
(e) above will be on a consolidated basis to the extent the accounts of the
Company and its subsidiary or subsidiaries are consolidated in reports furnished
to its stockholders generally.
(g) The Company will deliver to you at or before
the First Closing Date two signed copies of the Registration Statement including
all financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon the order of the Underwriter, from
time to time until the effective date of the Registration Statement, as many
copies of any Preliminary Prospectus filed with the Commission prior to the
effective date of the Registration Statement as the Underwriter may reasonably
request. The Company will deliver to the Underwriter on the effective date of
the Registration Statement and thereafter for so long as a Prospectus is
required to be delivered under the Act, from time to time, as many copies of the
Prospectus, in final form, or as thereafter amended or supplemented, as the
Underwriter may from time to time reasonably request. The Company, not later
than (i) 5:00 p.m., New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to 12:00 noon,
New York City time, on such date or (ii) 6:00 p.m., New York City time, on the
business day following the date of determination of the public offering price,
if such determination occurred after 12:00 noon, New York City time, on such
date, will deliver to the Underwriter, without charge, as many copies of the
Prospectus and any amendment or supplement thereto as the Underwriter may
reasonably request for purposes of confirming orders that are expected to settle
on the First Closing Date.
(h) The Company will make generally available to
its security holders and to the registered holders of its Warrants and deliver
to you as soon as it is practicable to do so but in no event later than 90 days
after the end of twelve months after its current fiscal quarter, an earnings
statement (which need not be audited) covering a period of at least 12
consecutive months beginning after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from
the sale of the Units for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) The Company will, promptly upon your
request, prepare and file with the Commission any amendments or supplements to
the Registration Statement,
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Preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the
Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Units, and will use its best efforts to cause the same to
become effective as promptly as possible.
(k) The Company will reserve and keep available
that maximum number of its authorized but unissued securities which are issuable
upon exercise of the Unit Purchase Option outstanding from time to time.
(l) For a period of thirteen months from the
First Closing Date, no officer, director or stockholder of the Company (the
"Principal Stockholders") 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 or other securities of
the Company, without the prior written consent of the Underwriter. In order to
enforce this covenant, the Company shall impose stop-transfer instructions with
respect to the shares owned by the Principal Stockholders until the end of such
period.
(m) Prior to completion of this offering, the
Company will make all filings required, including registration under the
Securities Exchange Act of 1934, to obtain the listing of the Units, Class A
Common Stock, and Warrants on the Nasdaq SmallCap Market (or a listing on such
other market or exchange as the Underwriter consents to), and will effect and
maintain such listing for at least five years from the date of this Agreement.
(n) The Company and each of the Principal
Stockholders represents that it or he has not taken and agree that it or he will
not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Units, Shares or the Warrants
or to facilitate the sale or resale of the Securities.
(o) On the Closing Date and simultaneously with
the delivery of the Units, the Company shall execute and deliver to you, the
Unit Purchase Option. The Unit Purchase Option will be substantially in the form
of the Underwriter's Unit Purchase Option filed as an Exhibit to the
Registration Statement.
(p) During the 18 month period commencing on the
date of this Agreement, the Company will not, without the prior written consent
of the Underwriter, grant options to purchase shares of Class A Common Stock at
an exercise price less than the greater of (i) the initial public offering price
of the Units (without allocating any value to the Warrants) or (ii) the fair
market value of the Class A Common Stock on the date of grant. During the six
month period commencing on the date of this Agreement, the Company will not,
without the prior written consent of the Underwriter, grant options to any
current officer of the Company. During the three year period commencing on the
date of this Agreement, the Company will not, without the prior written consent
of the Underwriter, offer or sell any of its securities pursuant to Regulation S
under the Act.
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(q) The Company will not, without the prior
written consent of the Underwriter, grant registration rights to any person
which are exercisable sooner than 13 months from the First Closing Date.
(r) ▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be the Chief Executive
Officer and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall be the President, Chief Operating Officer and
Chief Financial Officer and ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ will each be the
Senior Vice President of the Company on the Closing Dates. The Company has
obtained key person life insurance on the lives of each of ▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, respectively, in an amount
of not less than $2 million and will use its best efforts to maintain such
insurance during the three year period commencing on the First Closing Date or
the term of their employment, whichever period is longer. In the event ▇▇▇▇ ▇.
▇▇▇▇▇▇'▇ employment is terminated prior to the three year period commencing on
the First Closing Date, the Company will obtain a comparable policy on the life
of his successor for the balance of the three year period. For a period of
thirteen months from the First Closing Date, the compensation of the executive
officers of the Company shall not be increased from the compensation levels
disclosed in the Prospectus.
(s) On the Closing Date and simultaneously with
the delivery of the Units the Company shall execute and deliver to you, an
agreement with you regarding mergers, acquisitions, joint ventures and certain
other forms of transactions, in the form previously delivered to the Company by
you (the "M/A Agreement").
(t) So long as any Warrants are outstanding, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter and
dealer as many copies of each such Prospectus as the Underwriter or dealer may
reasonably request. The Company shall not call for redemption any of the
Warrants unless a registration statement covering the securities underlying the
Warrants has been declared effective by the Commission and remains current at
least until the date fixed for redemption. In addition, for so long as any
Warrant is outstanding, the Company will promptly notify the Underwriter of any
material change in the business, financial condition or prospects of the
Company.
(u) Upon the exercise of any Warrant or Warrants
after _______ __, 1998, the Company will pay ▇.▇. ▇▇▇▇▇ Investment Banking
Corp., a fee of 5% of the aggregate exercise price of the Warrants, of which 1%
may be reallowed to the dealer who solicited the exercise (which may also be
▇.▇. ▇▇▇▇▇ Investment Banking Corp.) if (i) the market price of the Company's
Class A Common Stock is greater than the exercise price of the Warrants on the
date
-14-
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of exercise; (ii) the exercise of the Warrant was solicited by a member of the
National Association of Securities Dealers, Inc., (iii) the Warrant is not held
in a discretionary account; (iv) the disclosure of compensation arrangements has
been made in documents provided to customers, both as part of the original
offering and at the time of exercise, and (v) the solicitation of the Warrant
was not in violation of Rule 10b-6 promulgated under the Securities Exchange Act
of 1934, as amended. The Company agrees not to solicit the exercise of any
Warrants other than through ▇.▇. ▇▇▇▇▇ Investment Banking Corp. and will not
authorize any other dealer to engage in such solicitation without the prior
written consent of ▇.▇. ▇▇▇▇▇ Investment Banking Corp.
(v) For a period of five (5) years from the
Effective Date the Company (i) 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 (3) fiscal 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 and (ii) shall not change its accounting firm without the prior
written consent of the Chairman or the President of the Underwriter.
(w) As promptly as practicable after the Closing
Date, the Company will prepare, at its own expense, hard cover "bound volumes"
relating to the offering, and will distribute at least four of such volumes to
the individuals designated by the Underwriter or counsel to the Underwriter.
(x) For a period of five years from the First
Closing Date (i) the Underwriter shall have the right, but not the obligation,
to designate one director of the Board of Directors of the Company and (ii) the
Company shall engage a public relations firm acceptable to the Underwriter.
(y) The Company shall, for a period of six years
after date of this Agreement, submit which reports to the Secretary of the
Treasury and to stockholders, as the Secretary may require, pursuant to Section
1202 of the Internal Revenue Code, as amended, or regulations promulgated
thereunder, in order for the Company to qualify as a "small business" so that
stockholders may realize special tax treatment with respect to their investment
in the Company.
(z) With respect to the Selling Stockholders,
the Company will send all post-effective amendments or prospectus supplements
disclosing actual price and selling terms to the NASD concurrently with the
filing thereof with the Commission. The Company will notify the Underwriter and
the NASD if the Company becomes aware that any 5% or greater stockholder of the
Company becomes an affiliated or associated person of an NASD member
participating in the distribution of this offering.
4. Conditions of Underwriter' Obligation. The
obligations of the Underwriter to purchase and pay for the Units which they have
respectively agreed to purchase
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hereunder, are subject to the accuracy (as of the date hereof, and as of the
Closing Dates) of and compliance with the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder,
and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later
than 10:00 A.M., New York time, on the date on which the
amendment to the registration statement originally filed with
respect to the Units or to the Registration Statement, as the
case may be, containing information regarding the initial
public offering price of the Units has been filed with the
Commission, or such later time and date as shall have been
agreed to by you; if required, the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or
supplement thereto shall have been filed with the Commission
in the manner and within the time period required by Rule 434
and 424(b) under the Act; on or prior to the Closing Dates no
stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that
or a similar purpose shall have been instituted or shall be
pending or, to your knowledge or to the knowledge of the
Company, shall be contemplated by the Commission; any request
on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of
Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the
Underwriter;
(b) At the First Closing Date, you shall have
received the opinion, dated as of the First Closing Date, of
▇▇▇▇ & ▇▇▇▇▇ PC, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriter, to the
effect that:
(i) the Company has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of the State of California,
with full corporate power and authority to own its
properties and conduct its business as described in
the Registration Statement and Prospectus. The
Company is duly qualified or licensed to do business
as a foreign corporation and is in good standing in
the State of California;
(ii) to the best knowledge of such counsel,
(a) the Company has obtained, or is in the process of
obtaining, all licenses, permits and other
governmental authorizations necessary to the conduct
of its business as described in the Prospectus, (b)
such licenses, permits and other governmental
authorizations as have been obtained are in full
force and effect, and (c) the Company is in all
material respects complying therewith;
(iii) the authorized capitalization of the
Company as of December 31, 1996 is as set forth
under "Capitalization" in the
-16-
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Prospectus; all shares of the Company's outstanding
stock requiring authorization for issuance by the
Company's board of directors have been duly
authorized, validly issued, are fully paid and
non-assessable and conform to the description thereof
contained in the Prospectus; the outstanding shares
of Class A Common Stock of the Company have not been
issued in violation of the preemptive rights of any
shareholder and the shareholders of the Company do
not have any preemptive rights or other rights to
subscribe for or to purchase, nor are there any
restrictions upon the voting or transfer of any of
the Stock; the Class A Common Stock, the Warrants,
the Unit Purchase Option and the Warrant Agreement
conform to the respective descriptions thereof
contained in the Prospectus; the Shares have been,
and the shares of Class A Common Stock to be issued
upon exercise of the Warrants and the Unit Purchase
Option, upon issuance in accordance with the terms of
such Warrants, the Warrant Agreement and Unit
Purchase Option have been duly authorized and, when
issued and delivered, will be duly and validly
issued, fully paid and non-assessable, free of
preemptive rights and no personal liability will
attach to the ownership thereof; all prior sales by
the Company of the Company's securities have been
made in compliance with or under an exemption from
registration under the Act and applicable state
securities laws and no shareholders of the Company
have any rescission rights with respect to Company
securities; a sufficient number of shares of Class A
Common Stock has been reserved for issuance upon
exercise of the Warrants and Unit Purchase Option and
to the best of such counsel's knowledge, neither the
filing of the Registration Statement nor the offering
or sale of the Units as contemplated by this
Agreement gives rise to any registration rights or
other rights, other than those which have been waived
or satisfied for or relating to the registration of
any shares of Class A Common Stock;
(iv) this Agreement, the Unit Purchase
Option, the Warrant Agreement, the M/A Agreement and
the Escrow Agreement have been duly and validly
authorized, executed and delivered by the Company
and, if the laws of the State of California were to
govern the enforcement of such documents (as to which
we express no opinion), each constitutes a legal,
valid and binding obligation of the Company
enforceable against the Company in accordance with
its respective terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be
limited by applicable law);
-17-
18
(v) the certificates evidencing the shares
of Class A Common Stock are in valid and proper legal
form; the Warrants will be exercisable for shares of
Class A Common Stock of the Company in accordance
with the terms of the Warrants and at the prices
therein provided for; at all times during the term of
the Warrants the shares of Class A Common Stock of
the Company issuable upon exercise of the Warrants
have been duly authorized and reserved for issuance
upon such exercise and such shares, when issued upon
such exercise in accordance with the terms of the
Warrants and at the price provided for, will be duly
and validly issued, fully paid and non-assessable;
(vi) such counsel knows of no pending or
threatened legal or governmental proceedings to which
the Company is a party which could materially
adversely affect the business, property, financial
condition or operations of the Company; or which
question the validity of the Securities, this
Agreement, the Warrant Agreement, the Unit Purchase
Option, the M/A Agreement or the Escrow Agreement or
of any action taken or to be taken by the Company
pursuant to this Agreement, the Warrant Agreement,
the Unit Purchase Option, the M/A Agreement or the
Escrow Agreement and no such proceedings are known to
such counsel to be contemplated against the Company;
there are no governmental proceedings or regulations
required to be described or referred to in the
Registration Statement which are not so described or
referred to;
(vii) the Company is not in violation of or
default under, nor will the execution and delivery of
this Agreement, the Unit Purchase Option, the Warrant
Agreement, the M/A Agreement or the Escrow Agreement
and the incurrence of the obligations herein and
therein set forth and the consummation of the
transactions herein or therein contemplated, result
in a breach or violation of, or constitute a default
under the certificate or articles of incorporation or
by-laws, in the performance or observance of any
material obligations, agreement, covenant or
condition contained in any bond, debenture, note or
other evidence of indebtedness or in any contract,
indenture, mortgage, loan agreement, lease, joint
venture or other agreement or instrument to which the
Company is a party or by which it or any of its
properties may be bound or in violation of any
material order, rule, regulation, writ, injunction,
or decree of any government, governmental
instrumentality or court, domestic or foreign;
(viii) the Registration Statement has become
effective under the Act, and to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in
effect, and no
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proceedings for that purpose have been instituted or
are pending before, or threatened by, the Commission;
the Registration Statement and the Prospectus (except
for the financial statements and other financial data
contained therein, or omitted therefrom, as to which
such counsel need express no opinion) comply as to
form in all material respects with the applicable
requirements of the Act and the Rules and
Regulations;
(ix) such counsel has participated in the
preparation of the Registration Statement and the
Prospectus and nothing has come to the attention of
such counsel to cause such counsel to have reason to
believe that the Registration Statement or any
amendment thereto at the time it became effective or
as of the Closing Dates contained any untrue
statement of a material fact required to be stated
therein or omitted to state any material fact
required to be stated therein or necessary to make
the statements therein not misleading or that the
Prospectus or any supplement thereto contains any
untrue statement of a material fact or omits to state
a material fact necessary in order to make statements
therein, in light of the circumstances under which
they were made, not misleading (except, in the case
of both the Registration Statement and any amendment
thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto
and other financial information and schedules
contained therein, as to which such counsel need
express no opinion);
(x) all descriptions in the Registration
Statement and the Prospectus, and any amendment or
supplement thereto, of contracts and other documents
are accurate and fairly present the information
required to be shown, and such counsel is familiar
with all contracts and other documents referred to in
the Registration Statement and the Prospectus and any
such amendment or supplement or filed as exhibits to
the Registration Statement, and such counsel does not
know of any contracts or documents of a character
required to be summarized or described therein or to
be filed as exhibits thereto which are not so
summarized, described or filed;
(xi) no authorization, approval, consent, or
license of any governmental or regulatory authority
or agency is necessary in connection with the
authorization, issuance, transfer, sale or delivery
of the Units by the Company, in connection with the
execution, delivery and performance of this Agreement
by the Company or in connection with the taking of
any action contemplated herein, or the issuance of
the Unit Purchase Option or the Securities underlying
the Unit Purchase Option, other than registrations or
qualifications of the Units under applicable state or
foreign securities or Blue Sky laws and registration
under the Act;
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(xii) the statements in the Registration
Statement under the captions "Business", "Use of
Proceeds", "Management", and "Description of
Securities" have been reviewed by such counsel and
insofar as they refer to descriptions of agreements,
statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions,
are correct in all material respects;
(xiii) the Units, the Class A Common Stock and
the Warrants have been duly authorized for quotation
on the Nasdaq SmallCap Market; and
(xiv) to such counsel's knowledge, there are
no business relationships or related-party
transactions of the nature described in Item 404 of
Regulation S-B involving the Company, any Subsidiary
and any person described in such Item that are
required to be disclosed in the Prospectus and which
have not been so disclosed.
(c) At the First Closing Date, you shall
have received the opinion, addressed to the
Underwriter, dated as of the First Closing Date, of
▇▇▇▇, Raywid & ▇▇▇▇▇▇▇▇▇ LLP, regulatory counsel to
the Company, in form and substance satisfactory to
counsel for the Underwriter, to the effect that:
(i) The information in the Prospectus under
the captions entitled "Risk Factors -- Government
Regulation and Legal Uncertainties" and "Business of
the Company" insofar as it pertains to legal and
regulatory matters, has been reviewed and analyzed by
us and in our opinion accurately and adequately
describes in all material respects the nature and
extent to which the Company's operations and proposed
business may be subject to government regulations and
guidelines in the United States.
(ii) The business as presently conducted by
the Company and as proposed to be conducted as stated
in the Prospectus does not, to our knowledge, violate
any rules, regulations or policies of the Federal
Trade Commission, the Department of Justice or the
Federal Communications Commission.
Such opinion shall also cover such matters incident
to the transactions contemplated hereby as you or counsel for the Underwriter
shall reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law other than the law of the United
States or of the State of California upon opinions of counsel satisfactory to
you, in which case the opinion shall state that they have no reason to believe
that you and they are not entitled to so rely.
-20-
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(d) All corporate proceedings and other legal
matters relating to this Agreement, the Registration Statement, the Prospectus
and other related matters shall be satisfactory to or approved by Bachner,
Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the Underwriter, and you shall have
received from such counsel a signed opinion, dated as of the First Closing Date,
together with copies thereof for each of the other Underwriter, with respect to
the validity of the issuance of the Units, the form of the Registration
Statement and Prospectus (other than the financial statements and other
financial data contained therein), the execution of this Agreement and other
related matters as you may reasonably require. The Company shall have furnished
to counsel for the Underwriter such documents as they may reasonably request for
the purpose of enabling them to render such opinion.
(e) You shall have received a letter prior to
the effective date of the Registration Statement and again on and as of the
First Closing Date from BDO ▇▇▇▇▇▇▇ LLP, independent public accountants for the
Company, substantially in the form approved by you, and including estimates of
the Company's revenues and results of operations for the period ending at the
end of the month immediately preceding the effective date and results of the
comparable period during the prior fiscal year.
(f) At the Closing Dates, (i) the
representations and warranties of the Company contained in this Agreement shall
be true and correct with the same effect as if made on and as of the Closing
Dates and the Company shall have performed all of its obligations hereunder and
satisfied all the conditions on its part to be satisfied at or prior to such
Closing Date; (ii) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall 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 not misleading; (iii) there shall have
been, since the respective dates as of which information is given, no material
adverse change, or any development involving a prospective material adverse
change, in the business, properties, condition (financial or otherwise), results
of operations, capital stock, long-term or short-term debt or general affairs of
the Company from that set forth in the Registration Statement and the
Prospectus, except changes which the Registration Statement and Prospectus
indicate might occur after the effective date of the Registration Statement, and
the Company shall not have incurred any material liabilities or entered into any
agreement not in the ordinary course of business other than as referred to in
the Registration Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding at law or in equity shall be pending
or threatened against the Company which would be required to be set forth in the
Registration Statement, and no proceedings shall be pending or threatened
against the Company before or by any commission, board or administrative agency
in the United States or elsewhere, wherein an unfavorable decision, ruling or
finding would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company, and (v) you shall have received, at the First Closing Date, a
certificate signed by each of the Chairman of the Board or the President and the
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principal financial or accounting officer of the Company, dated as of the First
Closing Date, evidencing compliance with the provisions of this subsection (f).
(g) Upon exercise of the option provided for in
Section 2(b) hereof, the obligations of the Underwriter to purchase and pay for
the Option Units referred to therein will be subject (as of the date hereof and
as of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, and no stop
order suspending the effectiveness thereof 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, and any reasonable
request on the part of the Commission for additional
information shall have been complied with to the
satisfaction of Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to the Underwriter.
(ii) At the Option Closing Date there shall
have been delivered to you as Representative the
signed opinions of ▇▇▇▇ & ▇▇▇▇▇ PC and ▇▇▇▇, Raywid &
▇▇▇▇▇▇▇▇▇ LLP, counsels for the Company, dated as of
the Option Closing Date, in form and substance
satisfactory to Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to the Underwriter, which opinions shall be
substantially the same in scope and substance as the
opinions furnished to you at the First Closing Date
pursuant to Section 4(b) and (c) hereof, except that
such opinion, where appropriate, shall cover the
Option Units.
(iii) At the Option Closing Date there shall
have been delivered to you a certificate of the
Chairman of the Board or the President and the
principal financial or accounting officer of the
Company, dated the Option Closing Date, in form and
substance satisfactory to Bachner, Tally, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, counsel to the Underwriter, substantially
the same in scope and substance as the certificate
furnished to you at the First Closing Date pursuant
to Section 4(f) hereof.
(iv) At the Option Closing Date there shall
have been delivered to you a letter in form and
substance satisfactory to you from BDO ▇▇▇▇▇▇▇ LLP,
dated the Option Closing Date and addressed to the
Underwriter confirming the information in their
letter referred to in Section 4(f) hereof and stating
that nothing has come to their attention during the
period from the ending date of their review referred
to in said letter to a date not more than five
business days prior to the Option Closing Date, which
would require any change in said letter if it were
required to be dated the Option Closing Date.
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(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and
issuance of the Option Units shall be satisfactory in
form and substance to you, and you and Bachner,
Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the
Underwriter, shall have been furnished with all such
documents, certificates, and opinions as you may
request in connection with this transaction in order
to evidence the accuracy and completeness of any of
the representations, warranties or statements of the
Company or its compliance with any of the covenants
or conditions contained herein.
(h) No action shall have been taken by the
Commission or the NASD the effect of which would make it improper, at any time
prior to the Closing Date, for members of the NASD to execute transactions (as
principal or agent) in the Units, Class A Common Stock or the Warrants and no
proceedings for the taking of such action shall have been instituted or shall be
pending, or, to the knowledge of the Underwriter or the Company, shall be
contemplated by the Commission or the NASD. The Company represents that at the
date hereof it has no knowledge that any such action is in fact contemplated by
the Commission or the NASD. The Company shall have advised the Underwriter of
any NASD affiliation of any of its officers, directors, stockholders or their
affiliates.
(i) If any of the conditions herein provided for
in this Section shall not have been fulfilled as of the date indicated, this
Agreement and all obligations of the Underwriter under this Agreement may be
cancelled at, or at any time prior to, each Closing Date by the Underwriter. Any
such cancellation shall be without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company. The
obligation of the Company to sell and deliver the Units is subject to the
condition that at the Closing Dates, no stop orders suspending the effectiveness
of the Registration Statement shall have been issued under the Act or any
proceedings therefor initiated or threatened by the Commission.
If the condition to the obligations of the Company provided
for in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Units on
exercise of the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) The Company agrees to indemnify and hold
harmless the Underwriter and each person, if any, who controls the Underwriter
within the meaning of the Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all attorneys' fees), to which the Underwriter or such
controlling person may become subject, under the Act or otherwise, and will
reimburse, as incurred, such Underwriter and such
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controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages or liabilities, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
(B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Units under the securities laws thereof (any such application, document
or information being hereinafter called a "Blue Sky Application"), or arise out
of or are based upon the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, Prospectus, or any amendment
or supplement thereto, or in any Blue Sky Application, a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary Prospectus or the Prospectus or any such amendment or
supplement thereto. This indemnity will be in addition to any liability which
the Company may otherwise have.
(b) The Underwriter will indemnify and hold
harmless the Company, each of its directors, each nominee (if any) for director
named in the Prospectus, each of its officers who have signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (i) in reliance upon and in conformity with written
information furnished to the Company by you specifically for use in the
preparation thereof and (ii) relates to the transactions effected by the
Underwriter in connection with the offer and sale of the Units contemplated
hereby. This indemnity agreement will be in addition to any liability which the
Underwriter may otherwise have.
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(c) Promptly after receipt by an indemnified
party under this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify in writing the indemnifying party
of the commencement thereof; but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such counsel
shall be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the named parties to any such action (including any impleaded parties)
include both such Underwriter or such controlling person and the indemnifying
party and in the judgment of the Underwriter, it is advisable for the
Underwriter or controlling persons to be represented by separate counsel (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of such Underwriter or such controlling person, it
being understood, however, that the indemnifying party shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the Underwriter and controlling persons, which
firm shall be designated in writing by you). No settlement of any action against
an indemnified party shall be made without the consent of the indemnifying
party, which shall not be unreasonably withheld in light of all factors of
importance to such indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under
the Act in any case in which (i) the Underwriter makes claim for indemnification
pursuant to Section 6 hereof but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case, notwithstanding the fact that
the express provisions of Section 6 provide for indemnification in such case, or
(ii) contribution under the Act may be required on the part of the Underwriter,
then the Company and each person who controls the Company, in the aggregate, and
the Underwriter shall contribute to the aggregate
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losses, claims, damages or liabilities to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense and investigation and all reasonable attorneys'
fees) in either such case (after contribution from others) in such proportions
that the Underwriter is responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that the
underwriting discount per Unit appearing on the cover page of the Prospectus
bears to the public offering price appearing thereon, and the Company shall be
responsible for the remaining portion, provided, however, that (a) if such
allocation is not permitted by applicable law then the relative fault of the
Company and the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company, or the Underwriter and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriter agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriter to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages (even if the Underwriter in the
aggregate were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the first sentence of this Section 7. 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 is not guilty of such fraudulent
misrepresentation. As used in this paragraph, the word "Company" includes any
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 Underwriter and each person who
controls the Underwriter shall be entitled to contribution from the Company, its
officers, directors and controlling persons to the full extent permitted by law.
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 Underwriter. No contribution shall be requested with
regard to the settlement of any matter from any party who did not consent to the
settlement; provided, however, that such consent shall not be unreasonably
withheld in light of all factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes
effective or the sale of the Units to the Underwriter is consummated, the
Company will pay all costs and expenses incident to the performance of this
Agreement by the Company including, but not limited to, the fees and expenses of
counsel to the Company and of the Company's accountants; the costs and expenses
incident to the preparation, printing, filing and distribution under the Act of
the Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), Preliminary Prospectus and the Prospectus, as
amended or supplemented, or the Term Sheet, the fee of the NASD in connection
with the filing required by the NASD relating to the offering of the Units
contemplated hereby; all expenses, including reasonable fees and disbursements
of
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counsel to the Underwriter, in connection with the qualification of the Units
under the state securities or blue sky laws which you shall designate; the cost
of printing and furnishing to the Underwriter copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, Selling
Agreement, and the Blue Sky Memorandum, any fees relating to the listing of the
Units, Class A Common Stock and Warrants on the Nasdaq Small Cap Market or any
other securities exchange, the cost of printing the certificates representing
the securities comprising the Units, the fees of the transfer agent and warrant
agent the cost of publication of at least three "tombstones" of the offering (at
least one of which shall be in national business newspaper and one of which
shall be in a major New York newspaper) and the cost of preparing at least four
hard cover "bound volumes" relating to the offering, in accordance with the
Underwriter's request. The Company shall pay any and all taxes (including any
transfer, franchise, capital stock or other tax imposed by any jurisdiction) on
sales to the Underwriter hereunder. The Company will also pay all costs and
expenses incident to the furnishing of any amended Prospectus or of any
supplement to be attached to the Prospectus as called for in Section 3(a) of
this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses the
Company shall at the First Closing Date pay to ▇.▇. ▇▇▇▇▇ Investment Banking
Corp., a non-accountable expense allowance of $195,000 of which $40,000 has been
paid. In the event the overallotment option is exercised, the Company shall pay
to ▇.▇. ▇▇▇▇▇ Investment Banking Corp. the Option Closing Date an additional
amount equal to 3% of the gross proceeds received upon exercise of the
overallotment option. In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant, representation
or warranty contained herein or because any other condition to the Underwriter's
obligations hereunder required to be fulfilled by the Company is not fulfilled)
the Company shall be liable for the actual out-of-pocket accountable expenses of
the Underwriter, including legal fees up to a maximum of $40,000. In the event
the transactions contemplated hereby are not consummated by reason of any action
of the Company or because of a breach by the Company of any covenant,
representation or warranty herein, the Company shall be liable for the actual
out-of-pocket accountable expenses of you, including legal fees, up to a maximum
of $195,000.
(c) No person is entitled either directly or
indirectly to compensation from the Company, from the Underwriter or from any
other person for services as a finder in connection with the proposed offering,
and the Company agrees to indemnify and hold harmless the Underwriter, against
any losses, claims, damages or liabilities, joint or several (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), to which the Underwriter or
person may become subject insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon the claim of any
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed offering
by reason of such person's or entity's influence or prior contact with the
indemnifying party.
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9. Effective Date.
The Agreement shall become effective upon its execution except
that you may, at your option, delay its effectiveness until 11:00 A.M., New York
time on the first full business day following the effective date of the
Registration Statement, or at such earlier time after the effective date of the
Registration Statement as you in your discretion shall first commence the
initial public offering by the Underwriter of any of the Units. The time of the
initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Units, or the time when the Units
are first generally offered by you to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by you at any time before it
becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13,
14 and 15 shall remain in effect notwithstanding such termination.
10. Termination.
(a) This Agreement, except for Sections 3(c),
6, 7, 8, 12, 13, 14 and 15 hereof, may be terminated at any time prior to the
First Closing Date, and the option referred to in Section 2(b) hereof, if
exercised, may be cancelled at any time prior to the Option Closing Date, by you
if in your judgment it is impracticable to offer for sale or to enforce
contracts made by the Underwriter for the resale of the Units agreed to be
purchased hereunder by reason of (i) the Company having sustained a material
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree; (ii) trading in securities on the New York Stock Exchange, the
American Stock Exchange, the Nasdaq SmallCap Market or the Nasdaq National
Market having been suspended or limited; (iii) material governmental
restrictions having been imposed on trading in securities generally (not in
force and effect on the date hereof); (iv) a banking moratorium having been
declared by federal or New York state authorities; (v) an outbreak of
international hostilities or other national or international calamity or crisis
or change in economic or political conditions having occurred; (vi) a pending or
threatened legal or governmental proceeding or action relating generally to the
Company's business, or a notification having been received by the Company of the
threat of any such proceeding or action, which could materially adversely affect
the Company; (vii) except as contemplated by the Prospectus, the Company is
merged or consolidated into or acquired by another company or group or there
exists a binding legal commitment for the foregoing or any other material change
of ownership or control occurs; (viii) the passage by the Congress of the United
States or by any state legislative body or federal or state agency or other
authority of any act, rule or regulation, measure, or the adoption of any
orders, rules or regulations by any governmental body or any authoritative
accounting institute or board, or any governmental executive, which is
reasonably believed likely by you to have a material impact on the business,
financial condition or financial statements of the Company or the market for the
securities offered pursuant to the Prospectus; (ix) any adverse change in the
financial or securities markets beyond normal market fluctuations having
occurred since the date of this Agreement, or (x) any material adverse change
having occurred, since the respective dates of which information is given in the
Registration Statement and Prospectus, in the earnings,
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business prospects or general condition of the Company, financial or otherwise,
whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section 10
or in Section 9, the Company shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
11. Unit Purchase Option.
At or before the First Closing Date, the Company will sell to
▇.▇. ▇▇▇▇▇ Investment Banking Corp. (for its own account), or its designees for
a consideration of $.____, and upon the terms and conditions set forth in the
form of Unit Purchase Option annexed as an exhibit to the Registration
Statement, a Unit Purchase Option to purchase an aggregate of 130,000 Units. In
the event of conflict in the terms of this Agreement and the Unit Purchase
Option, the language of the Unit Purchase Option shall control.
12. Representations, Warranties and Agreements to Survive
Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its Principal Stockholders,
where appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriter, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.
13. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Underwriter, will be mailed, delivered and confirmed to
them at ▇.▇. ▇▇▇▇▇ Investment Banking Corp., ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, with a copy sent to Bachner, Tally, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or if sent to the Company, will be mailed,
delivered and confirmed to it at On'Village Communications, Inc., ▇▇▇ ▇. ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
14. Parties in Interest.
The Agreement herein set forth is made solely for the benefit
of the Underwriter, the Company and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or the Underwriter, and
directors of the Company, nominees for directors (if any) named in the
Prospectus, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors, assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from the Underwriter of the Units.
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15. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements made
and to be entirely performed within New York.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
ON'VILLAGE COMMUNICATIONS, INC.
By: _______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
▇.▇. ▇▇▇▇▇ INVESTMENT BANKING CORP.
By: _______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇, Vice Chairman and
General Counsel
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