EXHIBIT 1.1
GAY ENTERTAINMENT TELEVISION, INC.
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
FORM OF - UNDERWRITING AGREEMENT
_________, 1997
The Agean Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
The undersigned, Gay Entertainment Television, Inc., a New York
corporation (the "Company"), hereby confirms its agreement with The Agean Group,
Inc. (being referred to herein as "you" or the "Underwriter"), as follows:
1. INTRODUCTION. The Company proposes to engage you to sell on its
behalf, a minimum of 1,882,350 and a maximum of 2,350,000 units (each a "Unit"),
each Unit consisting of one share of Common Stock (a "Share") and one Redeemable
Common Stock Purchase Warrant (a "Warrant"). The Shares and Warrants are
hereinafter referred to as the "Firm Securities." The Company also proposes to
issue and sell to you, pursuant to the terms of the Underwriter's Warrant
Agreement, warrants (the "Underwriter's Warrants") for the purchase of up to an
additional 235,000 Units, each Unit consisting of one Share of Common Stock and
one Redeemable Common Stock Purchase Warrant. The Underwriter's Warrants shall
be exercisable during the four year period commencing on the first anniversary
of the issuance of such Underwriter's Warrants at an exercise price of 120% of
the Offering Price per Unit, subject to adjustments in the number of Units
issuable upon the exercise thereof and in the exercise price of the
Underwriter's Warrants as a result of certain events, including subdivisions and
combinations of the Common Stock. The Units, the Warrants, the Shares and the
Underwriter's Warrants are more fully described in the Registration Statement
and the Prospectus referred to below.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Underwriter that:
a. The Company has filed with the Securities and Exchange
Commission (the "SEC") a registration statement and an amendment or amendments
thereto, on Form SB-2 (No. 333-36873), including any related preliminary
prospectus (the "Preliminary Prospectus"), for the registration of the Units,
the Shares, and the Shares of Common Stock issuable upon exercise of the
Warrants and the Underwriter's Warrants (the "Common Shares"), under the
Securities Act of 1933, as amended (the "Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Act, and the
rules and regulations (the "Regulations") of the SEC promulgated under the Act.
The Company will promptly file a further amendment to said registration
statement, which has been similarly prepared, in the form heretofore delivered
to you and will not, before the registration statement becomes effective, file
any other amendment thereto to which you shall have reasonably objected after
having been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement, as amended, on file with the SEC at the
time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof or incorporated therein and all information deemed a part thereof
as of such time pursuant to paragraph (b) of Rule 430(A) of the Regulations, is
hereinafter called the Registration Statement," and the form of prospectus, in
the form first filed with the SEC pursuant to Rule 424(b) of the Regulations, is
hereinafter called the "Prospectus."
b. On the date upon which the Registration Statement is
declared effective by the SEC (the "Effective Date") and all times subsequent
thereto up to the Closing Date (as such term is defined in Section 3(d) hereof),
the Registration Statement and the Prospectus will comply in all material
aspects with the applicable provisions of the Act and the Regulations; neither
the Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus was first filed with the SEC
(whether filed as a part of the Registration Statement for the registration of
the securities or any amendment thereto or pursuant to Rule 424 (a) of the
Regulations) and when any amendment thereof or supplement thereto was first
filed with the SEC, such Preliminary Prospectus complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The representation and warranty made in this Section
2(b) does not apply to statements made or statements omitted in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriter by the Underwriter expressly for use in the Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
c. This Agreement, the Underwriter's Warrant Agreement and the
Consulting Agreement (as defined in Section 5(v) hereof) have been (or as of the
Closing Date will have been) duly and validly authorized by the Company, and
this Agreement constitutes and the Underwriter's Warrant Agreement and
Consulting Agreement, when executed and delivered pursuant to this Agreement,
will (assuming due execution by the Underwriter) each constitute a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification provision may be
limited under the federal and state securities laws, and (iii) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and the discretion of the court before
which any proceeding therefor may be brought. The Units, the Warrants, the
Shares the
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Underwriter's Warrants and the Shares issuable upon exercise of the Warrants and
the Underwriter's Warrants to be issued and sold by the Company pursuant to this
Agreement, have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the holders thereof are not and
will not be subject to personal liability by reason of being such holders; the
Units, the Warrants, the Shares and the Underwriter's Warrants are not and will
not be subject to the preemptive rights of any holders of any security of the
Company or similar contractual right granted by the Company; and all corporate
action required to be taken for the authorization, issuance and sale of the
Units, the Warrants, the Shares and the Underwriter's Warrants has been duly and
validly taken. The Underwriter's Warrants constitute valid and binding
obligations of the Company, enforceable in accordance with their terms, to issue
and sell, upon exercise in accordance with the terms thereof, the number and
type of the Company's securities called for thereby; except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and the discretion of the court before which any proceeding therefor
may be brought.
d. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the issuance and sales of all such securities complied in all respects with
applicable federal and state securities laws; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the Company
or similar contractual rights granted by the Company.
e. The Company has good and marketable title, to or valid and
enforceable contractual or leasehold estate in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, free and clear of
all liens, encumbrances, claims, security interests, defects and restrictions of
any material nature whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable.
f. There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding pending or threatened
against, or involving the properties or business of the Company which might
materially and adversely affect the financial position, or prospects, or
business of the Company, except as referred to in the Prospectus.
g. All contacts and other documents required to be described
in the Registration Statement or the Prospectus fairly present the financial
position and the results of operations of the Company at the dates and for the
periods to which they apply; and such financial statements have been prepared in
conformity with generally accepted accounting principles, consistently applied
throughout the periods involved. There has been no material adverse change in
financial condition or results of operations of the Company or development
involving a prospective change in the condition or prospects of the Company,
financial or
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otherwise, since the date of the financial statements included in the
Prospectus, except as disclosed therein.
▇. ▇▇▇▇▇, Safer, ▇▇▇▇▇▇ & Co., Inc., whose report is filed
with the SEC as part of the Registration Statement, are independent accountants
as required by the Act and the Regulations.
i. The Company has no subsidiaries. The Company has been duly
organized and is validly existing as a corporation in good standing under the
laws of its state of incorporation. Except as otherwise set forth in the
Prospectus, the Company does not own, directly or indirectly, an interest in any
corporation, partnership, joint venture, trust or other business entity. The
Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which operations require such qualification
or licensing. The Company has all requisite corporate power and authority, and
the Company has all necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental regulatory officials and
bodies, to own or lease its properties and conduct its business as described in
the Prospectus, and the Company is and has been doing business in compliance
with all such material authorizations, approvals, orders, licenses, certificates
and permits and all federal state and local laws, rules and regulations. The
Company has all requisite corporate power and authority to enter into this
Agreement, the Underwriter's Warrant Agreement and the Consulting Agreement and
to carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing with, any court
government agency or other body is required for the issuance of the Shares, the
Common Shares and the Underwriter's Securities, pursuant to the Agreement, and
the Underwriter's Warrant Agreement, and as contemplated by the Prospectus,
except with respect to applicable federal and state securities laws.
j. The outstanding debt, the property and the business of the
Company, conform in all material respects to the descriptions thereof contained
in the in the Registration Statement and Prospectus.
k. The Shares, the Underwriter's Warrants, the Underwriter's
Securities and other securities issued or to be issued by the Company on or
before the Closing Dates described herein conform, or will conform when issued,
in all material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus.
l. No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing 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.
m. The Company is not violation of any term or provision of
its respective certificate of Incorporation or By-laws. Neither the execution
and delivery of this Agreement,
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nor the issue and sale of the Shares, the Underwriter's Warrants, the Common
Shares and the Underwriter's Securities, nor the consummation of any of the
transactions contemplated herein, nor the compliance by the Company with the
terms and provisions hereof has materially conflicted with or will materially
conflict with, or has resulted in or will result in a material breach of, any of
the terms and provisions, of, or has constituted or will constitute a material
default under, or has resulted in or will result in the creation or imposition
of any lien, charge or encumbrance upon the property or assets of the Company,
pursuant to the terms of any indenture, mortgage, deed of trust, note, loan or
credit agreement or any other agreement or instrument evidencing an obligation
for borrowed money, or any other agreement or instrument to which the Company is
a party or by which the Company is or may be bound or to which any of the
property or assets of the Company, is subject; nor will such action result in
any material violation of the provisions of the respective Certificate of
Incorporation or the By-laws of the Company or any contract or agreement, or any
statute or any order, rule or regulation applicable to the Company or any
Subsidiary or any other regulatory authority or other governmental body having
jurisdiction over the Company.
n. All taxes which are due from the Company have been paid in
full, and the Company, has no tax deficiency or claim outstanding, proposed or
assessed against it.
o. Subsequent to the respective dates as of which information
is given in the most recently circulated Preliminary Prospectus included as a
part of the Registration Statement, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not issued any securities
(except for the issuance of securities described under the caption
"Capitalization"), or (ii) declared or paid any dividend or made any other
distribution on or in respect to its capital stock; and the Company has not (i)
incurred any liability or obligation, direct or contingent, for borrowed money;
or (ii) entered into any transaction other than in the ordinary course of
business.
p. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or part thereof.
q. On the Effective Date, (i) the authorization of capital
stock of the Company is as set forth in Registration Statement, and (ii) not
more than an aggregate of _____ shares of Common Stock shall be issued and
outstanding (including any and all (A) securities with equivalent rights as the
Common Stock, (B) _________ shares of Common Stock, or such equivalent
securities, issuable upon exercise of options, warrants and other contract
rights, and (C) securities convertible directly or indirectly into shares of
Common Stock or such equivalent securities, and excluding any stock, options or
warrants issuable to the Underwriter in connection with the public offering of
the Shares).
r. Except for the registration rights granted under the
Underwriter's Warrant Agreement, no holders of any securities of the Company or
of any options, warrants or convertible of exchangeable securities of the
Company exercisable for or convertible or exchangeable for securities of the
Company have the right to include any securities issued by the
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Company in the registration Statement or any registration statement to be filed
by the Company.
s. The Company has entered into employment agreement with
▇▇▇▇▇▇ ▇▇▇▇▇▇ in the form filed as Exhibit 10.4 to the Registration Statement,
and intends to procure a keyman life insurance policies in the amount of
$1,000,000 on ▇▇. ▇▇▇▇▇▇'▇ life.
t. Assuming that there will be two "market makers" for the
Shares, at least 300 beneficial owners of the Shares and a sufficient "public
float" of the Shares, and that the Company's registration of the Shares pursuant
to the Securities Exchange Act of 1934, as amended ( the "Exchange Act") becomes
effective (all as contemplated by the requirements of the National Association
of Securities Dealers, In.), the Common Stock is eligible for quotation on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"). The Company has filed a registration statement with the Commission
pursuant to Section 2(g) of the Exchange Act, and has used its best efforts to
have same declared effective by the Commission on an accelerated basis on the
Effective Date. In addition, the Company has taken all actions necessary to
qualify the Units, Shares and Warrants for listing on the NASDAQ system on the
Effective Date.
u. Except as described in the Prospectus, there are no claims,
payment, issuances, arrangement or understandings for services in the nature of
a finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, commitments,
payment or issuances of securities with respect to the Company that may affect
the Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
v. Neither the Company nor any of its officers, directors or
partners, nor, to the knowledge of the Company, any of its employees, agents or
any other person action on behalf of the Company has, directly or indirectly,
given or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer, supplier or official or
governmental agency or instrumentality of any government )domestic or foreign)
or other person who was, is, or may be in a position to help or hinder person
who was, is, or may be in a position to help or hinder the business of the
Company) or assist it in connection with any actual or proposed transaction)
which (i) might subject the Company to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) if not given in the
past, might have had a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus, or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
w. The Company owns or possesses the requisite licenses or
rights to use all trademarks, service marks, service names, trade names, patents
and patent applications, copyrights, methods, protocols, techniques,
technologies, procedures and other rights (collectively the )"intangibles")
described as owned or used by the Company in the Registration Statement. There
is no claim, action or proceeding by any person pending or, to the Company's
knowledge
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threatened which pertains to or challenges the rights of the Company with
respect to any Intangibles used in the conduct of the business of the Company,
except as described in the Prospectus. To the Company's knowledge, the Company's
current products, services and processes do not infringe on any Intangibles held
by any third party.
x. Except as set forth in the Registration Statement, the
Company is under no obligation to pay royalties or fees of any kind whatsoever
to any third party with respect to Intangibles it has developed, uses, employees
or intends to use or employ.
y. The Company has generally enjoyed a satisfactory
employer/employee relationship with is respective employees and is in compliance
in all material respects with all federal, state and local laws and regulations
respecting the employment of their respective employees and employment
practices, terms and conditions o employment wages and hours relating thereto.
There are no pending or, to the Company's knowledge, threatened investigations
involving the Company by the U.S. Department of labor, or any other governmental
agency responsible for the enforcement of such federal, state or local laws and
regulations. There is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any strike,
picketing, boycott, dispute, threatened against or involving the Company, or any
predecessor entity, and none has occurred. No representation question exists
respecting the employees of the Company. No collective bargaining agreement or
modification thereof is currently being negotiated by the Company. No grievance
or arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company.
z. The Company, to the Company's knowledge, any of its
employees, directors or stockholders has taken, directly or indirectly, no
action designed to or which has constituted or which might reasonably be
expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
aa. The Company does not maintain or has not maintained,
sponsored or contributed to any program or arrangement that is an "employee
pension benefit plan, " and "employee welfare benefit plan" or a "Multi-employer
plan" as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("ERISA Plans"), except for the Company's 1997restricted stock option plan. The
Company does not presently maintain or contribute or at any time in the past,
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA. The Company has never completely or partially withdrawn from a
"multi-employer plan."
ab. Except as set forth in the Prospectus under "Certain
Transactions," the Company is not a party to any agreement with any officer,
director or stockholder of the Company, or any affiliate or associate of any
such person or entity which is required to be disclosed in the Prospectus
pursuant to Regulation S-B. Except as set forth in the Prospectus, to the
Company's knowledge, no officer, director or stockholder of the Company or any
"affiliate" or "associate" (as these terms are defined in Rule 405 promulgated
under the
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Regulations) of any such person or entity or the Company, has or has had, either
directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchased from or sells
or furnishes to the Company, any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected.
ac. The minute books of the Company have been made available to
counsel to the Underwriter and contain a complete summary of all meetings and
actions by unanimous consent of directors and stockholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
ad. The number of Shares to be offered to the public pursuant to
the Registration Statement represents at least ___% of the issued and
outstanding shares of the Common Stock after giving effect to the conversion of
all convertible securities and the exercise of all outstanding options and
warrants (excluding the Overallotment Option and the Underwriter's Warrant), and
any securities issued with the Underwriter's prior written consent.
3. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITER. The Underwriter
represents and warrants to the Company that it is a member of the National
Association of Securities Dealers, Inc. ("NASD") and registered as a
broker/dealer with the Commission. There are no past, pending or, to the best of
the Underwriter's knowledge, threatened proceedings involving the NASD, the
Commission or any state regulatory authority which would impair the ability of
the Underwriter to conduct the Offering contemplated hereunder.
4. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND UNDERWRITER'S
WARRANTS.
a. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriter a minimum of 1,882,350 and a maximum of
2,350,000 Units, and the Underwriter agrees to purchase from the Company such
minimum of 1,882,350 or maximum of 2,350,000 Units at a purchase price of $3.825
per Unit and at the time described herein to be sold by the Underwriter, on a
best efforts basis, at an initial purchase price of $4.25 per Unit.
b. On Closing Date I, the Company shall issue and sell to the
Underwriter, the Underwriter's Warrants at a total purchase price of $.001,
which warrants shall entitle the holders thereof to purchase an aggregate of up
to 235,000 Units, assuming the Maximum Offering. The Underwriter's Warrant shall
be exercisable for a period of four (4) years commencing one (1) year from the
Effective Date at an initial exercise price of 120% of the Offering Price per
Unit. The Underwriter's Warrant Agreement and form of Warrant Certificate shall
be substantially in the form filed as Exhibit 4.2 to the Registration Statement.
c. Payment for the Underwriter's Warrants shall be made on
Closing Date I. Payment for the Firm Securities shall be made on each of Closing
Date I and Closing Date II,
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respectively, at the Underwriter's election by certified or bank cashier's check
in New York Clearing House funds, payable to the order of the Company at the
offices of the Underwriter or at such other place as agreed upon by the
Underwriter or at such other place as agreed upon by the Underwriter and the
Company by wire transfer, upon delivery of certificates (in form and substance
satisfactory to the Underwriter) representing the Securities or by confirmation
of electronic transfer of the Securities to the Underwriter for the account of
the Underwriter. Delivery and payment for the Firm Securities shall be made at
10:00 a.m. New York time, on or before the fifth business day following each of
the closings or at such other time as shall be agreed upon by the Underwriter
and the Company. The hour and date of delivery and payment for the Firm
Securities are called "Closing Date I." The Firm Securities shall be registered
in such name or names and in such authorized denominations as the Underwriter
may request in writing at lease two (2) full business days prior to Closing Date
I. The Company will permit the Underwriter to examine and package any
certificates representing the Firm Securities for delivery, at least one (1)
full business day prior to Closing Date I.
d. The Company shall not be obligated to sell or deliver Firm
Securities except upon tender of payment by the Underwriter for the Firm
Securities.
5. PUBLIC OFFERING. The Underwriter is to make a public offering of the
Firm Securities, on a best efforts basis. The Securities are to be initially
offered to the public at the offering price set forth on the cover page of the
Prospectus (such price being hereinafter called the "Public Offering Price").
The Underwriter may, at its own expense, enter into one or more agreements as
the Underwriter, in its sole discretion, deems advisable, with one or more
broker-dealers who shall act as dealers in connection with such public offering.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees that it
will:
a. Use its best efforts to cause the Registration Statement to
become effective and will notify the Underwriter immediately and confirm the
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto becomes effective, (ii) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceeding for
that purpose, (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Shares, or the
Underwriter's Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, and (iv) of
the receipt of any comments from the Commission. If the Commission or any state
securities commission shall enter a stop order or suspend such qualification at
anytime, the Company will make every reasonable effort to obtain promptly the
lifting of such order.
b. File the Prospectus (in form and substance satisfactory to
the Underwriter) or transmit the Prospectus by a means reasonably calculated to
result in filing with the Commission in accordance with Rule 424.
c. During the time when a prospectus is required to be
delivered under the Act,
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use all reasonable efforts to comply with all requirements imposed upon it by
the Act and the Exchange Act, as now and hereafter amended and by the
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealings in the Shares and the Underwriter's
Securities in accordance with the provisions hereof and the Prospectus. If at
any time when a prospectus relating to the Shares or Underwriter's Securities is
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriter the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated in light of the circumstances under which they were made, not misleading
or if it is necessary at any time to amend the Prospectus to comply with the
Act, the Company will notify the Underwriter promptly and prepare and file with
the Commission an appropriate amendment or supplement in accordance with Section
10 of the Act.
d. Deliver to the Underwriter, without charge, such number of
copies of each Preliminary Prospectus and the Prospectus as the Underwriter may
reasonably request and, as soon as the Registration Statement or any amendment
or supplement thereto becomes effective, deliver to the Underwriter two signed
copies of the Registration Statement, including exhibits, and all post-effective
amendments thereto and copies of all exhibits filed therewith or incorporated
therein by reference and signed copies of all consents of certified experts.
e. Endeavor in good faith, in cooperation with the
Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the shares and the Underwriter's Securities for offering
and sale under the securities' laws of such jurisdictions as the Underwriter may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Underwriter agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction.
f. Make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following Closing Date I, an earnings statement (which need not be
certified by independent public or independent certified public accounts unless
required by the Act or the Regulations, but which shall satisfy the provisions
of Section 11(a) of the Act) covering a period of at least twelve consecutive
months beginning after the Effective Date.
g. For a period of five years from the Effective Date, furnish
to the Underwriter copies of such financial statements and other periodic and
special reports as the Company from time to time furnishes generally to holders
of any class of its securities, and promptly furnish to the Underwriter (i) a
copy of each periodic report the Company shall be required to file with the
Commission, (ii) a copy of each press release and every news item and article
with respect to the Company or any Subsidiary or their respective affairs which
was released by the Company, (iii)
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copies of each Form SR, (iv) a copy of each Form 8K or Schedules 13D, 13G, 14D-1
or13E-4 received or prepared by the Company, and (v) such additional documents
and information with respect to the Company or any Subsidiary and their
respective affairs or any future subsidiaries of the Company as the Underwriter
may from time to time reasonably request.
h. Apply the net proceeds from the offering received by it a
manner consistent with the caption "USE OF PROCEEDS" in the Prospectus.
i. Deliver to the Underwriter, prior to filing, any amendment
or supplement to the Registration Statement or Prospectus proposed to be filed
after the Effective Date and not file any such amendment or supplement to which
the Underwriter shall reasonably object, after being furnished such copy, in
writing with reasonable specificity as to the nature and extent of any
objection.
j. Furnish to the Underwriter as early as practicable prior to
the date hereof and Closing Date I, but not later than two (2) full business
days prior thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more than
thirty (30) days prior to the Effective Date) which have been read by the
Company's independent accountants as stated in their letter to be furnished to
the Underwriter pursuant to Section 7(g) hereof.
k. For a period of three (3) years from Closing Date I,
provide the Underwriter, upon its request, at the Company's sole expense, with
access to daily consolidated financial transfer sheets relating to the Common
Stock and designate American Stock Transfer & Trust Company, as transfer agent
for the Company's securities or such other transfer agent mutually agreeable by
the Company and the Underwriter.
l. For a period of three (3) years after the Effective Date,
engage an advisor (the "Advisor") designated in writing by the Underwriter to
the Board of Directors of the Company (the "Board"), if requested by the
Underwriter. In the event the Underwriter shall not have designated such
individual at the time of any meeting of the Board of such person is unavailable
to serve, the Company shall notify the Underwriter of each meeting of the Board.
All individual designated by the Underwriter shall receive all notices and other
correspondence and communications sent by the Company to members of the Board.
In addition, such Advisor shall be entitled to receive reimbursement for all
reasonable costs incurred in attending such meetings, including, but not limited
to food, lodging and transportation. The Company further agrees that, during
said three (3) year period, it shall schedule not less than four (4) formal and
"in person" meetings of its Board of Directors in each such year at which
meetings such Advisor shall be permitted to attend as set forth herein; said
meetings shall be held quarterly each year and thirty (30) days advance notice
of such meetings shall be given to the Advisor. Further, during such three (3)
year period, the Company and its principal stockholders shall give notice to the
Underwriter with respect to any proposed acquisitions, mergers, reorganizations
or other similar transactions.
11
The Company agrees to indemnify and hold the Underwriter
and such Advisor harmless against any and all claims, actions, damages, costs
and expenses, and judgments arising solely out of the attendance and
participation of the Advisor at any such meeting described herein. In the event
the Company maintains a liability insurance policy affording coverage for the
acts of its officers and directors, it agrees, if possible (without any
additional premium or other related cost to the Company) to include the Advisor
as an insured under such policy.
m. Until the sooner of (i) seven years from the date hereof,
or (ii) the sale to the public of the Underwriter's Securities and the
Underwriter's Warrant Shares, the Company will not take any action or actions
which may prevent or disqualify the Company's use of Form SB-2 (or other
appropriate form) for the registration under the Act of the Underwriter's
Securities.
n. For a period of five years from the date hereof, use its
best efforts to maintain the quotation by NASDAQ of the Common Stock.
o. Supply the Underwriter with one, and ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
counsel to the Underwriter, with two (2) bound volumes of the underwriting
materials within a reasonable time after the latest Closing Date.
p. For a period of two years from the Effective Date, not
issue any shares of Common Stock or Preferred Stock or any warrants, options or
other rights to purchase Common Stock or Preferred Stock at a price less than
120% of the initial public offering price without the prior written consent of
the Underwriter; provided, however, that the Company may issue securities upon
the conversion of any securities outstanding on the date hereof pursuant to the
terms thereof and upon the exercise of any warrants or options outstanding on
the date hereof pursuant to the terms thereof.
q. So long as the Shares or Underwriter's Securities are
registered under the Exchange Act, the Company will hold an annual meeting of
stockholders for the election of directors within 180 days after the end of each
of the Company's fiscal years or at such other date as mutually agreed upon by
and between the Underwriter and the Company, and, within 150 days after the end
of each of the Company's fiscal years will provide the Company's stockholders
with the audited financial statements of the Company as of the end of the fiscal
year just completed prior thereto. Such financial statements shall be those
required by Rule 14a-3 under the Exchange Act and shall be included in an annual
report pursuant to the requirements of such Rule.
r. Engage a financial public relations firm satisfactory to
the Underwriter as soon as possible after Closing Date I. Such firm, or an
acceptable substitute firm, shall be continuously engaged from the filing
referred to above to a date twelve (12) months from Closing Date I.
s. Enter into a financial advisory and consulting agreement
(the "Consulting Agreement") with the Underwriter and the Underwriter's Warrant
Agreement in substantially the
12
form filed as Exhibits ___ and ___, respectively to the Registration Statement.
t. The Company has or shall purchase term keyman insurance on
the life of ▇▇▇▇▇▇ ▇▇▇▇▇▇ in the amount of $1,000,000 naming the Company as the
sole beneficiary thereof, as soon as possible after Closing Date ▇.
▇. ▇▇▇▇▇ to the Underwriter a preferential right on the terms
and subject to the conditions set forth in this paragraph, for a period of two
(2) years from the Effective Date, to purchase for its account, or to sell for
the account of the Company or its present or future affiliates or subsidiaries
or any of its stockholders listed in the Prospectus under the caption "PRINCIPAL
STOCKHOLDERS (the "Principal Stockholders"), any securities of the company or
any Principal Stockholders, with respect to which the Company or any of its
present or future affiliates or subsidiaries or its principal Stockholders, on
terms not more favorable to the Company or such present or future affiliate or
subsidiary or its Principal Stockholders than they can secure elsewhere, to
purchase or sell any such securities. If the Underwriter fails to accept in
writing such proposal made by the Company or any of its present or future
affiliates or subsidiaries within five (5) business days or its Principal
Stockholders within ten (10) days after receipt of a notice containing such
proposal, then the Underwriter shall have no further claim or right with respect
to the proposal contained in such notice. If, thereafter, such proposal is
materially modified, the Company, and each present or future affiliate or
subsidiary or its Principal Stockholders shall in all respects have the same
obligations and adopt the same procedures with respect to such proposal as are
provided herein above with respect to the original proposal.
v. Take all necessary and appropriate actions to be included
in Standard and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual.
7. PAYMENT OF EXPENSES.
a. The Company hereby agrees to pay all reasonable expenses
(other than fees of counsel to the Underwriter, except as provided in (iii)
below) in connection with the offering, including but not limited to, (i) the
preparation, printing, filing and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement and the Prospectus and
the printing and mailing of this Agreement and related documents, including the
cost of all copies thereof and of the Preliminary Prospectus and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriter in quantities of herein above state, (ii) the printing, engraving,
issuance, and delivery of the Units, Shares, Warrants and the Underwriter's
Warrants, including any transfer or other taxes payable thereon, (iii) the
qualification of the Units and the Underwriter's Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," and "Legal Investments Survey,"
if any, and fees of counsel for the Underwriter (which fees shall be payable by
the Company in the sum of up to $20,000) and disbursements of counsel for the
Underwriter, (iv) advertising costs and expenses including but not limited to
the costs and expenses in
13
connection with the "road show", information meetings and presentations, bound
volumes and "tombstones" in publications selected by the Underwriter and
prospectus memorabilia, (v) costs and expenses in connection with due diligence
investigations, including but not limited to the fees of any independent counsel
or consultant retained, and all reasonable travel and lodging expenses incurred
by you and/or counsel to the Underwriter in connection with visits to, and
examination of, the Company's premises, (vi) fees and expenses of the transfer
agent and warrant agent, (vii) applications for assignments of a rating of the
Securities by qualified rating agencies, and (viii) the fees payable to NASD and
NASDAQ. The $20,000 payment to counsel for the Underwriter shall not include
fees of special counsel if same is required to be incurred in a merit review
state which may require local counsel. In this connection, Blue Sky applications
shall be made in such states and jurisdictions as shall be requested by the
Underwriter. Payments with regard to items (iii), (iv), and (v) shall be made on
each of Closing Date I and Closing Date II. The Underwriter shall provide the
Company with a written statement itemizing such expenses.
b. NON-ACCOUNTABLE EXPENSE ALLOWANCE. The Company shall pay to
the Underwriter an aggregate non-accountable expense allowance, in addition to
the expenses payable, pursuant to this Section 6(a), equal to three percent (3%)
of the gross proceeds received by the Company from the sale of Securities and,
on its part, the Underwriter agrees to deduct from the said three percent (3%)
allowance $15,000 previously paid by the Company to the Underwriter as an
advance against payment due pursuant to the provisions of this Section 6(b). In
the event that the Underwriter terminates the offering or is unable to
consummate the offering within nine (9) months of the date hereof, the advances
toward the non-accountable expense allowance shall become accountable and shall
be returnable to the Company to the extent its out-of-pocket expense are less
than the $15,000 advanced.
8. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date, to the
accuracy of the statements of officers of the Company made pursuant to the
provisions hereof and to the performance by the Company of its obligations
hereunder and to the following conditions:
a. The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you, and, at each of the
Closing Dates, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the
Underwriter.
b. At Closing Date I, the Underwriter shall have received the
favorable opinion of Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson, P.A., counsel to the
Company dated Closing Date I, addressed to the Underwriter and in form and
substance satisfactory to ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Underwriter, to the
effect that:
14
(1) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its state
of incorporation, (B) is duly qualified and in good standing as a
foreign corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its operations requires
such qualifications, and (C ) has all requisite power and authority to
own or lease its properties and conduct its business as described in
the Prospectus;
(2) the Units, Shares, Warrants, Underwriter's Warrants, the
Common Shares and the Underwriter's Securities have been duly
authorized and are, or in the case of the Underwriter's Securities,
will be, upon exercise and payment therefor, validly issued, fully paid
and non-assessable securities of the Company, and the holders thereof
are not and will not be subject to personal liability by reason of
being such holders; none of the Units, Shares, Warrants, Underwriter's
Warrants, the Common Shares, or the Underwriter's Securities (i) are
subject to any preemptive or similar contractual rights of any
stockholder of the Company by reason of the Company's certificate of
incorporation, as amended, or any applicable statute; or (ii) are
subject to any preemptive, or, to such counsel's knowledge, similar
contractual rights of any stockholder of the Company by reason of any
agreement to which the Company is a party; all corporate action
required to be taken for the authorization, issue and sale of such
securities has been duly and validly taken; if issued, the
Underwriter's Securities shall constitute, valid and binding
obligations of the Company to issue and sell, upon exercise thereof and
payment therefor, the number and type of securities of the Company
called for thereby; and the certificates representing the Units,
Shares, Warrants and the Underwriter's Warrant are in due and proper
form;
(3) except as described in the Prospectus, to such counsel's
knowledge, the Company does not own an interest in any corporation,
partnership, joint venture, trust or other business entity.
(4) this Agreement, the Consulting Agreement and the
Underwriter's Warrant Agreement have each been duly and validly
authorized, executed and delivered by the Company, assuming due
execution by the parties thereto other than the Company, and are valid
and binding agreements of the Company, enforceable against the Company
in accordance with their respective terms, except (A) as such
enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, (B) as
enforceability of any indemnification provision may be limited under
the federal and state securities laws, and (C ) that the remedy of
specific performance and injunctive and other forms or equitable relief
may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought;
(5) to such counsel's knowledge, there are no contracts or
other documents required to be described in the Prospectus or to be
filed as exhibits to the Registration Statement other than those
described and filed as required, and to such counsel's knowledge, there
are no statutes, rules or regulations or legal governmental
15
proceedings required to be described in the Prospectus which are not
described as required and no legal or governmental proceedings pending
or threatened which could materially adversely affect the business or
financial conditions of the Company which have not been disclosed in
the Prospectus;
(6) the Registration Statement is effective under the Act, and
to such counsel's knowledge, no proceedings for a stop order are
pending or, to such counsel's knowledge threatened under the Act;
(7) all consents, approvals, authorizations or orders of any
court or governmental agency or body (other than such as may be
required under Blue Sky laws, as to which no opinion need be rendered)
required in connection with the consummation of the transactions
contemplated by this Agreement have been obtained and are in effect;
(8) neither the execution and delivery of this Agreement, the
Underwriter's Warrant Agreement or the Consulting Agreement, nor the
issue and sale of the Units, Shares, Warrants, Underwriter's Warrants,
the Common Shares or the Underwriter's Securities, nor the consummation
of the transactions contemplated hereby, nor the compliance by the
Company with the terms and provisions hereof, constitute a default
under, any agreement that the Company is a party to, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to the terms of any
mortgage, deed of trust, note, indenture or loan or credit agreement or
any other agreement or instrument known to such counsel (after due
inquiry) to which the Company is a party or by which the Company may be
bound or 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
Certificate of Incorporation or the By-laws of the Company, or any
statute or any order, rule or regulation applicable to the Company of
any court or of any federal, state or other regulatory authority or
other governmental body having jurisdiction over the Company;
(9) the Registration Statement, each preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to
which no opinion need be rendered) comply as to form in al material
respects with the requirements of the Act and Regulations. Such counsel
shall state that such counsel has participated in conferences with
officers and other representatives of the Company, representatives of
the independent public accounts for the Company and representatives of
the Underwriter at which the contents of the Registration Statement,
the Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Registration Statement and Prospectus, on the basis of the
foregoing, no facts have come to the attention of such counsel which
lead them to believe that either the Registration Statement or any
amendment thereto at the time such Registration Statement or amendment
became effective or the Prospectus as of the date of such opinion
contained any untrue statement of a material fact or omitted to
16
state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that
such counsel need express no opinion with respect to the financial
statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus);
(10) the terms and provisions of the Shares, the Underwriter's
Warrants, the Common Shares the Underwriter's Securities and all other
securities issued or issuable by the Company conform in all material
respects to the description thereof contained in the Registration
Statement and the Prospectus;
(11) to such counsel's knowledge, the Company is not in breach
of, or in default under, any term or provision of any indenture,
mortgage, deed of trust, lease, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company is a
party or by which the Company or any of their respective properties may
be bound or affected; the Company is not in violation of any term or
provision of its Certificate of Incorporation or By-laws, and the
Company is not in violation of any franchise, license, permit,
judgment, decree, order, statute, rule or regulation, except as
referred to in the Prospectus;
(12) the statements in the Prospectus under "RISK FACTORS",
"BUSINESS", CERTAIN TRANSACTIONS", "MANAGEMENT" and "DESCRIPTION OF
SECURITIES" have been reviewed by such counsel, and insofar as they
refer to statements of law, descriptions of statutes, licenses, rules
or regulations or legal conclusions are correct in all material
aspects;
(13) the authorized and outstanding capital stock of the
Company is as set forth under the caption stock of the Company is as
set forth under the caption "CAPITALIZATION" in the Prospectus; all of
the issued and outstanding capital stock, options and warrants of the
Company have been duly authorized and validly issued and all of the
issued and outstanding shares of capital stock of the Company are fully
paid and non-assessable; and none of such securities or interests were
issued in violation of the preemptive rights or similar rights of any
holder of any security of interest of the Company or of any applicable
federal or state securities law;
(14) to such counsel's knowledge, the Company is conducting
its operations in compliance with applicable federal, state and local
laws, statutes, rules and regulations;
(15) to such counsel's knowledge, the Company has good and
marketable title to, or valid and enforceable leasehold estates in the
item of real and personal property stated in the Prospectus to be owned
or leased by it as lessee, free and clear of all liens, encumbrances,
claims, security interests, defects and restrictions of any material
nature whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable;
17
(16) to such counsel's knowledge, the Company owns or
possesses the requisite licenses or other rights to use the Intangibles
necessary to conduct the business of the Company, and there is no claim
or action by any person pertaining to, or proceeding pending, or
threatened, which challenges such rights of the Company, with respect
to any such Intangibles used in the conduct of the business of the
Company.
(17) except as and to the extent set forth in the Prospectus,
to such counsel's knowledge, the Company is not under any obligation to
pay to any third party royalties or fees of any kind whatsoever with
respect to any technology or intellectual properties developed,
employed or used;
(18) to such counsel's knowledge, there are no claims,
payments, issuances, arrangements or understandings for services in the
nature of a finder's or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangement or any other
arrangements agreements, understandings, payments or issuances that may
affect the Underwriter's compensation, as determined by the NASD;
(19) to such counsel's knowledge, persons listed under the
caption "PRINCIPAL STOCKHOLDERS" in the Prospectus are the respective
"beneficial owners' (As such phrase is defined in Regulation 13d-3
under the Exchange Act) of the shares of Common Stock set forth
opposite their respective names thereunder as and to the extent set
forth herein;
(20) to such counsel's knowledge, other than as set forth in
the Prospectus, no person, corporation, trust, partnership, association
or other entity has the right to include and/or register any securities
of the Company in the Registration Statement therefore;
(21) to such counsel's knowledge, the Company, nor any of its
respective officers, nor, to the Company's knowledge, any of their
respective employees, agents or any other person acting on behalf of
any of the Company has directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions
to customers, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency or instrumentality of
any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is,
or may be in a position to help or hinder the business of any of the
Company (or assist it in connection with any actual or proposed
transaction) which (a) might subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding, (b) if not given in the past, might have had a materially
adverse effect on the assets, business or operations of the Company as
reflected in any of the financial statements contained in the
Registration Statement, or (c ) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the
Company.
18
(22) the minute books of the Company have been made available
to counsel to the Underwriter and contain a complete summary of all
meetings and actions by unanimous consent of directors and stockholders
since the time of incorporation and reflect all transactions referred
to in such minutes accurately in all material respects; and
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent such counsel
deems proper and to the extent specified in such option, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to
Underwriter's counsel) of other counsel reasonably acceptable to Underwriter's
counsel, familiar with the applicable laws; (B) as to matters of fact, to the
extent they deem proper, on certificates and written statements of responsible
officers of the Company and certificates or other written statements of officers
of departments of various jurisdictions having custody of documents respecting
the corporate existence or good standing of the Company, provided that copies of
any such statements or certificates shall be delivered to Underwriter's counsel
if requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
At Closing Date II, the Underwriter shall have received the
favorable opinion of Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson, P.A., counsel to the
Company, dated Closing Date II, addressed to the Underwriter and in form and
substance satisfactory to ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Underwriter,
confirming as of Closing Date II, the statements made by Atlas, ▇▇▇▇▇▇▇▇, Trop &
Borkson, P.A. in their opinion deliver on Closing Date I.
c. On or prior to each of Closing Date I and Closing Date II,
counsel for the Underwriter shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in Section 8(b), or
in order to evidence the accuracy, completeness or satisfaction of any of the
representation, warranties or conditions herein contained.
d. Prior to each of Closing Date I and Closing Date II, (i)
there shall have been no material adverse change nor development involving a
prospective change in the condition or prospects of the business activities,
financial or otherwise, of the Company from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no transaction, not in the ordinary course of business, entered
into by the Company from the latest date as of which the financial condition of
the Company is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company; (iii) the Company shall not be in default
under any provision of any instrument relating to any outstanding indebtedness
which default would have a material adverse effect on the Company; (iv) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or
threatened against the Company wherein any unfavorable result or decision could
materially, adversely affect any of their respective properties
19
or business before or by any court or federal or state commission, board or
other administrative agency wherein an unfavorable decision, ruling or finding
may materially adversely affect the business, operations, prospects of financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; (vi) no stop order shall have been issued under the
Act and no proceedings thereof shall have been initiated or threatened by the
Commission; and (vii) the market for securities in general or for the Company's
Shares in particular, or political, financial or economic conditions shall have
materially changed from those reasonably foreseeable as of the date hereof as to
render it impracticable in the Underwriter's judgment to make a public offering
of the Shares, or there has been a material adverse change in market levels for
securities in general (or those of the Company in particular) or financial or
economic conditions which render it inadvisable in the Underwriter's judgment to
proceed.
e. At each of Closing Date I and Closing Date II, the
Underwriter shall have received a certificate of the Company signed by the
Chairman of the Board or the President and Secretary of the Company, dated
Closing Date I and Closing Date II, respectively, to the effect that the
conditions set forth in subsections (d) (i) through (vi) above have been
satisfied and that, as of Closing Date I and Closing Date II, respectively, the
representations and warranties of the Company set forth in Section 2 hereof are
true and correct.
f. By Closing Date I, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
g. At the time this Agreement is executed, and at each of
Closing Date I and Closing Date II, the Underwriter shall have received a
letter, addressed to the Underwriter and in form and substance satisfactory in
all respects (including the non-material nature of the changes or decreases, if
any, referred to in clause (iii) below) to the Underwriter and to ▇▇▇▇▇▇ &
▇▇▇▇▇▇, counsel for the Underwriter, from Spear, Safer & ▇▇▇▇▇▇ dated,
respectively, as of the date of this Agreement and as of each of Closing Date I
and Closing Date II:
(1) confirming that they are independent accounts with
respect to the Company within the meaning of the Act and the applicable
Regulations;
(2) stating that in their opinion the financial statements
of the Company included in the Registration Statement and Prospectus
comply as to form in all material respects with the applicable
accounting requirements of the Act and the published Regulations
thereunder;
(3) stating that, on the basis of a reading of the latest
available minutes of the stockholders and board of directors and the
various committees of the board of directors of the Company,
consultations with officers and other employees of the Company
responsible for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their attention which
would lead them to believe that
20
(A) either the audited financial statements for the years ended
_______________ of the Company in the Registration Statement do not
comply as to form in all material respects with the applicable
accounting requirements of the Act, and the Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited consolidated financial statements of the Company included in
the Registration Statement, (B) at a date not later than five (5) days
prior to the Effective Date, there was any change in the capital stock
or long-term debt of the Company, or any decrease in the stockholders'
equity of the Company as compared with amounts shown in the
_______________ balance sheet included in the Registration Statement,
other than as set forth in or contemplated by the Registration
Statement, or, if there was any decrease, setting forth the amount of
such decrease, and (C) during the period from ____________ to a
specified date not more than five (5) days prior to the Effective Date
there was any decrease in net revenues, increase in net losses or
increases in net losses per common share of the Company, in each case
as compared with the corresponding period beginning ______________
other than as set forth in or contemplated by the Registration
Statement, or, if there was any such decrease, setting forth the amount
of such decrease;
(4) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
account records, including worksheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards)
set forth in the letter and found them to be in agreement; and
(5) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonably
request.
h. All proceedings taken in connection with the authorization,
issuance or sale of the Shares, the Underwriter's Warrants, the Common Shares
and the Underwriter's Securities as herein contemplated shall be satisfactory in
form and substance to the Underwriter and to ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the
Underwriter.
i. On each of Closing Date I and Closing Date II, there shall
have been duly tendered to you for your account the appropriate number of
Securities and individually for your own account the Underwriter's Warrants.
j. No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 5(d) hereof shall have been
issued on either Closing Date I or Closing Date II (unless requested by the
Underwriter), and no proceedings for that purpose shall have been instituted or
to its knowledge or that of the Company shall be contemplated.
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Any certificate signed by any officer of the Company and
delivered to the Underwriter or to counsel to the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein. If any condition to the Underwriter's obligations
hereunder to be fulfilled prior to or at any Closing Date is not so fulfilled,
the Underwriter may terminate this Agreement or, if the Underwriter so elects,
may waive any such conditions which have not been fulfilled or extend the time
for their fulfillment.
8. INDEMNIFICATION.
(1) The Company shall indemnify and hold the Underwriter, and
each person, if any, who controls the Underwriter ("Controlling Person") within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act),
harmless against any and all liabilities, claims, lawsuits, including any and
all awards and/or judgments to which it may become subject under the Act, the
exchange Act or any other federal or State statute, at common law or otherwise,
insofar as said liabilities, claims and lawsuits (including awards and/or
judgments) arise out of or are in connection with the Registration Statement,
Prospectus and related Exhibits filed under the Act, except for any liabilities,
claims and lawsuits (including awards and/or judgments), arising out of acts or
omissions of the Underwriter. In addition, the Company shall also indemnify and
hold the Underwriter. In addition, the Company shall also indemnify and hold the
Underwriter harmless against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing.
The Underwriter shall give the Company prompt notice of any
such liability, claim or lawsuit which the Underwriter contends is the subject
matter of the Company's indemnification, and the Company thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right to settle, compromise and dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
The Underwriter shall indemnify and hold the Company, and each
Controlling Person, if any, who controls the Company with the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, harmless against any and all
liabilities, claims, lawsuits, including any and all awards and/or judgments to
which it may become subject under the Act, the Exchange Act or any other federal
or state statute, at common law or otherwise, insofar as said liabilities,
claims and lawsuits (including awards and/or judgments) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
required to be stated or necessary to make the statement therein, not
misleading, which statement or omission was made in reliance upon information
furnished in writing to the Company by or on behalf of the Underwriter for
inclusion in the Registration Statement or Prospectus or any amendment or
supplement thereto. In addition, the Underwriter shall also indemnify and hold
the Company harmless against any and all costs and expenses, including
reasonable counsel fees, incurred or elating to the foregoing.
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The Company shall give to the Underwriter prompt notice of any
such liability, claim or lawsuit which the Company contends is the subject
matter of the Underwriter's indemnification and the Underwriter thereupon shall
be granted the right to take any and all necessary and proper action, at its
sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Section 8 makes claim for indemnification pursuant hereto 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 this Section 8 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person n circumstances for which indemnification is such person in
circumstances for which indemnification is provided under this Section 8, then,
and in each such case, the Company and the Underwriter shall contributed to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after any contribution from others) in such proportion taking into
consideration the relative benefits received by each party from the offering
covered by the Prospectus (taking into account the portion of the proceeds of
the offering realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was assessed,
the opportunity to correct and prevent any statement or omission and other
equitable considerations appropriate under the circumstances; provided, however,
that notwithstanding the above in no event shall the Underwriter be required to
contribute any amount in excess of 8% of the initial pubic offering price of the
Securities; and provided, that, in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Within fifteen (15) days after receipt of any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing party"), notify
the contributing party of the commencement thereof, but the omission so to
notify the contributing party will not relive it from any liability which it may
have to any other party other than for contribution hereunder. In case any such
action, suit or proceeding is brought against any party, and such party notifies
a contributing party of his or its representatives of the commencement thereof
within the aforesaid fifteen (15) days, the contributing party will be entitled
to participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The indemnification provisions contained in
this Section 8 are in addition to any other rights or remedies which either
party hereto may have with respect to the other or hereunder.
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9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise required, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriter and the Company, including the indemnity
agreements contained in Section 8 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any of
the Underwriter, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriter until the earlier of the expiration of any applicable statue of
limitations and the seventh anniversary of Closing Date II, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
(1) This Agreement shall become effective at 9:30 a.m., New
York time, on the first full business day following the day on which the
Registration Statement becomes effective or at the time of the initial pubic
offering by the Underwriter of the Securities, whichever is earlier. The time of
the initial public offering, for the purpose of this Section 10, shall mean the
time, after the Registration Statement becomes effective, of the release by the
Underwriter for publication of the first newspaper advertisement which is
subsequently published relating to the Securities or the time, after the
Registration Statement becomes effective, when the Securities are first released
by the Underwriter for offering by the Underwriter or dealers by latter or
telegram, whichever shall first occur. The Underwriter may prevent this
Agreement from becoming effective without liability to any other party, except
as noted below, by giving the notice indicated below in this Section 10 below
the time this Agreement becomes effective. The Underwriter agrees to give the
undersigned notice of the commencement of the offering described herein.
(2) The Underwriter shall have the right to terminate this
Agreement if any of the conditions enumerated in Section 7 are not fulfilled or
waived by the Underwriter on or before any Closing Date.
(3) If the Underwriter elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10, the Company shall be notified on the same day as such election is made by
the Underwriter by telephone or telegram, confirmed by letter.
(4) Anything herein to the contrary notwithstanding, if this
Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Underwriter, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied then, in addition to the
obligations assumed by the Company pursuant to Section 6(a) hereof, the
Underwriter shall retain the initial $25,000 expense allowance previously paid.
Notwithstanding any contrary provision contained in this
agreement, any election
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hereunder or termination of this Agreement, and whether or not this Agreement is
otherwise carried out, the provisions of Section 8 shall not be in any way
affected
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
Witnesses: GAY ENTERTAINMENT TELEVISION, INC.
________________________ By: ________________________
Name: ________________________
________________________ Title: ________________________
THE AGEAN GROUP, INC.
________________________ By: ________________________
Name: ________________________
________________________ Title: ________________________
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