PARADISE MUSIC AND ENTERTAINMENT, INC.
1,000,000 UNITS
Each Unit Consisting of One Share of Common Stock
and One Redeemable Common Stock Purchase Warrant
UNDERWRITING AGREEMENT
_____________, 1997
▇▇▇▇▇▇ & Co. Securities Inc.
As Representative of the Underwriters
named in Schedule I hereto
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Paradise Music & Entertainment, Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement with ▇▇▇▇▇▇ & Co. Securities Inc.
(being referred to herein variously as "you" or the "Representative") and the
other underwriters named in Schedule I hereto (the "Representative" and the
other underwriters being collectively called the "Underwriters") as follows:
1. INTRODUCTORY. The Company proposes to issue and sell, severally
and not jointly, to the Underwriters 1,000,000 units (the "Firm Units"), each
Firm Unit consisting of one share of Common Stock, $0.01 par value, of the
Company (the "Common Stock") and one Redeemable Common Stock Purchase Warrant of
the Company (the "Redeemable Warrants"). Subsequent to the sale and issuance of
the Firm Units in accordance with the terms of this Agreement, the shares of
Common Stock and the Redeemable Warrants will be immediately separately
transferable. Two Redeemable Warrants entitle the holder of such warrants to
exercise the Redeemable Warrants for one (1) share of Common Stock at an initial
exercise price of $____ per share (120% of the initial public offering price of
the Units) commencing on the Effective Date (as hereinafter defined) and ending
at 5:00 p.m., New York time, on _______, 2001 (four (4) years after the
Effective Date). In addition, solely for the purpose of covering
over-allotments, the Company proposes to grant to the Representative an option
to purchase from it up to an additional 150,000 units (the "Additional Units"
and collectively with the Firm Units, the "Units"), each Additional Unit
consisting of one share of Common Stock (the "Additional Stock") and one
Redeemable Warrant (the "Additional Warrants"). The Common Stock to be sold by
the Company, excluding the Additional Stock, is herein called the "Stock". The
Units and the components thereof are more fully described in the Prospectus
referred to below.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Underwriters:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and amendments thereto, on Form
SB-2 (File No. 333-13941), including any related preliminary prospectus
("Preliminary Prospectus"), for the registration of the Units, the Stock, the
Redeemable Warrants, the Additional Stock and the Additional Redeemable Warrants
under the Securities Act of 1933, as amended (the "Act"). The Company will not,
before the registration statement becomes effective (the "Effective Date"), file
any other amendment to said registration statement to which you shall reasonably
object in writing after being furnished with a copy thereof. Copies of such
registration statement and all amendments thereto, and all forms of the related
Preliminary Prospectus contained therein, previously filed by the Company with
the Commission, have heretofore been delivered to you. Except as the context
may otherwise require, such registration statement, as amended, on file with the
Commission at the time the registration statement becomes effective (including
the prospectus, financial statements, exhibits and all other documents filed as
a part thereof and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430A of the General Rules and Regulations of
the Commission under the Act (the "Regulations")) is herein called the
"Registration Statement". The prospectus in the form filed with the Commission
pursuant to Rule 424(b) of the Regulations is herein called the "Prospectus".
(b) The Company has not received, directly or indirectly, from the
Commission or any "Blue Sky" or securities authority of any jurisdiction an
order preventing or suspending the use of any Preliminary Prospectus relating to
the proposed offering of the Units and Additional Units or has the Commission or
any "Blue Sky" or securities authority, to the Company's knowledge, instituted
proceedings for that purpose. Each Preliminary Prospectus, at the time of
filing with the Commission, contained all material statements which were
required to be stated therein in accordance with the Act and the Regulations,
and conformed in all material respects with the requirements of the Act and the
Regulations and did not include 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 the light of the circumstances under which they were
made, not misleading, except that no representations or warranties are made with
respect to statements or omissions made in reliance upon and in conformity with
written information furnished to the Company by the Representative expressly for
use in the Preliminary Prospectus. The Registration Statement at the time it
becomes effective and the Prospectus at the time it is filed with the Commission
pursuant to Rule 424(b) and on the Closing Date (and the Additional Closing
Date, if any, determined as hereinafter provided in Section 3) will contain all
material statements which are required to be stated therein in accordance with
the Act and the Regulations, and will in all
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material respects conform to the requirements of the Act and the Regulations,
and the Registration Statement and the Prospectus will not, on such dates,
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
except that no representations or warranties are made with respect to statements
or omissions made in reliance upon and in conformity with written information
furnished to the Company expressly for use in the Registration Statement or
Prospectus or any amendment or supplement thereto.
(c) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware. Each of
Picture Vision, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇ Music, Inc. and All Access Entertainment
Management Group, Inc. is a subsidiary of the Company (collectively, the
"Subsidiaries") and has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation. The Company owns, directly or indirectly, all of the capital
stock of each of the Subsidiaries. All such shares of capital stock so owned
are validly issued and outstanding, fully paid and nonassessable and are owned
free and clear of any liens, encumbrances or other restrictions. The Company
and each of the Subsidiaries are duly qualified and in good standing as foreign
corporations in all jurisdictions where the character or location of their
properties (owned or leased) or the nature of their business makes such
qualification necessary, except where the failure so to qualify would not have a
material adverse effect on the business, properties, results of operations,
condition (financial or otherwise), affairs or prospects (a "Material Adverse
Effect") of the Company and the Subsidiaries, taken as a whole. The Company and
the Subsidiaries have all requisite corporate power and authority, and all
necessary authorizations, approvals, orders, licenses, certificates and permits
of and from all governmental regulatory officials and bodies, to own their
respective properties and conduct their respective businesses as described in
the Prospectus, and the Company has all such power, authority, authorizations,
approvals, orders, licenses, certificates and permits to enter into this
Agreement and to carry out the provisions and conditions hereof. The Company
and the Subsidiaries own, or possess adequate rights to use, all patents,
trademarks, service marks, copyrights and other rights necessary for the conduct
of their business as described in the Prospectus and neither the Company, nor
any of the Subsidiaries nor any officer or director of the Company or any of the
Subsidiaries has received any notice of conflict with the asserted rights of
others in any respect which would have a Material Adverse Effect upon the
Company or any of the Subsidiaries, and none knows any basis therefor. The
Company has no subsidiaries other than the Subsidiaries.
(d) The Company and the Subsidiaries have either good and marketable
title in fee simple to, or valid and enforceable leasehold estates in, all items
of real property and personal property which are stated in the Prospectus owned
or leased by them, in each case free and clear of all liens, encumbrances,
claims, security interests, subleases and defects, other than those referred to
in the Prospectus and those which do not have a Material Adverse Effect upon the
Company and the Subsidiaries, taken as a whole. Each of the Company and the
Subsidiaries has the right to operate all of its facilities in their present
locations and the operation of such facilities
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does not violate in any material respect the provisions of any lease with
respect thereto which the Company, any of the Subsidiaries, or any third party
is a party.
(e) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company or any of the Subsidiaries, threatened against, or
involving the properties or business of, the Company or any of the Subsidiaries,
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 disturbance by the employees of the Company or any of the Subsidiaries
exist, which could have a Material Adverse Effect upon the Company and the
Subsidiaries, taken as a whole, except as referred to in the Prospectus.
(f) All contracts, agreements, documents and other instruments
required to be filed as exhibits to the Registration Statement have been filed
with the Commission as exhibits thereto.
(g) The consolidated financial statements together with the related
notes of the Company and the Subsidiaries included in the Registration Statement
and Prospectus present fairly the consolidated financial position and the
consolidated results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved.
The consolidated capitalization of the Company, as set forth under the caption
"Capitalization" in the Prospectus, was as so described on the date of which it
is set forth therein.
(h) ▇▇▇▇▇▇▇▇▇ Kass & Company, PC, whose reports are filed with the
Commission as a part of the Registration Statement, are independent accountants
with respect to the Company as required by the Act and the Regulations.
(i) Except for the shares of capital stock of the Subsidiaries,
neither the Company nor any of the Subsidiaries owns, directly or indirectly,
any shares of stock or any other securities of any corporation nor does the
Company or any of the Subsidiaries have any equity interest in any firm,
partnership, joint venture, association or other entity, except as referred to
in the Prospectus.
(j) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus, there has been no
material adverse change in the business, properties, results of operations,
condition (financial or otherwise), affairs or prospects of the Company and the
Subsidiaries, taken as a whole, except as referred to therein; and the
outstanding debt, the property and the business of the Company and each of the
Subsidiaries conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus.
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(k) No default exists, and no event has occurred which with notice or
lapse of time, or both, would constitute a default, in the due performance and
observance of any term, covenant or condition of any indenture, mortgage, deed
of trust, note, bank loan or credit agreement or any other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which either of them or any of their property may be bound or affected, which
default would have a Material Adverse Effect upon the Company or any of the
Subsidiaries.
(l) Neither the Company nor any of the Subsidiaries is in breach of
any term or provision of its Certificate of Incorporation, by-laws or other
charter documents and, to the best of the Company's knowledge, in violation of
any franchise, license, permit, judgment, decree, order, statute, rule or
regulation, which violation is a Material Adverse Effect upon the Company or any
of the Subsidiaries. Neither the Company nor any of the Subsidiaries, to the
best of the Company's knowledge, is in violation of any laws, ordinances,
governmental rules or regulations to which either of them is subject, which
violation is a Material Adverse Effect upon the Company and the Subsidiaries,
taken as a whole. Neither the Company nor any of the Subsidiaries has failed to
obtain any licenses, permits, franchises or other governmental authorizations
materially necessary to the ownership of its property or to the conduct of its
business, where the failure to do so is a Material Adverse Effect upon the
Company and the Subsidiaries, taken as a whole.
(m) Neither the execution and delivery of this Agreement, the
Redeemable Warrant Agreement, the Representative's Warrant Agreement (as defined
in Section 3(h) hereof) and the Financial Consulting Agreement, and the
consummation of the transactions herein or therein contemplated, nor compliance
with the terms and provisions hereof or thereof will conflict with, or result in
a breach of any of the terms, provisions or conditions of the Certificate of
Incorporation, by-laws or other charter documents of the Company or the
Subsidiary. The execution and delivery of this Agreement, the Redeemable
Warrant Agreement, the Representative's Warrant Agreement and the Financial
Consulting Agreement, the consummation of the transactions herein or therein
contemplated, and compliance with the terms and provisions hereof or thereof
will not conflict with, or result in a breach of, or constitute a default under
any of the terms, provisions or conditions of any agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which either of
them or any of their properties is bound, except where such conflict, breach or
default would not have a Material Adverse Effect upon the Company or any of the
Subsidiaries, or violate any franchise, license, permit, judgment, decree,
order, statute, rule or regulation of any government, governmental authority or
court having jurisdiction over the Company or any of the Subsidiaries, except
where such violation would not have a Material Adverse Effect upon the Company
or any of the Subsidiaries.
(n) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Redeemable Warrant Agreement, the Representative's Warrant Agreement and the
Financial Consulting Agreement, and this Agreement, the Redeemable Warrant
Agreement, the Representative's Warrant Agreement, and the Financial Consulting
Agreement, have been duly authorized, executed and delivered by the
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Company and constitute legal, valid and binding agreements of the Company and
are enforceable against the Company in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally,
and except insofar as the enforceability of the indemnification and contribution
terms may be limited by applicable law or public policy.
(o) All of the issued shares of Common Stock are duly and validly
issued and outstanding, fully paid and nonassessable; the Stock and the
Additional Stock, when issued and delivered in accordance with this Agreement,
will be duly and validly issued and outstanding, fully paid and nonassessable
and free of preemptive rights. The Company's capital stock conforms in all
material respects to all statements in relation thereto contained in the
Registration Statement and Prospectus.
(p) The Redeemable Warrants, the Additional Redeemable Warrants and
the warrants that will be issued pursuant to the terms of the Representative's
Warrant Agreement (the "Representative's Warrants") have been duly and validly
authorized by the Company and upon delivery to you against payment therefore and
otherwise in accordance with this Agreement, the Redeemable Warrant Agreement
and the Representative's Warrant Agreement, as the case may be, will be duly
issued and legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally.
(q) The Common Stock underlying the Redeemable Warrants (the
"Redeemable Warrant Stock"), the Additional Redeemable Warrants (the "Additional
Redeemable Warrant Stock") and the Representative's Warrants (the
"Representative's Warrant Stock") has been duly authorized and reserved for
issuance upon the representative's exercise of the Redeemable Warrants, the
Additional Redeemable Warrants and the Representative's Warrants, and, when
issued upon payment of the exercise price therefor, will be validly issued,
fully paid and nonassessable shares of Common Stock.
(r) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may otherwise
be indicated or contemplated herein or therein, neither the Company nor any of
the Subsidiaries has (i) issued any securities except securities issued under
the Company's employee benefit plans and as provided herein or in the
Registration Statement, or incurred any liability or obligation, direct or
contingent, for borrowed money, (ii) entered into any material transaction not
in the ordinary course of business, (iii) entered into any transaction with an
affiliate of the Company other than one or more of the Subsidiaries, or (iv)
declared or paid any dividend on its shares of Common Stock, except dividends
paid to the Company by any of the Subsidiaries.
(s) The Company has obtained from all of its directors, officers and
stockholders that beneficially own five percent (5%) or more of the Company's
Common Stock
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as of the date hereof their written agreement that (i) for a period of
two (2) years from the date of the Prospectus, they will not, without your
prior written consent, sell, contract to sell, or grant any option for the sale
of or otherwise dispose of, directly or indirectly, any shares of Common Stock
of the Company (or any securities convertible into or exercisable for such
shares of Common Stock) owned by them, (ii) that for a period of four (4) years
from the date of the Prospectus, they will utilize the facilities of the
Representative to effectuate any public sale of the Company's securities made in
accordance with the provisions of Rule 144 promulgated under the Act, provided
that the compensation and fees for such transactions shall not be greater than
the Representative's customary compensation and fees for similar transactions
and (iii) that for a period of four (4) years from the date of the Prospectus,
they will not sell, contract to sell or grant any option for the sale of or
otherwise dispose of, any shares of Common Stock of the Company (or any
securities convertible into or exercisable for such shares of Common Stock)
owned by them in an amount greater than the volume limitations of Rule 144(e)
promulgated under the Act.
(t) No consent, authorization or approval is required to be obtained
by the Company from any Federal, state or local governmental agency or body in
order to consummate the transactions contemplated herein or in the Registration
Statement, other than such consents, authorizations or approvals as have been
obtained.
(u) Except as provided in the Registration Statement, no person holds
a right to require or participate in the registration under the Act of any
securities of the Company to be effected by the Registration Statement, which
right has not been duly waived by the holder thereof as of the date hereof. The
Company does not have outstanding, and at the Closing Date and the Additional
Closing Date, if any, will not have outstanding, any options to purchase, or any
rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its Common Stock or any such warrants, convertible securities or obligations,
except as referred to in the Prospectus.
(v) The Company and each of the Subsidiaries has timely filed all
Federal, state, and local tax returns which are required to be filed and has
paid all taxes shown on such returns and all assessments received by it to the
extent that the same have become due.
(w) To the knowledge and belief of the Company's officers and
directors (such officers and directors having made reasonable investigation with
respect thereto), neither the Company, nor any of the Subsidiaries nor any
officer, director or employee of the Company or any of the Subsidiaries has made
any payment of funds of the Company or any of the Subsidiaries or purchased any
property with funds of the Company or any of the Subsidiaries in a manner
prohibited by law, and no funds of the Company or any of the Subsidiaries or
property purchased with funds of the Company or the Subsidiaries have been set
aside to be used for any payment prohibited by law.
(x) Except as set forth in the Registration Statement and Prospectus,
the Company does not know of any claims for services in the nature of a finders
fee, brokerage fee
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or otherwise with respect to this offering for which the Company or any of
the Subsidiaries or you may be responsible.
(y) The Company has obtained from such key executives as are
designated by the Representative (the "Key Executives") new or modified
employment agreements upon terms agreeable to the Company and the
Representative, including, without limitation, the term, compensation,
arrangement, restrictive covenants, termination compensation (including
termination royalty payments) and other items. The Company has obtained key man
life insurance upon the lives of the Key Executives in face amounts mutually
agreeable to the Company and the Representative.
(z) Application for quotation of the Common Stock on The Nasdaq
SmallCap Market has been approved, subject to notice of issuance.
3. PURCHASE, SALE AND DELIVERY OF THE UNITS.
(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, severally and not jointly, to the Underwriters, and the
Underwriters, severally and not jointly, agree to purchase from the Company, at
a purchase price of $____ per Unit, the number of Firm Units set forth opposite
their respective names in Schedule I.
(b) Payment for the Firm Units shall be made by wire transfer or
certified or official bank check in New York Clearing House funds or similar
next day funds, payable to the order of the Company at the offices of ▇▇▇▇▇▇ &
Co. Securities Inc., ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or such other place
as shall be agreed upon between us. Such delivery and payment shall be made at
10:00 A.M., New York time, on not later than the fifth business day following
the Effective Date; provided, however, that such date may be extended for not
more than an additional five business days by the Representative or in
accordance with the provisions of Section 9(c) hereof. The hour and date of
such delivery and payment are herein called the "Closing Date".
(c) Certificates evidencing the Stock and Redeemable Warrants
representing the Firm Units shall be registered in such name or names and in
such authorized denominations as you may request in writing at least two full
business days prior to the Closing Date. The Company will permit you to examine
and package said certificates at least one full business day prior to the
Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to you the option to purchase all or a portion of the
Additional Units as may be necessary to cover over-allotments at the same
purchase price per Unit to be paid by the Underwriters to the Company for the
Firm Units as determined in this Section 3. This option may be exercised only
to cover over-allotments in the sale of Additional Units by the Underwriters.
This option may be
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exercised at any time on or before the thirtieth day following the effective
date of the Registration Statement by written notice by the Representative to
the Company. Such notice shall set forth the aggregate number of Additional
Units as to which the option is being exercised, the name or names in which
the shares of Additional Stock and Additional Redeemable Warrants representing
the Additional Units are to be registered, the denominations in which the
Additional Stock and Additional Redeemable Warrants representing the Additional
Units are to be issued, and the date and time, as reasonably determined by you,
when the Additional Stock and Additional Redeemable Warrants representing the
Additional Units are to be delivered (such date and time being herein sometimes
referred to as the "Additional Closing Date"); provided, however, that the
Additional Closing Date shall not be earlier than the Closing Date nor earlier
than the second business day after the date on which the option shall have been
exercised nor later than the eighth business day after the day on which the
option shall have been exercised.
(e) Payment for the Additional Units shall be made by wire transfer
or certified or official bank checks in New York Clearing House funds or similar
next day funds, payable to the order of the Company at the offices of ▇▇▇▇▇▇ &
Co. Securities Inc., ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or such other
place as shall be agreed upon between us.
(f) Certificates evidencing the Additional Stock and Additional
Redeemable Warrants representing the Additional Units shall be registered in
such name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Additional Closing Date.
The Company will permit you to examine and package said certificates for
delivery at least one full business day prior to the Additional Closing Date.
(g) The Company shall not be obligated to sell or deliver any shares
of Stock, Redeemable Warrants, Additional Stock or Additional Redeemable
Warrants, except upon tender of payment by the Representative for all the Firm
Units or Additional Units, as the case may be, agreed to be purchased from it
hereunder.
(h) On the Closing Date, the Company shall issue and sell to the
Representative, at a purchase price of $0.001 per Warrant, the Representative's
Warrants. The Representative's Warrants shall be exercisable for a period of
four (4) years commencing one (1) year from the Effective Date at an initial
exercise price equal to _______________________ percent (___%) of the initial
public offering price of the Units. The Representative's Warrants shall be
issued pursuant to the terms and provisions of the Representative's Warrant
Agreement substantially in the form of the Representative's Warrant Agreement
filed as Exhibit 4.3 to the Registration Statement (the "Representative's
Warrant Agreement").
4. OFFERING. You are to make a public offering of the Units as soon, on
or after the effective date of the Registration Statement, as you deem it
advisable so to do. The Units are to be initially offered to the public at the
initial public offering price set forth on the cover page of the Prospectus
(such price being herein called the "public offering price"). You may from time
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to time increase or decrease the public offering price after the initial public
offering to such extent as you may determine.
5. COVENANTS OF THE COMPANY.
The Company covenants that it will:
(a) Use its best efforts to cause the Registration Statement to
become effective and will notify you immediately, and confirm the notice in
writing, (i) when the Registration Statement, or any post-effective amendment
thereto, shall have become effective, (ii) of the issuance by the Commission of
any stop order or of the initiation or the threatening of any proceedings for
that purpose, and (iii) of the receipt of any comments by the Commission. The
Company will prepare and timely file with the Commission under Rule 424(b) of
the Regulations a Prospectus containing information previously omitted on the
Effective Date in reliance of Rule 430A of the Regulations. The Company will
use its best efforts to prevent the issuance of any stop order or any order
preventing or suspending the use of the Registration Statement or Prospectus
and, if such order is issued, to obtain the lifting thereof as promptly as
possible.
(b) During the time when a prospectus is required to be delivered
under the Act, comply so far as it is able with all requirements imposed upon it
by the Act, as now and hereafter amended, and by the Regulations, as from time
to time in force, so far as necessary to permit the continuance of sales or of
dealings in the Stock, the Redeemable Warrants, the Additional Stock and the
Additional Redeemable Warrants in accordance with the provisions hereof and the
Prospectus. If at any time when a prospectus relating to the Stock, the
Redeemable Warrants, the Additional Stock or the Additional Redeemable Warrants
is required to be delivered under the Act any event shall have occurred as a
result of which, in the reasonable opinion of counsel for the Company or your
counsel, the Registration Statement or Prospectus as then amended or
supplemented includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or it is necessary at any time to amend or supplement the
Registration Statement or Prospectus to comply with the Act, the Company will
notify you promptly and prepare and file with the Commission an appropriate
amendment or supplement (in form reasonably satisfactory to you).
(c) Deliver to you such number of copies of each Preliminary
Prospectus as you may reasonably request and, deliver to you two signed copies
of the Registration Statement, including exhibits, and all post-effective
amendments thereto and such number of copies of the Prospectus, the Registration
Statement and amendments and supplements thereto, if any, without exhibits, as
you may reasonably request for the purposes contemplated by the Act.
(d) Endeavor in good faith, in cooperation with you, at or prior to
the time the Registration Statement becomes effective, to qualify the Units, the
Stock, the Redeemable Warrants, the Additional Stock and the Additional
Redeemable Warrants for offering or sale of
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the Units and the Additional Units of such jurisdictions as you 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 would be required to become qualified to do business as
a foreign corporation doing business in such jurisdiction. In each jurisdiction
where the qualification of the Units, the Stock, the Redeemable Warrants, the
Additional Stock and the Additional Redeemable Warrants shall be effected, the
Company will, unless you agree that such action is not at the time necessary or
advisable, file and make such statements or reports at such times as are or may
be reasonably required by the laws of such jurisdiction.
(e) Make generally available to its security holders and to the
Representative as soon as practicable, but not later than the last day of the
fifteenth full calendar month following the Effective Date, an earnings
statement of the Company (which need not be certified by independent auditors
unless required by the Act or the Regulations, but which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations) covering a period of at least twelve months commencing after the
Effective Date.
(f) For a period of _____ days after the date of the Prospectus, not
issue, sell, contract to sell, grant an option for the sale of or otherwise
dispose of, directly or indirectly, any shares of Common Stock of the Company
(or any shares of securities convertible into or exercisable for such Common
Stock) other than the Units being sold by the Company and securities issued
pursuant to the Company's employee benefit plans or as otherwise referred to in
the Prospectus, without your prior written consent.
(g) For a period of five years from the effective date of the
Registration Statement, furnish you the following:
(i) as soon as practicable after they have been filed with the
Commission, two copies of each annual, quarterly and current report on Form
10-K, Form 10-Q or Form 8-K (to the extent the Company shall be required to
file such reports pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (collectively the
"Exchange Act") and, as soon as practicable after they have been sent by
the Company to its security holders, two copies of any communications sent
by it to its public security holders generally;
(ii) as soon as practicable, two copies of every press release
and every material news items and article in respect of the Company or its
affairs which was released by the Company; and
(iii) such additional non-confidential documents and
information with respect to the Company and its affairs as you may from
time to time reasonably request.
(h) Apply the net proceeds from the offering received by the Company
in the manner set forth under "Use of Proceeds" in the Prospectus, including
that the net proceeds will
-11-
only be used in connection with the business as described in the Prospectus,
and comply with Rule 463 under the Act.
(i) Furnish to you as early as practicable prior to the Closing Date
and Additional Closing Date, as the case may be, but no later than two full
business days prior thereto, a copy of the latest available unaudited interim
financial statements of the Company, if any, which have been reviewed by the
Company's independent auditors, as stated in their letters to be furnished
pursuant to Section 7(f) hereof.
(j) Not file any amendment or supplement to the Registration
Statement or Prospectus after the effective date of the Registration Statement
to which you shall reasonably object in writing after being furnished a copy
thereof.
(k) If any action or proceeding shall be brought by you in order to
enforce any right or remedy under this Agreement, the Company hereby consents
to, and agrees that it will submit to, the jurisdiction of the courts of the
State of New York and of any Federal court sitting in the United States District
Court for the Southern District of New York. The Company agrees that process in
any such action or proceeding may be served in that manner provided by New York
law for service on foreign corporations.
(l) Comply with all registration, filing and reporting requirements
of the Exchange Act which may from time to time be applicable to the Company.
(m) Make all filings required, including registration under the
Exchange Act, to obtain and keep the listing of its Common Stock in The Nasdaq
SmallCap Market, and effect and maintain such listing for the Common Stock for
at least five (5) years from the date of this Agreement.
(n) Use its best efforts to be included in Standard & Poors
Corporations Manual as soon as possible following the Closing Date, including
the payment of all fees for accelerated publication, and to continue to be
included in such Manual for at least five (5) years from the effective date of
the Registration Statement.
(o) Not later than three months following the date of this Agreement,
cause to be delivered to you and to your counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇,
four (4) bound volumes containing therein all filings, including exhibits, and
correspondence to and from the Commission, the National Association of
Securities Dealers, Inc, ("NASD") and all states or other jurisdictions
concerning the offering of the Stock, underwriting documents and closing
documents, plus any other relevant material.
(p) For a period of three (3) years from the Closing Date, engage
your designee as an advisor (the "Advisor") to the Company's Board of Directors.
The Advisor shall be permitted to attend meetings of the Board and each of its
committees and receive no more or less
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compensation as is equal to the entitlement of the Directors including, without
limitation, all compensation payable to Directors as members of the committees
of the Board or in connection with any other Board activities; PROVIDED,
HOWEVER, that the Company may require as a condition precedent that any such
Advisor shall agree to hold in confidence and trust and to act in a fiduciary
manner with respect to all information, including, but not limited to, trade
secrets, so received during such meetings and may require that such Advisor
sign a confidentiality agreement with the Company; and, PROVIDED, FURTHER,
that the Company reserves the right not to provide information and to exclude
such Advisor from any meeting or portion thereof if attendance at such meeting
by such Advisor or dissemination of any information at such meeting to such
Advisor would compromise or adversely affect the attorney-client privilege
between the Company and its counsel, or would, in the good faith judgment of
the Board of Directors, result in a conflict of interest situation. The Company
shall use its reasonable efforts to promptly bring to the attention of such
Advisor any agenda item that, in the good faith judgment of the Board of
Directors, would result in such a trade secret, privileged matter or conflict
of interest and the Board of Directors may exclude such Advisor (or
alternatively, the Advisor shall be entitled to exclude himself or herself)
from any deliberation or discussion of the Board of Directors concerning such
trade secret (if the Advisor has not executed a confidentiality agreement),
privileged matter or conflict of interest matter and as a recipient in the
dissemination of any such information. If such Advisor in his or her good
faith judgment believes that an item to be discussed by the Board of Directors
would result in any conflict of interest, such Advisor shall promptly bring such
conflict to the attention of the Chairman of the Board. In no event shall any
provision of this paragraph waive any obligation of confidentiality to the
Company owed by any such Advisor or the Representative. In addition, the
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; such costs in excess of $1,000 to be subject to the
prior written approval of the Company which will not be unreasonably withheld.
(q) For a period of three (3) years from the Closing Date, there will
be no less than four (4) formal, "in person" or "telephonic" meetings, of the
Company's Board of Directors in each such year at which meetings the Advisor
shall be permitted to attend or participate, as the case may be in accordance
with the provisions of Section 5(p); said meetings shall be held quarterly each
year and ten (10) days' advance notice of such meetings shall be given to the
Advisor. The Advisor shall receive notice of special meetings of the Board of
Directors at the same time and manner as the members of the Board.
(r) Indemnify and hold the Representative and the Advisor harmless,
to the full extent allowed by applicable laws, against any and all claims,
actions, awards and judgments arising solely out of the attendance and
participation of the Advisor at any meeting described in Section 5(p) of this
Agreement. In the event the Company maintains a liability insurance policy
affording coverage for the acts of its officers and directors, the Company
agrees, if possible, to include the Representative and the Advisor as an insured
under such policy.
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(s) Establish and maintain during the period that the Common Stock is
listed on The Nasdaq SmallCap Market an independent audit committee and a
compensation committee of the Company's Board of Directors, which committees
shall meet the requirements of The Nasdaq National Market.
(t) On the Closing Date, enter into a two (2) year financial
consulting agreement with the Representative (the "Financial Consulting
Agreement") pursuant to which the Representative will provide the Company with
investment banking and financial consulting services at a fee of $72,000,
payable at the rate of $3,000 per month in advance of each month for the twenty
four months subsequent to the Closing Date.
(u) For a period of three (3) years from the Closing Date, grant the
Representative a right of first refusal to act as underwriter or placement agent
on any subsequent public or private offerings of equity or debt securities
(excluding sales to employees pursuant to the Company's stock option plan,
traditional commercial financing or bank financing) of the Company or any
subsidiary or successor of the Company, or by the Company, its subsidiaries,
their affiliates or their respective officers, directors or principal
stockholders.
6. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay, whether or not the transactions
contemplated hereunder are consummated, all expenses (other than fees of your
counsel, except as provided in (iv) below) in connection with (i) the
preparation, printing, filing and mailing of the Registration Statement and the
Prospectus, including the cost of all copies thereof and of the Preliminary
Prospectus and of the Prospectus and any amendments or supplements thereto
supplied to you in quantities as hereinabove stated, (ii) the issuance, transfer
and delivery of the Firm Units and the Additional Units, including any transfer
or other taxes payable thereon, but not including the underwriting discounts
thereon, (iii) printing of this Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreement, the Underwriters' Questionnaire, the Power of
Attorney and the certificates evidencing the Common Stock and the Redeemable
Warrants, (iv) the qualification of the Units, the Stock, the Redeemable
Warrants, the Additional Stock and the Additional Redeemable Warrants, under
state or foreign securities or Blue Sky laws, including the costs of printing
and mailing the "Blue Sky Survey," the fees of counsel to the Underwriters of
which $7,500 has been paid prior to the date hereof, and disbursements in
connection therewith, (v) filing fees payable to the Commission, the NASD, the
Boston Stock Exchange and The Nasdaq SmallCap Market, Inc. (vi) in arranging and
holding due diligence meetings with prospective underwriters and selected
dealers, (vii) reasonable travel and lodging incurred by the Representative and
its counsel in connection with meetings outside of New York City, (viii)
tombstone advertising, and (ix) the preparation, production and delivery of
plaques and bound volumes.
(b) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 6, it will pay to the
Representative a non-accountable
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expense allowance equal to three percent (3%) of the gross proceeds received by
the Company from the sale of the Firm Units and the Additional Units, of which
$25,000 has been paid to date and the Company will pay the balance on the
Closing Date and any additional balance on the Additional Closing Date by
certified or bank cashier's check or, at the election of the Representative,
by deduction from the proceeds of the offering contemplated herein.
7. CONDITIONS OF YOUR OBLIGATIONS. The obligation of the several
Underwriters hereunder to purchase and pay for the Firm Units and the Additional
Units, as provided herein, shall be subject to the continuing accuracy in all
material respects of the representations and warranties of the Company as of the
date hereof and as of the Closing Date (or the Additional Closing Date, as the
case may be), to the performance by the Company in all material respects 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 City time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you and, at the Closing
Date and Additional Closing Date, no stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, shall have been issued
or proceeding therefor initiated or threatened by the Commission;
(b) At the Closing Date and the Additional Closing Date, as the case
may be, you shall have received the favorable opinion of ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Constant & ▇▇▇▇▇▇▇▇, counsel for the Company, dated the Closing Date or the
Additional Closing Date, as the case may be, addressed to the Underwriters and
in form and scope reasonably satisfactory to counsel of the Underwriters, to the
effect that:
(i) each of the Company and the Subsidiaries (A) is a
corporation duly organized and validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation and (B) has
full corporate power and authority and all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own its properties and to conduct its
business as now being conducted as described in the Prospectus;
(ii) each of the Company and the Subsidiaries is duly qualified
as a foreign corporation and in good standing in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect upon the Company and the Subsidiaries, taken as a whole;
(iii) the Company owns of record, directly or indirectly, all
of the capital stock of each of the Subsidiaries; all such shares of capital
stock so owned are validly issued and outstanding, fully paid and nonassessable
and are owned free and clear of any liens, encumbrances or other claims or
restrictions whatsoever;
-15-
(iv) the Company had authorized and outstanding capital stock as
set forth in the Prospectus; all the issued shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
nonassessable and all the issued shares of Common Stock of the Company and the
Stock and the Additional Stock are not subject to any preemptive rights; the
Stock, the Additional Stock and the other capital stock of the Company and the
Redeemable Warrants and the Additional Redeemable Warrants conform as to legal
matters to the description thereof contained under the caption "Description of
Capital Stock" in the Prospectus;
(v) the Redeemable Warrant Stock, the Additional Redeemable
Warrant Stock and the Representative's Warrant Stock have been duly authorized
and reserved for issuance and, when issued and delivered in accordance with the
terms of the Redeeamble Warrant Agreement and the Representative's Warrant
Agreement, as the case may be, will be duly and validly issued, fully paid and
nonassessable.
(vi) the Company has conveyed to the Underwriters good and valid
title to the Stock, Redeemable Warrants, Additional Stock and Additional
Redeemable Warrants, as the case may be, being sold hereunder, free and clear of
any liens, encumbrances, security interests and claims whatsoever; the Stock,
Redeemable Warrants, Additional Stock and Additional Redeemable Warrants, as the
case may be, shall be validly issued and fully paid and nonassessable when
issued and paid for in accordance with the terms of this Agreement, and the
certificates evidencing the Stock, the Redeemable Warrants, Additional Stock and
the Additional Redeemable Warrants are in due and proper form;
(vii) this Agreement, the Redeemable Warrant Agreement, the
Representative's Warrant Agreement and the Financial Consulting Agreement have
been duly and validly authorized, executed and delivered by the Company and each
is a valid and binding agreement of the Company enforceable in accordance with
its terms, except insofar as indemnification and contribution provisions may be
limited by applicable law (including, but not limited to, Federal or state
securities laws) or equitable principles, and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general equitable principles;
(viii) to the knowledge of such counsel, there are no
contracts or other documents which are required to be filed as exhibits to the
Registration Statement, as it may then be amended or supplemented, or required
to be described in the Registration Statement or Prospectus as it may then be
amended or supplemented that are not filed or described as required;
(ix) there are no legal or governmental proceedings pending
or, to the knowledge of such counsel, threatened against the Company or any of
the Subsidiaries, and no statutes or regulations applicable to the Company or
any of the Subsidiaries, of a character that are required to be disclosed in the
Registration Statement and Prospectus, which have not been so disclosed and
properly described therein;
-16-
(x) the statements in the Registration Statement and Prospectus,
insofar as they are descriptions of contracts, agreements or other documents, or
refer to statements of law or legal conclusions, are accurate in all material
respects and present fairly the information required to be shown with respect to
such contracts, agreements or other documents;
(xi) the execution and delivery of this Agreement, the
Redeemable Warrant Agreement, the Representative's Warrant Agreement and the
Financial Consulting Agreement, the consummation of the transactions
contemplated in this Agreement, the Redeemable Warrant Agreement, the
Representative's Warrant Agreement and the Financial Consulting Agreement, and
compliance with the terms of this Agreement, the Redeemable Warrant Agreement,
the Representative's Warrant Agreement and the Financial Consulting Agreement do
not and will not (A) conflict with or result in a breach of any of the terms or
provisions of, or constitute a default (or an event which with notice or lapse
of time or both would constitute a default or acceleration) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of the Subsidiaries pursuant to the terms of any
agreement or instrument known to such counsel and to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the Subsidiaries
may be bound or to which any of the properties or assets of the Company or any
of the Subsidiaries is subject, or any statute or any order, rule or regulation
applicable to the Company or any of the Subsidiaries of any court or of any
Federal, state or other regulatory authority or other governmental body having
jurisdiction over the Company or any of the Subsidiaries (provided, however,
that such counsel may render such opinion on state (other than New York),
regulatory or other governmental bodies, to such counsel's knowledge) or (B)
result in any violation of provisions of the Certificate of Incorporation,
by-laws or other charter documents of the Company or any of the Subsidiaries;
(xii) no consent, approval, authorization or order of any
court or governmental agency or body is required in connection with the
consummation of the transactions contemplated by this Agreement, the Redeemable
Warrant Agreement, the Representative's Warrant Agreement and the Financial
Consulting Agreement, except such as have been obtained or made or as may be
required under the Act or state securities or Blue Sky laws;
(xiii) (A) neither the Company nor any of the Subsidiaries is in
violation of any term or provision of its Certificate of Incorporation, by-laws
or other charter documents; (B) to such counsel's knowledge, neither the Company
nor any of the Subsidiaries is presently in breach of, or in default (nor has an
event occurred which with notice, lapse of time or both would constitute such a
default or acceleration) under any indenture, mortgage, deed of trust, note,
bank loan or credit agreement or (in any respect that is material in light of
the financial condition of the Company and the Subsidiaries, taken as a whole)
any other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which either of them or any of their property may
be bound or affected, or to such counsel's knowledge, in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, which violation would have a Material Adverse Effect upon the
Company or any of the Subsidiaries; and (C) to such counsel's
-17-
knowledge, neither the Company nor any of the Subsidiaries has received notice
of conflict with the asserted rights of others in respect of patents,
trademarks, service marks and rights necessary for the conduct of its business;
(xiv) the Company has the right to operate all of its
facilities in their present locations and the operation of its facilities in
such locations as described in the Prospectus does not violate the provisions of
any lease with respect thereto to which the Company is a party;
(xv) the Registration Statement and the Prospectus and any
amendments or supplements thereto (other than the financial statements and other
financial and statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the requirements of
the Act and the Regulations and nothing has come to the attention of such
counsel which would lead them to believe that the Registration Statement or the
Prospectus, as amended or supplemented, if amended or supplemented (other than
the financial statements and other financial and statistical data included
therein as to which no opinion need be rendered) contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading; and
(xvi) the Registration Statement is effective under the Act,
and to the best of such counsels knowledge, no proceedings for a stop order are
pending or threatened under the Act;
In rendering the opinions set forth above, such counsel may rely upon
certificates of officers of the Company and of public officials as to matters of
fact. In giving the foregoing opinions, such counsel may rely on such other
counsel as it deems advisable; provided that such counsel shall state that, in
such counsel's opinion, you are justified in relying on such opinions of such
other counsel. Copies of all such opinions and certificates shall be furnished
to your counsel on the Closing Date or the Additional Closing Date, as the case
may be.
(c) On or prior to the Closing Date and the Additional Closing Date,
as the case may be, you shall have been furnished such documents, certificates
and opinions as you may reasonably require for the purpose of enabling you to
review the matters referred to in subsection (b) of this Section 7, and in order
to evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
(d) Prior to the Closing Date and the Additional Closing Date, as the
case may be, (i) there shall have been no material adverse change in the
business, properties, results of operations, condition (financial or otherwise),
affairs or prospects, of the Company and the Subsidiary from that as of the
latest date 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 or the Subsidiary, from
the latest date as of which the financial condition of the Company and the
Subsidiary is set forth in the Registration Statement
-18-
and Prospectus, other than transactions referred to or contemplated therein
or to which you have given your written consent; (iii) neither the Company
nor the Subsidiary shall be in default (nor shall an event have occurred
which, with notice, or lapse of time or both would constitute a default or
acceleration) under any provision of, any agreement, understanding or
instrument relating to any indebtedness; (iv) no material amount of the
consolidated assets of the Company and the Subsidiary shall have been pledged
or mortgaged, except as set forth in the Registration Statement and
Prospectus; and (v) no action, suit or proceeding, at law or in equity, shall
have been pending or, to the knowledge of the Company, threatened against the
Company or the Subsidiary or affecting any of their properties or business
before or by any court or federal, state or other jurisdictional commission,
board or other administrative agency wherein an unfavorable decision, ruling
or finding would materially adversely affect the business, operations,
prospects or consolidated financial condition or income of the Company and
the Subsidiary except as set forth in the Registration Statement and
Prospectus.
(e) At the Closing Date and Additional Closing Date, as the case may
be, you shall have received a certificate of the President and the principal
financial or accounting officer of the Company, dated the Closing Date and
Additional Closing Date, as the case may be, (i) to the effect that the
conditions set forth in subsections (a) and (d) above have been satisfied and
(ii) as to the accuracy, as of the Closing Date and Additional Closing Date, as
the case may be, of the representations and warranties of the Company set forth
in Section 2 hereof.
(f) At the time this Agreement is executed and at the Closing Date
and Additional Closing Date, as the case may be, you shall have received a
letter, addressed to you in form and substance satisfactory to you in all
respects (including the non-material nature of the changes or decreases, if any,
referred in to clause (iii) below), from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & Company, PC, dated
as of the date of this Agreement and as of the Closing Date and Additional
Closing Date, as the case may be:
(i) confirming that they are independent accountants with
respect to the Company and its consolidated Subsidiaries within the
meaning of the Act and the applicable published Regulations;
(ii) stating that in their opinion, the consolidated financial
statements of the Company and its Subsidiaries included in the
Registration Statement examined by them comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published Regulations;
(iii) stating that, on the basis of procedures (but not an
audit in accordance with generally accepted auditing standards), which
included a reading of the latest available unaudited consolidated
interim financial statements of the Company and its Subsidiaries (with
an indication of the date of the latest available unaudited
consolidated interim financial statements), a reading of the latest
available minutes of the stockholders and boards of directors of the
Company and
-19-
its consolidated Subsidiaries and committees of such boards and
inquiries to certain officers and other employees of the Company
and its consolidated Subsidiaries responsible for financial and
accounting matters and other specified procedures and inquiries,
nothing has come to their attention that would cause them to believe
that (A) the unaudited consolidated financial statements of the
Company and its Subsidiaries included in the Registration Statement
(i) do not comply as to form in all material respects with the
applicable accounting requirements of the Act and Regulations, or (ii)
were not fairly presented in conformity with generally accepted
accounting principles on a basis substantially consistent with that of
the audited consolidated financial statements included in the
Registration Statement; (B) at the date of the latest available
consolidated interim financial statements and at a specified date not
more than five business days prior to the date of such letter, there
was any change in long-term debt or capital stock of the Company and
its consolidated Subsidiaries, as compared with the amounts shown in
the September 30, 1996 balance sheet of the Company and its
consolidated Subsidiaries included in the Registration Statement and
Prospectus, other than as set forth in or contemplated by the
Registration Statement and Prospectus, or, if there was any change,
setting forth the amount of such change; or (C) during the period from
September 30, 1996 to a specified date not more than five days prior
to the date of such letter, there was any decrease in revenues or any
increase in operating loss, net loss or pro forma net loss per share
of the Company, as compared with the corresponding period in the
preceding year, other than as set forth in or contemplated by the
Registration Statement and Prospectus, or, if there was any decrease
or increase, respectively, setting forth the amount of such decrease
or increase; and
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of dollar amounts and shares
and other information pertaining to the Company set forth in the
Prospectus, which have been specified by you prior to the date of this
Agreement, to the extent that such amounts, numbers, percentages and
other information may be derived from the general accounting records
of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of
specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards) set forth in the letter, and
found them to be in agreement.
(g) All proceedings taken in connection with the sale of the Firm
Units and the Additional Units as herein contemplated shall have been reasonably
satisfactory in form and substance to you and your counsel.
(h) The Company shall have furnished to the Representative such
further certificates and documents confirming the representations and warranties
contained herein, the
-20-
performance of covenants prior to the Closing Date and the Additional Closing
Date, as the case may be, and related matters as the Representative may
reasonably have requested; and you shall have received from counsel to the
Underwriters, a favorable opinion, dated as of the Closing Date and the
Additional Closing Date, as the case may be, with respect to such of the
matters set forth under subsection (b) of this Section 7, and with respect to
such other related matters, as you may reasonable require.
(i) There shall have been duly tendered to you certificates
representing all the Stock and the Additional Stock, as the case may be, agreed
to be sold by the Company on the Closing Date and the Additional Closing Date,
as the case may be.
(j) No order suspending the sale of the Firm Units or the Additional
Units, as the case may be, in any jurisdiction designated by you pursuant to
subsection (d) of Section 5 hereof, shall have been issued on the Closing Date
or the Additional Closing Date, as the case may be, and no proceedings for that
purpose shall have been instituted or to your knowledge or that of the Company
shall be contemplated.
Any certificate signed by any duly authorized officer of the Company
in such capacity and delivered to you or your counsel shall be deemed a
representation and warranty by the Company to you as to the statements made
therein. If any condition to your obligations hereunder to be fulfilled prior
to or at the Closing Date or the Additional Closing Date, as the case may be, is
not so fulfilled, you may terminate this Agreement or, if you so elect, waive
any such conditions which have not been fulfilled or extend the time for their
fulfillment.
8. INDEMNIFICATION.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each of the Underwriters, each of the officers and
directors of the Underwriters and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever) ("collectively,
"Damages") arising out of or based upon (i) the inaccuracy or breach of any
representation or warranty of the Company or the breach of any covenant made by
the Company in this Agreement or (ii) any untrue statement or alleged untrue
statement of a material fact contained (x) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended and
supplemented) or (y) in any application or other document (in this Section 8,
collectively called "Application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Stock or the Additional Stock under the
"Blue Sky" or securities laws thereof or filed with the Commission or any
securities exchange, such as The Nasdaq SmallCap Market, or (iii) the omission
or alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statements therein not
-21-
misleading; unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect
to the Underwriters by or on behalf of any Underwriter expressly for use in
the Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any Application or in any
communication to the Commission, as the case may be. With respect to any
Damages arising out of or based upon any untrue statement or alleged untrue
statement made in, or omission or alleged omission from, any Preliminary
Prospectus, the indemnity agreement contained in this Section 8(a) with
respect to such Preliminary Prospectus shall not inure to the benefit of the
Underwriters (or the benefit of any person controlling any Underwriter), if
the Prospectus (or the Prospectus as amended or supplemented if the Company
shall have made any amendments thereof or supplements thereto which shall
have been furnished to you prior to the time of confirmation of such sale)
does not contain such statement, alleged statement, omission or alleged
omission, a sufficient number of copies of such Prospectus were provided to
the Underwriters and a copy of such Prospectus shall not have been sent or
given to the person asserting such Damages at or prior to the written
confirmation of such sale to such person.
(b) Subject to the conditions set forth below, each Underwriter,
severally and not jointly, agrees to indemnify and hold harmless the Company,
each of the directors of the Company, each of the officers of the Company who
shall have signed the Registration Statement and each other person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act for all Damages with respect to statements or
omissions, or alleged statements or omissions, if any, made in any Preliminary
Prospectus, Registration Statement or Prospectus or any amendment or supplement
thereto or any Application in reliance upon, and in conformity with, written
information furnished to the Company with respect to the Underwriters by or on
behalf of any Underwriter for use in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
in any application, as the case may be.
(c) If any action is brought against an indemnified party under
subsection (a) or (b) above (the "Indemnified Party") in respect of which
indemnity may be sought against the indemnifying party under subsection (a) or
(b) above (the "Indemnifying Party"), such Indemnifying Party shall promptly
notify in writing the party or parties against whom indemnification is to be
sought of the institution of such action and the Indemnifying Parties shall
assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such Indemnified Party) and payment of expenses.
Such Indemnified Party shall have the right to employ it or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless the employment of such counsel shall have been
authorized in writing by the Indemnifying Parties in connection with the defense
of such action or the Indemnifying Parties shall not have employed counsel to
have charge of the defense of such action or such Indemnified Party or parties
shall have reasonably concluded that there may be defenses available to the
Indemnifying Parties which are different or additional to those available to the
Indemnifying Parties (in which case the Indemnifying Parties shall not have the
right to direct the defense of such action on behalf of the Indemnified Party or
Parties), in any of
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which events such reasonable fees and expenses shall be borne by the
Indemnifying Parties. Anything in this paragraph to the contrary
notwithstanding, the Indemnifying Party shall not be liable for the
reasonable fees and expenses of more than one counsel or for any settlement
of any such claim or action effected without its written consent. The
Indemnifying Party agrees promptly to notify the Indemnified Party of the
commencement of any litigation or proceedings against the Indemnifying Party
or any of its officers or directors in connection with the issue and sale of
the Stock and the Additional Stock or in connection with such Preliminary
Prospectus, Registration Statement or Prospectus, or any amendment or
supplement thereto, or any such Application.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an Indemnified Party in respect of
any losses, claims, damages or liabilities (or actions in respect thereof)
referred to therein, then each Indemnifying Party shall contribute to the amount
paid or payable to such Indemnified Party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Stock and
Additional Stock. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the Indemnified
Party failed to give the notice required above in this Section 8, then each
Indemnifying Party shall contribute to such amount paid or payable by such
Indemnified Party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this subsection
(d) were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) the Underwriters
shall not be required to contribute any amount in excess of the amount by which
the total price at which the Stock and Additional Stock underwritten by the
Underwriters and distributed to the public were offered to the public exceeds
the amount of any damages which the Underwriters have otherwise been required to
pay by reason of such untrue statement or omission and (ii) no person guilty of
-23-
fraudulent misrepresentation (within the meaning of Section 11 of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligations to purchase the Firm Units hereunder, and if the number of Firm
Units with respect to which such default relates does not exceed in the
aggregate 10% of the number of Firm Units which all Underwriters have agreed to
purchase hereunder, then such Firm Units to which the default relates shall be
purchased by the nondefaulting Underwriters in proportion to their respective
commitments hereunder.
(b) In the event that such default relates to more than 10% of the
number of Firm Units, you may in your discretion arrange for yourself or for
another party or parties to purchase such Firm Units to which such default
relates on the terms contained herein. If within one (1) business day after
such default relating to more than 10% of the number of Firm Units , you do
not arrange for the purchase of such Firm Units, then the Company shall be
entitled to a further period of one (1) business day within which to procure
another party or parties satisfactory to you to purchase said Firm Units on
such terms. In the event that neither you nor the Company arrange for the
purchase of the Firm Units to which a default relates as provided in this
Section 9, this Agreement may be terminated by you or the Company (except as
provided in Section 6 and Section 8(a) hereof) or the several Underwriters,
but nothing herein shall relieve a defaulting Underwriter of its liability,
if any, to the other several Underwriters and to the Company for damages
occasioned by its default hereunder. Such termination by the Company shall be
without liability to you and the several Underwriters.
(c) In the event that the Firm Units to which the default relates is
to be purchased by the non-defaulting Underwriters, or is to be purchased by
another party or parties as aforesaid, you or the Company shall have the right
to postpone the Closing Date for a reasonable period but not in any event
exceeding five (5) business days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus or in
any other documents and arrangements, and the Company agrees to file promptly
any amendment to the Registration Statement or the Prospectus which in the
opinion of counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 9 with like effect as if it had originally been a party to
this Agreement with respect to such Firm Units.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and the Additional Closing Date, and such
representations, warranties and agreements of you and the Company, including the
indemnity and contribution agreements contained in Section 8 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on
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behalf of you or any controlling person, or by or on behalf of the Company
or any controlling person, and shall survive termination of this Agreement
and/or delivery of the Firm Units and the Additional Units to you.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) 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 public offering by you
of the Units, whichever is earlier. The time of the initial public offering,
for the purpose of this Section 11, shall mean the time, after the Registration
Statement becomes effective, of the release by you for publication of the first
newspaper advertisement which is subsequently published relating to the Units or
the time, after the Registration Statement becomes effective, when the Units is
first released by you for offering by the Underwriters or dealers by letter or
telegram, whichever shall first occur. You or the Company may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as noted below, by giving the notice indicated below in Section
11(d) before the time this Agreement becomes effective.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the Additional Closing Date, as the case may be,
if, after the date of this Agreement, any domestic or international event or act
or occurrence has materially disrupted or, in the exercise of your reasonable
judgment, will in the immediate future materially disrupt, securities markets in
the United States; or trading on the New York Stock Exchange shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the New
York Stock Exchange by the New York Stock Exchange or by order of the Commission
or any other governmental authority having jurisdiction; or the United States
shall have become involved in a war or major hostilities; or a banking
moratorium has been declared by a New York or Federal authority; or the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not said loss shall have been insured, will, in your opinion, interfere
materially and adversely with the conduct of the business and operations of the
Company; or there shall have been such material adverse change in the condition
or prospects of the Company or the market for its and similar securities as in
your judgment would make it inadvisable to proceed with the offering, sale and
delivery of the Firm Units or the Additional Units, as the case may be.
(c) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11, the Company shall be
notified promptly by you by telephone or telegram, confirmed by letter. If the
Company elects to prevent this Agreement from becoming effective, you shall be
notified promptly by the Company by telephone or telegram, confirmed by letter.
-25-
(d) Anything in this Agreement to the contrary notwithstanding if
this Agreement shall not become effective by reason of an election of the
Company pursuant to this Section 11, or if this Agreement shall not be carried
out within the time specified herein by reason of any failure on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement by
it to be performed or satisfied, the sole liability of the Company to you, in
addition to the obligations assumed by the Company pursuant to Section 6 hereof,
will be to reimburse you for such actual out-of-pocket expenses (including the
fees and disbursements of your counsel) as shall have been incurred in
connection with this Agreement and the proposed purchase of the Firm Units and
the Additional Units, and upon demand the Company will pay the full amount
thereof to you. If this Agreement shall not become effective by reason of an
election by you pursuant to this Section 11 or if this Agreement shall be
terminated or otherwise not carried out within the time specified herein for any
reason other than the failure on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement by it or them to be
performed or satisfied, the Company shall have no liability to you other than
for obligations assumed by the Company pursuant to Section 6 hereof; provided,
however, that you may retain any sums heretofore paid to you by the Company as
provided in Section 3 hereof to the extent that such sums are for your actual
out-of-pocket expenses (including the fees and disbursements of your counsel) as
shall have been incurred in connection with this Agreement and the proposed
purchase of the Firm Units and the Additional Units.
Notwithstanding any election hereunder or any 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 by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
12. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered or telegraphed and confirmed to ▇▇▇▇▇▇ & Co.
Securities Inc., ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇, President, with a copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.; and if sent to the
Company, shall be mailed, delivered or telegraphed and confirmed to Paradise
Music & Entertainment, Inc. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, President, with a copy to ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant &
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Esq.
13. PARTIES. This Agreement shall be binding upon, you, the Company, and
the controlling persons, directors and officers referred to in Section 8 hereof,
and their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained.
14. CONSTRUCTION. This Agreement shall be construed in accordance with
the laws of the State of New York.
-26-
If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
PARADISE MUSIC & ENTERTAINMENT, INC.
By:
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, President
Accepted as of the date
first above written:
▇▇▇▇▇▇ & CO. SECURITIES INC.
AS REPRESENTATIVE OF THE UNDERWRITERS
NAMED IN SCHEDULE I HERETO
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President
-27-
SCHEDULE I
Underwriters Number of Firm Units
▇▇▇▇▇▇ & Co. Securities Inc.
TOTAL ___________
1,000,000
