X-Xxxxxxx.xxx Inc.
2,450,000 Shares of Common Stock
(No Par Value Per Share)
UNDERWRITING AGREEMENT
----------------------
Whale Securities Co., L.P. New York, New York
000 Xxxxx Xxxxxx ___________, 0000
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
X-Xxxxxxx.xxx Inc., a corporation incorporated under the laws
of Canada (the "Company"), proposes to issue and sell to Whale Securities Co.,
L.P. (the "Underwriter") two million three hundred eighteen thousand one hundred
sixty-two (2,318,162) common shares of the Company, no par value (the "Company
Offered Shares"), which Company Offered Shares are presently authorized but
unissued common shares, no par value (individually a "Common Share" and
collectively the "Common Shares"), of the Company. In addition, the selling
shareholders as set forth on Schedule A hereto ("Selling Shareholders") propose
to sell to the Underwriter an aggregate of one hundred thirty one thousand eight
hundred thirty eight (131,838) Common Shares, as set forth on Schedule A hereto
(the "Selling Shareholders' Shares"). The Company Offered Shares and the Selling
Shareholders' Shares are sometimes collectively referred to herein as the
"Offered Shares". In addition, the Underwriter, in order to cover
over-allotments in the sale of the Offered Shares, may purchase from the Company
up to an aggregate of three hundred sixty seven thousand five hundred (367,500)
Common Shares (the "Optional Shares"; the Offered Shares and the Optional Shares
are hereinafter sometimes collectively referred to as the "Shares"). The Company
also proposes to issue and sell to the Underwriter for its own account and the
accounts of its designees, warrants (the "Underwriter's Warrants") to purchase
up to an aggregate of two hundred forty-five thousand (245,000) Common Shares
(the "Warrant Shares") at an exercise price of $9.90 per Warrant Share, which
sale will be consummated in accordance with the terms and conditions of the form
of Underwriter's Warrant filed as an exhibit to the Registration Statement, as
defined in Section 4(d) below. The Shares, the Underwriter's Warrants and the
Warrant Shares are more fully described in the Registration Statement and the
Prospectus, as defined in Section 4(d) below.
The Company and the Selling Shareholders hereby confirm their
respective agreements with the Underwriter as follows:
1. Purchase and Sale of Offered Shares. On the basis of the representations
and warranties herein contained, but subject to the terms and conditions herein
set forth, the Company and the Selling Shareholders hereby agree to sell the
Company Offered Shares and the Selling Shareholder's Shares, respectively, to
the Underwriter, and the Underwriter agrees to purchase the Company Offered
Shares from the Company and the Selling Shareholders' Shares from the Selling
Shareholders, at a purchase price of $5.47 per Offered Share. The Underwriter
plans to offer the Offered Shares to the public at a public offering price of
$6.00 per Offered Share. The Underwriter agrees that it will not offer or sell
the Offered Shares to any resident of Canada unless an exception from
registration is available or registration is not required.
2. Payment and Delivery.
(a) Payment for the Offered Shares will be made to the Company and the
Selling Shareholders by wire transfer or official bank check or checks payable
to their respective order in New York Clearing House funds, at the offices of
the Underwriter, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, against delivery of
the Offered Shares to the Underwriter. Such payment and delivery will be made at
10:00 A.M., New York City time, on the third business day following the
Effective Date (as defined in Section 4(d) below) (the fourth business day
following the Effective Date in the event that trading of the Offered Shares
commences on the day following the Effective Date), the date and time of such
payment and delivery being herein called the "Closing Date." The certificates
representing the Offered Shares to be delivered will be in such denominations
and registered in such names as the Underwriter may request not less than two
full business days prior to the Closing Date, and will be made available to the
Underwriter for inspection, checking and packaging at the office of American
Stock Transfer & Trust Company, the Company's transfer agent, at 00 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 not less than one full business day prior to the
Closing Date.
(b) On the Closing Date, the Company will sell the Underwriter's
Warrants to the Underwriter or to the Underwriter's designees, which designees
may only be officers and partners of the Underwriter and members of the selling
group and/or their officers and partners (collectively, the "Underwriter's
Designees"). The Underwriter's Warrants will be in the form of, and in
accordance with, the provisions of the Underwriter's Warrant Agreement attached
as an exhibit to the Registration Statement. The aggregate purchase price for
the Underwriter's Warrants is One Hundred Dollars ($100.00). The Underwriter's
Warrants will be restricted from sale, transfer, assignment or hypothecation for
a period of one (1) year from the Effective Date, except to the Underwriter's
Designees. Payment for the Underwriter's Warrants will be made to the Company by
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check or checks payable to its order on the Closing Date against delivery of the
certificates representing the Underwriter's Warrants. The certificates
representing the Underwriter's Warrants will be in such denominations and such
names as the Underwriter may request prior to the Closing Date.
3. Option to Purchase Optional Shares.
(a) For the purposes of covering any over-allotments in connection with
the distribution and sale of the Offered Shares as contemplated by the
Prospectus, the Underwriter is hereby granted an option to purchase all or any
part of the Optional Shares from the Company. The purchase price to be paid for
the Optional Shares will be the same price per Optional Share as the price per
Offered Share set forth in Section 1 hereof. The option granted hereby may be
exercised by the Underwriter as to all or any part of the Optional Shares at any
time within 45 days after the Effective Date. The Underwriter will not be under
any obligation to purchase any Optional Shares prior to the exercise of such
option.
(b) The option granted hereby may be exercised by the Underwriter by
giving oral notice to the Company, which must be confirmed by a letter, telex or
telegraph within one business day thereafter setting forth the number of
Optional Shares to be purchased, the date and time for delivery of and payment
for the Optional Shares to be purchased and stating that the Optional Shares
referred to therein are to be used for the purpose of covering over-allotments
in connection with the distribution and sale of the Offered Shares. If such
notice is given prior to the Closing Date, the date set forth therein for such
delivery and payment will not be earlier than either two full business days
thereafter or the Closing Date, whichever occurs later. If such notice is given
on or after the Closing Date, the date set forth therein for such delivery and
payment will not be earlier than two full business days thereafter. In either
event, the date so set forth will not be more than 15 full business days after
the date of such notice. The date and time set forth in such notice is herein
called the "Option Closing Date." Upon exercise of such option, through the
Underwriter's delivery of the aforementioned notice, the Company will become
obligated to convey to the Underwriter, and, subject to the terms and conditions
set forth in Section 3(d) hereof, the Underwriter will become obligated to
purchase, the number of Optional Shares specified in such notice.
(c) Payment for any Optional Shares purchased will be made to the
Company by wire transfer or official bank check or checks payable to its order
in New York Clearing House funds, at the office of the Underwriter, against
delivery of the Optional Shares purchased to the Underwriter. The certificates
representing the Optional Shares to be delivered will be in such denominations
and registered in such names as the Underwriter requests not less than two full
business days prior to the Option Closing Date, and will be made available to
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the Underwriter for inspection, checking and packaging at the aforesaid office
of the Company's transfer agent not less than one full business day prior to the
Option Closing Date.
(d) The obligation of the Underwriter to purchase and pay for any of the
Optional Shares is subject to the accuracy and completeness in all material
respects (as of the date hereof and as of the Option Closing Date) of and
compliance in all material respects with the representations and warranties of
the Company herein, to the accuracy and completeness of the statements of the
Company or its officers made in any certificate or other document to be
delivered by the Company pursuant to this Agreement, to the performance in all
material respects by the Company of its obligations hereunder, to the
satisfaction by the Company of the conditions, as of the date hereof and as of
the Option Closing Date, set forth in Section 3(b) hereof, and to the delivery
to the Underwriter of opinions, certificates and letters dated the Option
Closing Date substantially similar in scope to those specified in Sections 6 and
7(b), (c), (d) and (e) hereof, but with each reference to "Offered Shares" and
"Closing Date" to be, respectively, to the Optional Shares and the Option
Closing Date.
4. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, the Underwriter that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of Canada, with full corporate power and authority
to own or lease, as the case may be, and operate its properties, whether
tangible or intangible, and to conduct its business as described in the
Registration Statement and to execute, deliver and perform this Agreement and
the Underwriter's Warrant Agreement and to consummate the transactions
contemplated hereby and thereby. The Company has no subsidiaries other than
3451615 Canada Inc., a corporation duly organized, validly existing and in good
standing under the laws of Canada and X-Xxxxxxx.xxx USA Inc., a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
(the "Subsidiaries"). Unless the context otherwise requires, all references to
the "Company" in this Agreement shall include the Subsidiaries. Each of the
Subsidiaries has full power and authority, corporate and other, necessary to own
or lease, as the case may be, and operate its properties, whether tangible or
intangible, and to conduct its business as described in the Registration
Statement. The Company and each of the Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
wherein such qualification is necessary and where failure so to qualify could
have a material adverse effect on the financial condition, results of
operations, business or properties of the Company and the Subsidiaries, taken as
a whole (a "Material Adverse Effect").
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(b) The Company owns all of the issued and outstanding shares of capital
stock of each of the Subsidiaries, free and clear of any security interests,
liens, encumbrances, claims and charges, and all of such shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
options or warrants for the purchase of, or other rights to purchase or acquire,
or outstanding securities convertible into or exchangeable for, any capital
stock or other securities of the Subsidiaries. Other than the Subsidiaries, the
Company has no equity interests in any entity.
(c) This Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, and the
Underwriter's Warrant Agreement, when executed and delivered by the Company on
the Closing Date, will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms. The
execution, delivery and performance of this Agreement and the Underwriter's
Warrant Agreement by the Company, the consummation by the Company of the
transactions herein and therein contemplated and the compliance by the Company
with the terms of this Agreement and the Underwriter's Warrant Agreement have
been duly authorized by all necessary corporate action and do not and will not,
with or without the giving of notice or the lapse of time, or both, (i) result
in any violation of the Articles of Incorporation or By-Laws, each as amended,
of the Company or the Subsidiaries; (ii) result in a breach of or conflict with
any of the terms or provisions of, or constitute a default under, or result in
the modification or termination of, or result in the creation or imposition of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or the Subsidiaries pursuant to any indenture, mortgage,
note, contract, commitment or other agreement or instrument to which the Company
or any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries or any of their respective properties or assets is or may be bound
or affected; (iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or the Subsidiaries or any of
their respective properties or businesses; or (iv) have any effect on any
permit, certification, registration, approval, consent order, license, franchise
or other authorization (collectively, the "Permits") necessary for the Company
or the Subsidiaries to own or lease and operate, as the case may be, its
properties or conduct its businesses or the ability of the Company or the
Subsidiaries to make use thereof.
(d) No Permits of any court or governmental agency or body, other than
under the Securities Act of 1933, as amended (the "Act"), the Regulations, as
defined in Section 4(d) below, and applicable state securities or Blue Sky laws,
are required (i) for the valid authorization, issuance, sale and delivery of the
Shares to the Underwriter, and (ii) the consummation by the Company of the
transactions contemplated by this Agreement and the Underwriter's Warrant
Agreement.
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(e) The conditions for use of a registration statement on Form F-1 set
forth in the General Instructions to Form F-1 have been satisfied with respect
to the Company, the transactions contemplated herein and in the Registration
Statement. The Company has prepared in conformity with the requirements of the
Act and the rules and regulations (the "Regulations") of the Securities and
Exchange Commission (the "Commission") and filed with the Commission a
registration statement (File No. 333-87537) on Form F-1 and has filed one or
more amendments thereto, covering the registration of the Shares under the Act,
including the related preliminary prospectus or preliminary prospectuses (each
thereof being herein called a "Preliminary Prospectus") and a proposed final
prospectus. Each Preliminary Prospectus was endorsed with the legend required by
Item 501(c)(5) of Regulation S-K of the Regulations and, if applicable, Rule
430A of the Regulations. Such registration statement including any documents
incorporated by reference therein and all financial schedules and exhibits
thereto, as amended at the time it becomes effective, and the final prospectus
included therein are herein, respectively, called the "Registration Statement"
and the "Prospectus," except that, (i) if the prospectus filed by the Company
pursuant to Rule 424(b) of the Regulations differs from the Prospectus, the term
"Prospectus" will also include the prospectus filed pursuant to Rule 424(b), and
(ii) if the Registration Statement is amended or such Prospectus is supplemented
after the date the Registration Statement is declared effective by the
Commission (the "Effective Date") and prior to the Option Closing Date, the
terms "Registration Statement" and "Prospectus" shall include the Registration
Statement as amended or supplemented.
(f) Neither the Commission nor, to the best of the Company's knowledge,
any state regulatory authority has issued any order preventing or suspending the
use of any Preliminary Prospectus or has instituted or, to the best of the
Company's knowledge, threatened to institute any proceedings with respect to
such an order.
(g) The Registration Statement when it becomes effective, the Prospectus
(and any amendment or supplement thereto) when it is filed with the Commission
pursuant to Rule 424(b), and both documents as of the Closing Date and the
Option Closing Date, referred to below, will contain all statements which are
required to be stated therein in accordance with the Act and the Regulations and
will in all material respects conform to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, on such dates, 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, except that this
representation and warranty does not apply to statements or omissions made in
6
reliance upon and in conformity with information furnished in writing to the
Company in connection with the Registration Statement or Prospectus or any
amendment or supplement thereto by the Underwriter expressly for use therein.
(h) The Company had at the date or dates indicated in the Prospectus a
duly authorized and outstanding capitalization as set forth in the Registration
Statement and the Prospectus. Based on the assumptions stated in the
Registration Statement and the Prospectus, the Company will have on the Closing
Date the adjusted stock capitalization set forth therein. Except as set forth in
the Registration Statement or the Prospectus, on the Effective Date and on the
Closing Date, there will be no options to purchase, warrants or other rights to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell shares of the Company's capital stock
or any such warrants, convertible securities or obligations. Except as set forth
in the Prospectus, no holders of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
(i) The descriptions in the Registration Statement and the Prospectus of
contracts and other documents are accurate and present fairly the information
required to be disclosed, and there are no contracts or other documents required
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement under the Act or the Regulations which
have not been so described or filed as required.
(j) PricewaterhouseCoopers, LLP, the accountants who have certified
certain of the consolidated financial statements filed and to be filed with the
Commission as part of the Registration Statement and the Prospectus, are
independent public accountants within the meaning of the Act and Regulations.
The consolidated financial statements and schedules and the notes thereto filed
as part of the Registration Statement and included in the Prospectus present
fairly the financial position of the Company as of the dates thereof, and the
results of operations and cash flows of the Company for the periods indicated
therein, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods involved. The selected financial
data set forth in the Registration Statement and the Prospectus present fairly
the information shown therein and have been compiled on a basis consistent with
that of the audited and unaudited financial statements included in the
Registration Statement and the Prospectus.
(k) The Company and each of the Subsidiaries has filed with the
appropriate federal, state and local governmental agencies, and all appropriate
foreign countries and political subdivisions thereof, all material tax returns,
including material franchise tax returns, which it is required to file or has
duly obtained extensions of time for the filing thereof and has paid all taxes
7
shown on such returns and all assessments received by it to the extent that the
same have become due; and the provisions for income taxes payable, if any, shown
on the consolidated financial statements filed with or as part of the
Registration Statement are sufficient for all accrued and unpaid foreign and
domestic taxes, whether or not disputed, and for all periods to and including
the dates of such consolidated financial statements. Except as disclosed in
writing to the Underwriter, neither the Company nor any of the Subsidiaries has
executed or filed with any taxing authority, foreign or domestic, any agreement
extending the period for assessment or collection of any income taxes and is not
a party to any pending action or proceeding by any foreign or domestic
governmental agency for assessment or collection of taxes; and no claims for
assessment or collection of taxes have been asserted against the Company or the
Subsidiaries.
(l) The outstanding Common Shares, including, without limitation, the
Selling Shareholders' Shares, and the outstanding options and warrants to
purchase Common Shares have been duly authorized and validly issued. The
outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms. The
Company has duly reserved a sufficient number of Common Shares from its
authorized but unissued Common Shares for issuance upon exercise of the
outstanding options and warrants. None of the outstanding Common Shares or
options or warrants to purchase Common Shares has been issued in violation of
the preemptive rights of any shareholder of the Company. None of the holders of
the outstanding Common Shares is subject to personal liability solely by reason
of being such a holder. The offers and sales of the outstanding Common Shares
and outstanding options and warrants to purchase Common Shares were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or exempt from such registration requirements. The
authorized Common Shares and outstanding options and warrants to purchase Common
Shares conform to the descriptions thereof contained in the Registration
Statement and Prospectus in all material respects. Except as set forth in the
Registration Statement and the Prospectus, on the Effective Date and the Closing
Date, there will be no outstanding options or warrants for the purchase of, or
other outstanding rights to purchase or acquire, Common Shares or securities
convertible into Common Shares.
(m) No securities of the Company have been sold by the Company or by or
on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as disclosed in the Registration Statement.
(n) The issuance and sale of the Company Offered Shares and Optional
Shares have been duly authorized and, when the Shares have been issued and duly
8
delivered against payment therefor as contemplated by this Agreement, the
Company Offered Shares and Optional Shares will be validly issued, fully paid
and nonassessable, and the holders thereof will not be subject to personal
liability solely by reason of being such holders. The Shares will not be subject
to preemptive rights of any shareholder of the Company.
(o) The issuance and sale of the Common Shares issuable upon exercise of
the Underwriter's Warrants have been duly authorized and, when such Common
Shares have been duly delivered against payment therefor, as contemplated by the
Underwriter's Warrant Agreement, such Common Shares will be validly issued,
fully paid and nonassessable. Holders of Common Shares issuable upon the
exercise of the Underwriter's Warrants will not be subject to personal liability
solely by reason of being such holders. Neither the Underwriter's Warrants nor
the Common Shares issuable upon exercise thereof will be subject to preemptive
rights of any shareholder of the Company. The Company has reserved a sufficient
number of Common Shares from its authorized but unissued Common Shares for
issuance upon exercise of the Underwriter's Warrants in accordance with the
provisions of the Underwriter's Warrant Agreement. The Underwriter's Warrants
conform to the descriptions thereof contained in the Registration Statement and
the Prospectus.
(p) Neither the Company nor any of the Subsidiaries is in violation of,
or in default under, (i) any term or provision of its articles of incorporation
or by-laws, each as amended; (ii) any term or provision or any financial
covenants of any indenture, mortgage, contract, commitment or other agreement or
instrument to which it is a party or by which it or any of its property or
business is or may be bound or affected; or (iii) any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company, any of the
Subsidiaries or any of the properties or businesses of the Company or the
Subsidiaries, the default or violation of which, in the case of clauses (ii) and
(iii) of this Section 4(o), could cause a Material Adverse Effect. The Company
and each of the Subsidiaries owns, possesses or has obtained all governmental
and other (including those obtainable from third parties) Permits, necessary to
own or lease, as the case may be, and to operate its properties, whether
tangible or intangible, and to conduct its business and operations as presently
conducted and all such Permits are outstanding and in good standing, and there
are no proceedings pending or, to the best of the Company's knowledge
threatened, or any basis therefor, seeking to cancel, terminate or limit such
Permits.
(q) Except as set forth in the Prospectus, there are no claims, actions,
suits, proceedings, arbitrations, investigations or inquiries before any
governmental agency, court or tribunal, domestic or foreign, or before any
private arbitration tribunal, pending, or, to the best of the Company's
knowledge, threatened against the Company or any of the Subsidiaries or
9
involving the properties or business of the Company or any of the Subsidiaries
which, if determined adversely to the Company or any of the Subsidiaries, would,
individually or in the aggregate, result in a Material Adverse Effect or which
question the validity of the capital stock of the Company or any of the
Subsidiaries or of this Agreement or of any action taken or to be taken by the
Company pursuant to, or in connection with, this Agreement; nor, to the best of
the Company's knowledge is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There are no outstanding
orders, judgments or decrees of any court, governmental agency or other tribunal
naming the Company or any of the Subsidiaries and enjoining the Company or any
of the Subsidiaries from taking, or requiring the Company or any of the
Subsidiaries to take, any action, or to which the Company or any of the
Subsidiaries, or the property or business of the Company or any of the
Subsidiaries, is bound or subject, in each case, which singly or in the
aggregate could have a Material Adverse Effect.
(r) Neither the Company nor any of its affiliates has incurred any
liability for any finder's fees or similar payments in connection with the
transactions herein contemplated.
(s) The Company and each of the Subsidiaries owns or possesses adequate
and enforceable rights to use all patents, patent applications, trademarks,
service marks, copyrights, rights, trade secrets, confidential information,
processes and formulations necessary for the conduct of its business as
described in the Prospectus (collectively the "Intangibles"); to the best of the
Company's knowledge, neither the Company nor any of the Subsidiaries has
infringed or is infringing upon the rights of others with respect to
Intangibles; and neither the Company nor any of the Subsidiaries has received
any notice of conflict with the asserted rights of others with respect to the
Intangibles which could, singly or in the aggregate, cause a Material Adverse
Effect, and the Company knows of no basis therefor; and, to the best of the
Company's knowledge, no others have infringed upon the Intangibles of the
Company or any of the Subsidiaries.
(t) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus and the Company's latest consolidated
financial statements, neither the Company nor any of the Subsidiaries has
incurred any material liability or obligation, direct or contingent, or entered
into any material transaction, whether or not incurred in the ordinary course of
business, and has not sustained any material loss or interference with its
business from fire, storm, explosion, flood or other casualty, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree; and since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there have not been, and prior
10
to the Closing Date referred to below there will not be, any changes in the
capital stock or any material increases in the long-term debt of the Company or
any change which has resulted or could result in a Material Adverse Effect,
other than as set forth or contemplated in the Prospectus.
(u) Neither the Company nor any of the Subsidiaries owns any real
property. The Company and each of the Subsidiaries has good title to all
personal property (tangible and intangible) owned by it, free and clear of all
security interests, charges, mortgages, liens, encumbrances and defects, except
such as are described in the Registration Statement and Prospectus or such as do
not materially affect the value or transferability of such property and do not
interfere with the use of such property made, or proposed to be made, by the
Company or by each of the Subsidiaries. The leases, licenses or other contracts
or instruments under which the Company and each of the Subsidiaries lease, hold
or are entitled to use any property, real or personal, are valid, subsisting and
enforceable only with such exceptions as are not material and do not interfere
with the use of such property made, or proposed to be made, by the Company or
each of the Subsidiaries, and all rentals, royalties or other payments accruing
thereunder which became due prior to the date of this Agreement have been duly
paid, and neither the Company nor any of the Subsidiaries, nor, to the best of
the Company's knowledge, any other party is in default thereunder and, to the
best of the Company's knowledge, no event has occurred which, with the passage
of time or the giving of notice, or both, would constitute a default thereunder,
in each case that could cause a Material Adverse Effect. Neither the Company nor
any of the Subsidiaries has received notice of any violation of any applicable
law, ordinance, regulation, order or requirement relating to its owned or leased
properties which singly or in the aggregate could have a Material Adverse
Effect. The Company and each of the Subsidiaries has adequately insured its
properties against loss or damage by fire or other casualty and maintains, in
adequate amounts, such other insurance as is usually maintained by companies
engaged in the same or similar businesses.
(v) Each contract or other instrument (however characterized or
described) to which the Company or each of the Subsidiaries is a party or by
which the properties or businesses of the Company or each of the Subsidiaries is
or may be bound or affected and to which reference is made in the Prospectus has
been duly and validly executed, is in full force and effect in all material
respects and is enforceable against the parties thereto in accordance with its
terms, and none of such contracts or instruments has been assigned by the
Company or any of the Subsidiaries, and neither the Company nor any of the
Subsidiaries, nor, to the best of the Company's knowledge, any other party, is
in default thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the lapse of time or the giving of notice, or both, would
constitute a default thereunder, except to the extent that any such default
singly or in the aggregate could not be expected to have a Material Adverse
Effect.
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None of the provisions of such contracts or instruments violates any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or any of the
Subsidiaries or any of their respective assets or businesses, including, without
limitation, those promulgated by the Commission, and comparable state and local
regulatory authorities, except to the extent that any such violation, singly or
in the aggregate, could not be expected to have a Material Adverse Effect.
(w) The employment, consulting, confidentiality and non-competition
agreements between the Company and its officers, employees and consultants and
between each of the Subsidiaries and their respective officers, employees and
consultants, described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or
arrangements affecting creditors' rights generally and subject to principles of
equity.
(x) Except as set forth in the Prospectus, neither the Company nor any
of the Subsidiaries has employee benefit plans (including, without limitation,
profit sharing and welfare benefit plans) or deferred compensation arrangements
that are subject to the provisions of the Employee Retirement Income Security
Act of 1974.
(y) To the best of the Company's knowledge, no labor problem exists with
any of the Company's employees or any of the employees of the Subsidiaries or is
imminent which could materially adversely affect the Company or the
Subsidiaries.
(z) Neither the Company nor any of the Subsidiaries has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by applicable
law. The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with the United States
Foreign Corrupt Practices Act of 1977, as amended.
(aa) The Shares have been approved for listing on the Nasdaq SmallCap
Market and the Boston Stock Exchange.
(bb) The Company has provided to Xxxxxx Xxxxxxxxxx LLP, counsel to the
Underwriter ("Underwriter's Counsel"), all agreements, certificates,
correspondence and other items, documents and information in its possession
and/or available to it requested by such counsel's Corporate Review Memorandum
dated April 21, 1999 (the "Memorandum") and the Company's response to such
Memorandum is accurate and complete in all material respects.
12
Any certificate signed by an officer of the Company, by an officer of any of
the Subsidiaries or by any of the Selling Shareholders and delivered to the
Underwriter or to Underwriter's Counsel shall be deemed to be a representation
and warranty by the Company, such Subsidiaries or the Selling Shareholder, as
the case may be, to the Underwriter as to the matters covered thereby.
5. Representations and Warranties of the Selling Shareholders. Each Selling
Shareholder severally represents and warrants to the Underwriter that:
(a) The Shares to be sold by such Selling Shareholder are, and on the
Closing Date will be, duly and validly authorized and validly issued, fully paid
and nonassessable; the certificates for such Shares will be genuine; such
Selling Shareholder will have on the Closing Date valid, marketable title to
such Shares, free and clear of all security interests, liens, encumbrances,
claims, charges, restrictions on transfer (other than applicable securities laws
and blue sky law restrictions) or other defects whatsoever, with full right and
authority to sell and deliver such Shares; and upon the delivery of and payment
for such Shares as herein contemplated the Underwriter will receive valid,
marketable title thereto, free and clear of all security interests, liens,
encumbrances, claims, charges, restrictions on transfer or other defects, except
any that may be created by the Underwriter's own action.
(b) None of the information furnished to the Company in writing by such
Selling Shareholder for use in, or in connection with the preparation of, the
Registration Statement or the Prospectus contains an 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 not misleading and the statements with
respect to such Selling Shareholder contained in the "Principal and Selling
Shareholders" section of the Prospectus and in Item 15 of the Registration
Statement are accurate and complete in all material respects.
(c) Such Selling Shareholder has duly authorized the Company to act as
attorney-in-fact (the "Attorney-in-Fact") for such Selling Shareholder pursuant
to a power of attorney (each, a "Power of Attorney") executed by such Selling
Shareholder (and, by the Company's execution of this Agreement on behalf of the
Selling Shareholders, it represents and warrants that it has been duly appointed
as Attorney-in-Fact by each of the Selling Shareholders) pursuant to which the
13
Attorney-in-Fact is authorized on behalf of the Selling Shareholder to execute
this Agreement and any other documents necessary or desirable in connection with
the sale of the Shares, to make delivery of the certificates for the Shares, to
receive the proceeds of the sale of the Shares and to give a receipt therefor
and to distribute the proceeds from the sale of such Selling Shareholder's
Shares to such Selling Shareholder. Such Selling Shareholder has caused a
certificate or certificates for the number of Shares to be sold by such Selling
Shareholder hereunder to be delivered to the Attorney-in-Fact with irrevocable
authority to purchase all requisite stock transfer tax stamps and to hold such
certificate or certificates in custody for delivery, or for exchange for other
certificates in proper form for delivery, pursuant to the provisions hereof on
the Closing Date.
(d) This Agreement constitutes the valid and binding obligation of such
Selling Shareholder, enforceable against the Selling Shareholder in accordance
with its terms subject, as to enforcement of remedies, to applicable bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of courts in
granting equitable remedies and except that enforceability of the
indemnification provisions set forth in Section 8 hereof and the contribution
provisions set forth in Section 9 hereof may be limited by the United States
federal and state securities laws or public policy underlying such laws.
(e) All authorizations and consents necessary for the execution and
delivery by such Selling Shareholder of this Agreement and the sale and delivery
hereunder of such Selling Shareholder's Shares have been obtained and are in
full force and effect on the date hereof and will be in full force and effect at
the Closing Date.
(f) The sale of such Selling Shareholder's Shares by such Selling
Shareholder pursuant to this Agreement is not prompted by any material
information concerning the Company known by such Selling Shareholder which is
not set forth in the Prospectus.
6. Certain Covenants of the Company and the Selling Shareholders. The
Company and the Selling Shareholders covenant with the Underwriter as follows:
(a) The Company will not at any time, whether before the Effective Date
or thereafter during such period as the Prospectus is required by law to be
delivered in connection with the sales of the Shares by the Underwriter or a
dealer, file or publish any amendment or supplement to the Registration
Statement or Prospectus of which the Underwriter has not been previously advised
and furnished a copy, or to which the Underwriter shall reasonably object in
writing.
14
(b) The Company will use its best efforts to cause the Registration
Statement to become effective and will advise the Underwriter immediately, and,
if requested by the Underwriter, confirm such advice in writing, (i) when the
Registration Statement, or any post-effective amendment to the Registration
Statement or any supplemented Prospectus is filed with the Commission; (ii) of
the receipt of any comments from the Commission; (iii) of any request of the
Commission for amendment or supplementation of the Registration Statement or
Prospectus or for additional information; and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any Preliminary
Prospectus, or of the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, or of the initiation of any proceedings for any of
such purposes. The Company will use its best efforts to prevent the issuance of
any such stop order or of any order preventing or suspending such use and to
obtain as soon as possible the lifting thereof, if any such order is issued.
(c) The Company will deliver to the Underwriter, without charge, from
time to time until the Effective Date, as many copies of each Preliminary
Prospectus as the Underwriter may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Act. The
Company will deliver to the Underwriter, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as the Underwriter may
reasonably request. The Company has furnished or will furnish to the Underwriter
a certified copy of the Registration Statement filed and of all amendments
thereto, whether filed before or after the Registration Statement becomes
effective, a copy of all exhibits filed therewith and a certified copy of all
consents and certificates of experts.
(d) The Company will comply with the Act, the Regulations, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder so as to permit the continuance of sales of and
dealings in the Offered Shares and in any Optional Shares which may be issued
and sold. If, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event occurs as a result of which the
Registration Statement and Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it shall be necessary to amend or
supplement the Registration Statement and Prospectus to comply with the Act or
the regulations thereunder, the Company will promptly file with the Commission,
subject to Section 6(a) hereof, an amendment or supplement which will correct
such statement or omission or which will effect such compliance.
15
(e) The Company will furnish such proper information as may be required
and otherwise cooperate in qualifying the Shares for offering and sale under the
securities or Blue Sky laws relating to the offering in such jurisdictions as
the Underwriter may reasonably designate, provided that no such qualification
will be required in any jurisdiction where, solely as a result thereof, the
Company would be subject to service of general process or to taxation or
qualification as a foreign corporation doing business in such jurisdiction.
(f) The Company will make generally available to its securityholders, in
the manner specified in Rule 158(b) under the Act, and deliver to the
Underwriter and Underwriter's Counsel as soon as practicable and in any event
not later than 45 days after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs, an
earning statement meeting the requirements of Rule 158(a) under the Act covering
a period of at least 12 consecutive months beginning after the effective date of
the Registration Statement.
(g) For a period of three years from the Effective Date, the Company
will deliver to the Underwriter and to Underwriter's Counsel on a timely basis
(i) a copy of each report or document, including, without limitation, reports on
Forms 6-K, 8-K, 20-F, 10-K (or 10-KSB) and 10-Q (or 10-QSB) (to the extent
applicable) and exhibits thereto, filed or furnished to the Commission, any
securities exchange or the National Association of Securities Dealers, Inc. (the
"NASD") within one business day of the date each such report or document is so
filed or furnished; (ii) as soon as practicable, copies of any reports or
communications (financial or other) of the Company mailed to its
securityholders; (iii) as soon as practicable, a copy of any Schedule 13D, 13G,
14D-1 or 13E-3 received or prepared by the Company from time to time which has
been filed with the Commission; (iv) monthly statements setting forth such
information regarding the Company's results of operations and financial position
(including balance sheet, profit and loss statements and data regarding
outstanding purchase orders) as is regularly prepared by management of the
Company; and (v) such additional information concerning the business and
financial condition of the Company as the Underwriter may from time to time
reasonably request and which can be prepared or obtained by the Company without
unreasonable effort or expense. The Company will furnish to its shareholders
annual reports containing audited financial statements and such other periodic
reports as it may determine to be appropriate or as may be required by law.
(h) Neither the Company, nor any Selling Shareholder nor any person that
controls, is controlled by or is under common control with the Company or a
Selling Shareholder will take any action during any period when the Prospectus
is required to be delivered designed to or which might be reasonably expected to
cause or result in the stabilization or manipulation of the price of the Common
Shares.
16
(i) If the transactions contemplated by this Agreement are consummated,
the Underwriter shall retain the $50,000 previously paid to it, and the Company
will pay or cause to be paid the following: all costs and expenses incident to
the performance of the obligations of the Company under this Agreement,
including, but not limited to, the fees and expenses of accountants and counsel
for the Company; the preparation, printing, mailing and filing of the
Registration Statement (including financial statements and exhibits),
Preliminary Prospectuses and the Prospectus, and any amendments or supplements
thereto; the printing and mailing of the Selected Dealer Agreement, the issuance
and delivery of the Shares to the Underwriter; all taxes, if any, on the
issuance of the Shares; the fees, expenses and other costs of qualifying the
Shares for sale under the Blue Sky or securities laws of those states in which
the Shares are to be offered or sold, including fees and disbursements of
counsel in connection therewith (including those of such local counsel as may
have been retained for such purpose) and the cost of printing and mailing the
"Blue Sky Survey"; the filing fees incident to securing any required review by
the NASD, the NASDAQ Stock Market and the Boston Stock Exchange; the cost of
furnishing to the Underwriter copies of the Registration Statement, Preliminary
Prospectuses and the Prospectus as herein provided; the costs, up to an
aggregate maximum of $10,000, of placing "tombstone advertisements" in any
publications which may be selected by the Underwriter; and all other costs and
expenses incident to the performance of the Company's obligations hereunder
which are not otherwise specifically provided for in this Section 6(i).
In addition, at the Closing Date or the Option Closing Date, as the case
may be, the Underwriter will deduct from the payment (to the Company or the
Selling Shareholders, as the case may be), for the Offered Shares or any
Optional Shares three percent (3%) of the gross proceeds of the offering (less
the sum of $50,000 previously paid to the Underwriter), as payment for the
Underwriter's nonaccountable expense allowance relating to the transactions
contemplated hereby, which amount will include the fees and expenses of
Underwriter's Counsel (other than the fees and expenses of Underwriter's Counsel
relating to Blue Sky qualifications and registrations, which, as provided for
above, shall be in addition to the three percent (3%) nonaccountable expense
allowance and shall be payable directly by the Company to Underwriter's Counsel
on or prior to the Closing Date).
(j) If the transactions contemplated by this Agreement or related hereto
are not consummated because the Company decides not to proceed with the offering
for any reason or because the Underwriter decides not to proceed with the
offering as a result of a breach by the Company of its representations,
warranties or covenants in the Agreement or as a result of adverse changes in
the affairs of the Company, then the Company will be obligated to reimburse the
17
Underwriter for its accountable expenses up to the sum of $75,000, inclusive of
the $50,000 previously paid to the Underwriter by the Company. In the event the
Company or the Underwriter decides not to proceed with the offering for reasons
other than those set forth in the preceding sentence, the Company will only be
obligated to reimburse the Underwriter for its accountable expenses up to
$50,000, inclusive of the $50,000 previously paid to the Underwriter by the
Company. In no event, however, will the Underwriter, in the event the offering
is terminated, be entitled to retain or receive more than an amount equal to its
actual accountable out-of-pocket expenses.
(k) The Company intends to apply the net proceeds from the sale of the
Shares for the purposes set forth in the Prospectus. Except as set forth in the
Prospectus, no portion of the net proceeds from the sale of the Shares will be
used to repay any indebtedness.
(l) During the period of twelve (12) months from the Effective Date
hereof, neither the Company nor any of its officers, directors or
securityholders will publicly offer for sale or publicly sell or otherwise
publicly dispose of, directly or indirectly, any securities of the Company
(other than the Selling Shareholders' Shares by the Selling Shareholders), in
any manner whatsoever, whether pursuant to Rule 144 of the Regulations or
otherwise, and no holder of registration rights relating to securities of the
Company will exercise any such registration rights, in either case, without the
prior written consent of the Underwriter. During the 12-month period commencing
one year from the date hereof, no officer, director or securityholder who
beneficially owns or holds 5% or more of the outstanding Common Shares
(calculated in accordance with Rule 13d-3(d)(i) under the Exchange Act) may sell
any Common Shares in excess of the amount that they would be allowed to sell if
they were deemed "affiliates" of the Company and their shares were deemed
"restricted," as those terms are defined in Rule 144 promulgated under the
Securities Act, without the prior written consent of the Underwriter. The
Company will deliver to the Underwriter the undertakings, as of the date hereof,
of its officers, directors and shareholders to the effect of the foregoing.
Notwithstanding anything in this Section 6(l) to the contrary, the Underwriter
agrees to waive the requirements of this Section 6(l) with respect to
securityholders who are not officers or directors and who hold less than an
aggregate of 5,000 shares and/or options to purchase shares.
(m) The Company will not file any registration statement relating to the
offer or sale of any of the Company's securities, including any registration
statement on Form S-8, during the twelve (12) months from the Effective Date,
without the Underwriter's prior written consent.
18
(n) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(o) The Company will use its best efforts to maintain the listing of the
Shares on the Nasdaq SmallCap Market and will, if so qualified, list the Shares,
and maintain such listing for so long as qualified, on the Nasdaq National
Market System.
(p) The Company will, concurrently with the Effective Date, register the
class of equity securities of which the Shares are a part under Section 12(b) or
12(g) of the Exchange Act and the Company will maintain such registration for a
minimum of five (5) years from the Effective Date.
(q) Subject to the sale of the Offered Shares, the Underwriter and its
successors will have the right to designate a nominee for election, at its or
their option, either as a member of or a non-voting advisor to the Board of
Directors of the Company (which board, during such period, shall meet at least
quarterly, have no members who are related (by marriage or otherwise) to other
of its board members, and be comprised of members, a majority of which are not
otherwise affiliated with the Company, its management or its founders), and the
Company will use its best efforts to cause such nominee to be elected and
continued in office as a director of the Company or as such advisor until the
expiration of three (3) years from the Effective Date. Each of the Company's
current officers, directors and shareholders (other than shareholders owning
less than an aggregate of 5,000 shares) agree to vote all of the Common Shares
owned by such person or entity so as to elect and continue in office such
nominee of the Underwriter. Following the election of such nominee as a director
or advisor, such person shall receive no more or less compensation than is paid
to other non-officer directors of the Company for attendance at meetings of the
Board of Directors of the Company and 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 agrees to indemnify
and hold such director or advisor harmless, to the maximum extent permitted by
law, against any and all claims, actions, awards and judgments arising out of
his service as a director or advisor and, in the event the Company maintains a
liability insurance policy affording coverage for the acts of its officers and
directors, to include such director or advisor as an insured under such policy.
19
The rights and benefits of such indemnification and the benefits of such
insurance shall, to the extent possible, extend to the Underwriter insofar as it
may be or may be alleged to be responsible for such director or advisor. The
Company will deliver to the Underwriter the undertakings as of the date hereof
of each of its officers, directors and shareholders (other than shareholders
owning less than an aggregate of 5,000 shares) to be bound by the terms of this
Section 6(q).
If the Underwriter does not exercise its option to designate a member of or
advisor to the Company's Board of Directors, the Underwriter shall nonetheless
have the right to send a representative (who need not be the same individual
from meeting to meeting) to observe each meeting of the Board of Directors. The
Company agrees to give the Underwriter notice of each such meeting and to
provide the Underwriter with an agenda and minutes of the meeting no later than
it gives such notice and provides such items to the directors.
(r) The Company shall retain American Stock Transfer and Trust Company
as its transfer agent for the Common Shares, or another transfer agent
reasonably acceptable to the Underwriter, for a period of three (3) years from
the Effective Date. In addition, for a period of three (3) years from the
Effective Date, the Company, at its own expense, shall cause such transfer agent
to provide the Underwriter, if so requested in writing, with copies of the
Company's daily transfer sheets, and, when requested by the Underwriter, a
current list of the Company's securityholders, including a list of the
beneficial owners of securities held by a depository trust company and other
nominees.
(s) The Company hereby agrees, at its sole cost and expense, to supply
and deliver to the Underwriter and Underwriter's Counsel, within a reasonable
period from the date hereof, four bound volumes, including the Registration
Statement, as amended or supplemented, all exhibits to the Registration
Statement, the Prospectus and all other underwriting documents.
(t) The Company shall, as of the date hereof, have applied for listing
in Standard & Poor's Corporation Records Service (including annual report
information) or Xxxxx'x Industrial Manual (Xxxxx'x OTC Industrial Manual not
being sufficient for these purposes) and shall use its best efforts to have the
Company listed in such manual and shall maintain such listing for a period of
three (3) years from the Effective Date.
(u) For a period of three (3) years from the Effective Date, the Company
shall provide the Underwriter, on a not less than annual basis, with internal
forecasts setting forth projected results of operations for each quarterly and
annual period in the two (2) fiscal years following the respective dates of such
20
forecasts. Such forecasts shall be provided to the Underwriter more frequently
than annually if prepared more frequently by management, and revised forecasts
shall be prepared and provided to the Underwriter when required to reflect more
current information, revised assumptions or actual results that differ
materially from those set forth in the forecasts.
(v) For a period of three (3) years from the Effective Date, the Company
shall nominate for appointment PricewaterhouseCoopers, LLP (or such other
nationally recognized accounting firm reasonably acceptable to the Underwriter)
as the Company's independent public accountants.
(w) For a period of three (3) years from the Effective Date, the
Company, at its expense, shall cause its then independent certified public
accountants, as described in Section 6(v) above, to review (but not audit) the
Company's financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information, the filing of the
Company's 10-Q (or 10-QSB) quarterly report (or other equivalent report) and the
mailing of quarterly financial information to shareholders.
(x) For a period of twenty-five (25) days from the Effective Date,
neither the Company nor any Selling Shareholder will issue press releases or
engage in any other publicity without the Underwriter's prior written consent,
other than normal and customary releases issued in the ordinary course of the
Company's business or those releases required by law.
(y) For a period of three (3) years from the Effective Date, the Company
will not offer or sell any of its securities (i) pursuant to Regulation S
promulgated under the Act (other than options granted under employee stock
option plans, provided that the excise price of the options is equal to or
greater than the market price per Common Share on the date of grant) or (ii) at
a discount to market or in a discounted transaction, without the prior written
consent of the Underwriter, other than the issuance of Common Shares upon
exercise of options and warrants outstanding on the Closing Date and described
in the Prospectus.
(z) For a period of three (3) years from the Effective Date, the Company
will provide to the Underwriter ten day's written notice prior to any issuance
by the Company or its subsidiaries of any equity securities or securities
exchangeable for or convertible into equity securities of the Company, except
for (i) Common Shares issuable upon exercise of currently outstanding options
and warrants or conversion of currently outstanding convertible securities and
(ii) options available for future grant pursuant to any stock option plan in
effect on the Effective Date and the issuance of shares of Common Shares upon
the exercise of such options.
21
(aa) Prior to the Effective Date and for a period of three (3) years
thereafter, the Company will retain a financial public relations firm reasonably
acceptable to the Underwriter.
(bb) For a period of three (3) years from the Effective Date, the
Company will cause its Board of Directors to meet, either in person or
telephonically, a minimum of four (4) times per year and will hold a
shareholder's meeting at least once per annum.
(cc) Prior to the Effective Date, the Company shall have obtained
Director's and Officer's insurance naming the Underwriter as an additional
insured party, in an amount equal to twenty-five percent (25%) of the gross
proceeds of the offering, and the Company will maintain such insurance for a
period of at least three (3) years from the Closing Date.
(dd) For a period of three years from the Effective Date, the Company
will not enter any transactions with any of its officers, directors or 5%
shareholders, or their affiliates, without the approval of a majority of the
independent and disinterested directors. In addition to the foregoing, the
Company will not exercise its option to purchase from Xxxx Xxxxxxxxx his
interest in Worklife Solutions, Inc. (the "Interest") without obtaining an
independent valuation of the Interest and a fairness opinion as to the
transaction (including the purchase price) from an investment banking firm,
financial consultant or similar firm reasonably acceptable to the Underwriter.
7. Conditions of the Underwriter's Obligation to Purchase the Offered Shares
from the Company and the Selling Shareholders. The obligation of the Underwriter
to purchase and pay for the Offered Shares which it has agreed to purchase from
the Company and the Selling Shareholders is subject (as of the date hereof and
the Closing Date) to the accuracy of and compliance in all material respects
with the representations and warranties of the Company and the Selling
Shareholders herein, to the accuracy in all material respects of the statements
of the Company and its officers and of the Selling Shareholders made pursuant
hereto, to the performance in all material respects by the Company and the
Selling Shareholders of their respective obligations hereunder, and to the
following additional conditions:
(a) The Registration Statement will have become effective not later than
10:00 A.M., New York City time, on the day following the date of this Agreement,
or at such later time or on such later date as the Underwriter may agree to in
writing; prior to the Closing Date, no stop order suspending the effectiveness
of the Registration Statement will have been issued and no proceedings for that
22
purpose will have been initiated or will be pending or, to the best of the
Underwriter's or the Company's knowledge, will be contemplated by the
Commission; and any request on the part of the Commission for additional
information will have been complied with to the satisfaction of Underwriter's
Counsel.
(b) At the time that this Agreement is executed and at the Closing Date,
there will have been delivered to the Underwriter the signed opinion of
Xxxxxx-Xxxxxxxxx, Hill and XxXxxxxx, counsel for the Company ("Company
Counsel"), dated as of the date hereof or the Closing Date, as the case may be
(and any other opinions of counsel referred to in such opinion of Company
Counsel or relied upon by Company Counsel in rendering their opinion),
reasonably satisfactory to Underwriter's Counsel, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing and in good standing under the laws of Canada, with full corporate
power and authority, and with all Permits necessary, to own or lease, as the
case may be, and operate its properties, whether tangible or intangible, and to
conduct its business as described in the Registration Statement. To the best of
Company Counsel's knowledge, the Company has no subsidiaries, other than 3451615
Canada Inc., a corporation duly organized, validly existing and in good standing
under the laws of Canada (the "Canadian Subsidiary"), and X-Xxxxxxx.xxx USA
Inc., (together with the Canadian Subsidiary, the "Subsidiaries"). Unless the
context otherwise requires, all references to the "Company" shall include the
Subsidiaries. The Canadian Subsidiary has full corporate power and authority and
all Permits necessary, to own or lease, as the case may be, and operate its
properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement. The U.S. Subsidiary has all Permits
necessary, to own or lease, as the case may be, and operate its Canadian
properties, whether tangible or intangible, and to conduct its business as
described in the Registration Statement. Each of the Company and the
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions wherein such qualification is necessary.
The Company owns all of the issued and outstanding shares of capital stock
of the Canadian Subsidiary, free and clear of any security interests, liens,
encumbrances, claims and charges of any nature whatsoever, except as set forth
in the Registration Statement and all of such shares have been duly authorized
and validly issued and are fully paid and nonassessable. To the best of Company
Counsel's knowledge, there are no options or warrants for the purchase of, or
other rights to purchase or acquire, or outstanding securities convertible into
or exchangeable for, any capital stock or other securities of the Canadian
Subsidiary. To the best of Company Counsel's knowledge, other than the
Subsidiaries, the Company has no equity interests in any entity.
23
(ii) The Company has full corporate power and authority to execute,
deliver and perform this Agreement and the Underwriter's Warrant Agreement and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Underwriter's Warrant
Agreement by the Company, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the terms
of this Agreement and the Underwriter's Warrant Agreement have been duly
authorized by all necessary corporate action, and this Agreement has been duly
executed and delivered by the Company.
(iii) The execution, delivery and performance of this Agreement and
the Underwriter's Warrant Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the compliance
by the Company with the terms of this Agreement and the Underwriter's Warrant
Agreement do not, and will not, with or without the giving of notice or the
lapse of time, or both, (A) result in a violation of the Articles of
Incorporation or By-Laws, each as amended, of the Company or any of the Canadian
Subsidiary, (B) to the best of Company Counsel's knowledge, result in a breach
of or conflict with any terms or provisions of, or constitute a default under,
or result in the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of the Subsidiaries pursuant to any
indenture, mortgage, note, contract, commitment or other material agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which the Company, any of the Subsidiaries or any of the properties or assets of
the Company or any of the Subsidiaries are or may be bound or affected; (C)
violate any existing applicable law, rule, regulation, judgment, order or decree
of any governmental agency or court, domestic or foreign, having jurisdiction
over the Company, any of the Subsidiaries or any of the properties or businesses
of the Company or any of the Subsidiaries; or (D) to the best of Company
Counsel's knowledge, have any effect on any Permit necessary for the Company or
any of the Subsidiaries to own or lease, as the case may be, and operate their
properties or conduct their business or the ability of the Company or any of the
Subsidiaries to make use thereof.
(iv) To the best of Company Counsel's knowledge, no Permits of any
Canadian court or governmental agency or body are required for the valid
authorization, issuance, sale and delivery of the Shares or the Underwriter's
Warrants to the Underwriter, and the consummation by the Company and the Selling
Shareholders of the transactions contemplated by this Agreement or the
Underwriter's Warrant Agreement.
(v) Each Selling Shareholder has duly executed and delivered a Power
of Attorney appointing the Company as Attorney-in-Fact with authority to execute
and deliver this Agreement on behalf of such Selling Shareholder, to authorize
the delivery of the Selling Shareholders' Shares to be sold by such Selling
24
Shareholder thereunder and otherwise to act on behalf of such Selling
Shareholder in connection with the transactions contemplated by this Agreement.
This Agreement has been duly and validly authorized, executed and delivered on
behalf of each of the Selling Shareholders by the Attorney-in-Fact and is a
valid and binding obligation of each of the Selling Shareholders, enforceable
against such Selling Shareholders in accordance with their respective terms.
(vi) The descriptions in the Registration Statement and the
Prospectus of statutes, regulations, government classifications, contracts and
other documents (including opinions of such counsel); and the response to Item
10 of Form F-1 have been reviewed by Company Counsel, and, based upon such
review, are accurate in all material respects and present fairly the information
required to be disclosed, and there are no material statutes, regulations or
government classifications, or, to the best of Company Counsel's knowledge,
material contracts or documents, of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement, which are not so described or filed as required.
None of the material provisions of the contracts or instruments described
above violates any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company, any Canadian Subsidiary or any of their
respective assets or businesses.
(vii) The outstanding Common Shares, including, without limitation,
the Selling Shareholders' Shares, and outstanding options and warrants to
purchase Common Shares have been duly authorized and validly issued. The
outstanding Common Shares are fully paid and nonassessable. The outstanding
options and warrants to purchase Common Shares constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of creditors
generally and the discretion of courts in granting equitable remedies. None of
the outstanding Common Shares or options or warrants to purchase Common Shares
has been issued in violation of the preemptive rights of any shareholder of the
Company. None of the holders of the outstanding Common Shares is subject to
personal liability solely by reason of being such a holder. The authorized
Common Shares and outstanding options and warrants to purchase Common Shares
conform to the descriptions thereof contained in the Registration Statement and
Prospectus. To the best of Company Counsel's knowledge, except as set forth in
the Prospectus, no holders of any of the Company's securities has any rights,
"demand", "piggyback" or otherwise, to have such securities registered under the
Act.
25
(viii) The issuance and sale of the Company Offered Shares and
Optional Shares have been duly authorized and, when the Shares have been issued
and duly delivered against payment therefor as contemplated by this Agreement,
the Shares will be validly issued, fully paid and nonassessable, and the holders
thereof will not be subject to personal liability solely by reason of being such
holders. The Shares are not subject to preemptive rights of any shareholder of
the Company. The certificates representing the Shares are in proper legal form.
(ix) The issuance and sale of the Common Shares issuable upon exercise of the
Underwriter's Warrants have been duly authorized and, when such Common Shares
have been duly delivered against payment therefor, as contemplated by the
Underwriter's Warrant Agreement, such Common Shares will be validly issued,
fully paid and nonassessable. Holders of Common Shares issuable upon exercise of
the Underwriter's Warrants will not be subject to personal liability solely by
reason of being such holders. Neither the Underwriter's Warrants nor the Common
Shares issuable upon exercise thereof will be subject to preemptive rights of
any shareholder of the Company. The Company has reserved a sufficient number of
Common Shares from its authorized, but unissued Common Shares for issuance upon
exercise of the Underwriter's Warrants in accordance with the provisions of the
Underwriter's Warrant Agreement. The Underwriter's Warrants conform to the
descriptions thereof in the Registration Statement and Prospectus in all
material respects.
(x) Upon delivery of the Company Offered Shares to the Underwriter
against payment therefor as provided in this Agreement, the Underwriter
(assuming it is a bona fide purchaser within the meaning of the Canada Business
Corporations Act) will acquire title to the Company Offered Shares, free of any
adverse claims as defined in the Business Corporations Act.
(xi) Assuming that the Underwriter exercises the over-allotment
option to purchase any of the Optional Shares and makes payment therefor in
accordance with the terms of this Agreement, upon delivery of the Optional
Shares to the Underwriter hereunder, the Underwriter (assuming it is a bona fide
purchaser within the meaning of the Canada Business Corporations Act) will
acquire good title to such Optional Shares, free and clear of any adverse claims
as defined in the Canada Business Corporations Act.
(xii) To the best of Company Counsel's knowledge, there are no
claims, actions, suits, proceedings, arbitrations, investigations or inquiries
before any governmental agency, court or tribunal, foreign or domestic, or
before any private arbitration tribunal, pending or threatened against the
Company or any of the Subsidiaries, or involving the Company's or any of the
Subsidiaries' properties or businesses, other than as described in the
Prospectus, such description being accurate in all material respects, and other
than litigation incident to the kind of business conducted by the Company which,
individually and in the aggregate, could result in a Material Adverse Effect.
26
(xiii) The Company and each of the Subsidiaries owns or possesses
adequate and enforceable rights to use all patents, patent applications,
trademarks, service marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to be used in the
conduct of its business as described in the Prospectus (collectively the
"Intangibles"); to the best of Company Counsel's knowledge, neither the Company
nor any of the Subsidiaries has infringed nor is infringing with the rights of
others with respect to the Intangibles; and, to the best of Company Counsel's
knowledge, neither the Company nor any of the Subsidiaries has received any
notice that it has or may have infringed, is infringing upon or is conflicting
with the asserted rights of others with respect to the Intangibles which might,
singly or in the aggregate, materially adversely affect its business, results of
operations or financial condition and such counsel is not aware of any licenses
with respect to the Intangibles which are required to be obtained by the Company
or any of the Subsidiaries other than those licenses which the Company and each
of the Subsidiaries have obtained. The opinions described in this Section
7(b)(xvi) may be given by Company Counsel in reliance on the opinion of an
attorney, reasonably acceptable to Underwriter's Counsel, practicing in the
intellectual property area.
Although, except as otherwise stated herein, Company Counsel has not
verified and is not passing upon and assumes no responsibility for, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and the Prospectus, based upon Company Counsel's
participation in the preparation of the Registration Statement and the
Prospectus and in meetings attended by representatives of the Company, United
States Counsel (as hereinafter defined), the independent auditors of the
Company, representatives of the Underwriters, and Underwriter's Counsel, at
which the contents of the Registration Statement and the Prospectus and related
matters were reviewed and discussed, no facts came to its attention which lead
it to believe that (A) the Registration Statement (except as to the financial
statements and other financial data contained therein, as to which Company
Counsel need not express an opinion), on the Effective Date, contained any
untrue statement of a material fact required to be stated therein or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or that (B) the Prospectus (except as to the financial
statements and other financial data contained therein, as to which Company
Counsel need not express an opinion) contains any untrue statement of a material
fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
27
In rendering its opinion pursuant to this Section 7(b), Company Counsel
may rely upon the certificates of government officials and officers of the
Company as to matters of fact, provided that Company Counsel shall state that
they have no reason to believe, and do not believe, that they are not justified
in relying upon such opinions or such certificates of government officials and
officers of the Company as to matters of fact, as the case may be.
The opinion letter delivered pursuant to this Section 7(b) shall state
that any opinion given therein qualified by the phrase "to the best of our
knowledge" is being given by Company Counsel after due investigation of the
matters therein discussed.
(c) At the time that this Agreement is executed and at the Closing Date,
there will have been delivered to the Underwriter the signed opinion of Weil,
Gotshal & Xxxxxx LLP, United States counsel for the Company ("United States
Counsel"), dated as of the date hereof or the Closing Date, as the case may be
(and any other opinions of counsel referred to in such opinion of Company
Counsel or relied upon by Company Counsel in rendering their opinion),
reasonably satisfactory to Underwriter's Counsel, to the effect that:
(i) The U.S. Subsidiary is a corporation validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
(ii) The Company owns all of the outstanding shares of capital stock
of the U.S. Subsidiary of record. To United States Counsel's knowledge, such
shares are also owned beneficially by the Company and are free and clear of all
adverse claims, limitations on voting rights, options and other encumbrances,
except as set forth in the Registration Statement, and are duly authorized,
validly issued, fully paid and nonassessable. To United States Counsel's
knowledge, there are no outstanding or authorized options, warrants, calls,
subscriptions, rights, commitments or other instruments or agreements of any
character obligating the Company or the U.S. Subsidiary to issue any shares of
capital stock of the U.S. Subsidiary or any securities convertible into or
evidencing the right to purchase or subscribe for any shares of such stock, and
there are no agreements or understandings with respect to the voting, sale or
transfer of any shares of capital stock of the U.S. Subsidiary.
(iii) Each of this Agreement and the Warrant Agreement constitutes
the legal, valid and binding obligation of the Company, enforceable against it
in accordance with its respective terms, subject to applicable bankruptcy,
28
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that
rights to indemnification and contribution under this Agreement may be limited
by federal or state securities laws or public policy relating thereto.
(iv) The execution and delivery by the Company of this Agreement and
the Warrant Agreement and the performance by the Company of its obligations
thereunder do not and will not conflict with, constitute a default under or
violate (i) any of the terms, conditions or provisions of any material document,
agreement or other instrument to which the Company or the U.S. Subsidiary is a
party or by which either of them is bound of which United States Counsel is
aware, (ii) any New York or U.S. federal law or regulation (other than federal
and state securities or blue sky laws, as to which we express no opinion in this
paragraph), or (iii) any judgment, writ, injunction, decree, order or ruling of
any New York or U.S. federal court or governmental authority binding on the
Company or the U.S. Subsidiary of which United States Counsel is aware.
(v) No consent, approval, waiver, license or authorization or other
action by or filing with any New York or U.S. federal governmental authority is
required in connection with the execution and delivery by the Company of the
Underwriting Agreement and the Warrant Agreement, the consummation by the
Company of the transactions contemplated thereby or the performance by the
Company of its obligations thereunder, except for (i) the registration of the
Offered Shares under the Securities Act (which has occurred), (ii) the
registration of the common shares of the Company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")(which has occurred), (iii) the
approval of Nasdaq Listing Qualifications for listing the Offered Shares on the
Nasdaq SmallCap as contemplated by the Underwriting Agreement (which has been
obtained), (iv) the approval of The Boston Stock Exchange for listing the
Offered Shares on The Boston Stock Exchange, as contemplated by the Underwriting
Agreement (which has been obtained), and (v) such consents, approvals,
authorizations, registrations, qualifications or notices as may be required
under state securities or blue sky laws in connection with the purchase and
distribution by the Underwriter of the Offered Shares to be purchased by it
under the Underwriting Agreement (as to which United States Counsel expresses no
opinion).
(vi) The Registration Statement and the Prospectus (except for the
financial statements and the notes thereto and the other financial, statistical
and accounting data included in the Registration Statement or the Prospectus as
to which United States Counsel expresses no opinion) comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder.
29
(vii) The Registration Statement has become effective under the
Securities Act, and United States Counsel is not aware of any stop order
suspending the effectiveness of the Registration Statement. To United States
Counsel's knowledge, no proceedings therefor have been initiated or overtly
threatened by the Commission.
(viii) To United States Counsel's knowledge, there are no legal or
governmental proceedings pending or overtly threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be described
in the Registration Statement or the Prospectus and are not so described or any
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed or incorporated by
reference as exhibits to the Registration Statement that are not described,
filed or incorporated as required. To United States Counsel's knowledge, the
response to the requirements of Item 10 of Form F-1 in the Registration
Statement and the Prospectus is accurate in all material respects and presents
fairly the information required to be disclosed therein.
United States Counsel has participated in conferences with directors,
officers and other representatives of the Company, representatives of Canadian
counsel for the Company, representatives of the independent public accountants
for the Company, representatives of the Underwriter and representatives of
counsel for the Underwriter, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were discussed,
and, although United States Counsel has not independently verified and is not
passing upon and assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
Prospectus (except to the extent specified in the foregoing opinion), no facts
have come to United States Counsel's attention which leads it to believe that
the Registration Statement, on the effective date thereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading or that the Prospectus, on the date thereof or on the date hereof,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading (it being understood that United States Counsel
expresses no view with respect to the financial statements and related notes,
the financial statement schedules and the other financial, statistical and
accounting data included).
30
In rendering its opinion pursuant to this Section 7(c), United States
Counsel may rely upon the certificates of government officials and officers of
the Company as to matters of fact, provided that United States Counsel shall
state that they have no reason to believe, and do not believe, that they are not
justified in relying upon such opinions or such certificates of government
officials and officers of the Company as to matters of fact, as the case may be.
(d) At the Closing Date, there will have been delivered to the
Underwriter a signed opinion of Underwriter's Counsel, dated as of the Closing
Date, to the effect that the opinions delivered pursuant to Sections 7(b) and
7(c) hereof appear on their face to be appropriately responsive to the
requirements of this Agreement, except to the extent waived by the Underwriter,
specifying the same, and with respect to such related matters as the Underwriter
may require.
(e) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or general affairs of
the Company from that set forth or contemplated in the Registration Statement
and the Prospectus, except changes which the Registration Statement and the
Prospectus indicate might occur after the Effective Date; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no material transaction, contract or
agreement entered into by the Company, other than in the ordinary course of
business, which would be required to be set forth in the Registration Statement
and the Prospectus, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the Company's
knowledge, overtly threatened against the Company which is required to be set
forth in the Registration Statement and the Prospectus, other than as set forth
therein, and no proceedings will be pending or, to the best of the Company's
knowledge, overtly threatened against the Company before or by any federal,
state or other commission, board or administrative agency wherein an unfavorable
decision, ruling or finding would materially adversely affect the business,
property, financial condition or results of operations of the Company, other
than as set forth in the Registration Statement and the Prospectus. At the
Closing Date, there will be delivered to the Underwriter a certificate signed by
31
the Chairman of the Board or the President or a Vice President of the Company,
dated the Closing Date, evidencing compliance with the provisions of this
Section 7(e) and by the Selling Shareholders and stating that the
representations and warranties of the Company set forth in Sections 4 and 5
hereof were accurate and complete in all material respects when made on the date
hereof and are accurate and complete in all material respects on the Closing
Date as if then made; that each of the Company and each Selling Shareholder has
performed in all material respects all covenants and complied in all material
respects with all conditions required by this Agreement to be performed or
complied with by each of them prior to or as of the Closing Date; and that, as
of the Closing Date, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been initiated or, to the best of his knowledge, are contemplated or overtly
threatened. In addition, the Underwriter will have received such other and
further certificates of officers of the Company and of the Selling Shareholders
as the Underwriter or Underwriter's Counsel may reasonably request.
(f) At the time that this Agreement is executed and at the Closing
Date, the Underwriter will have received a signed letter from
PricewaterhouseCoopers LLP, dated the date such letter is to be received by the
Underwriter and addressed to it, confirming that it is a firm of independent
public accountants within the meaning of the Act and Regulations and stating
that: (i) insofar as reported on by such firm, in its opinion, the financial
statements of the Company included in the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act and the
applicable Regulations; (ii) on the basis of procedures and inquiries (not
constituting an examination in accordance with generally accepted auditing
standards) consisting of a reading of the unaudited interim financial statements
of the Company, if any, appearing in the Registration Statement and the
Prospectus and the latest available unaudited interim financial statements of
the Company, if more recent than that appearing in the Registration Statement
and Prospectus, inquiries of officers of the Company responsible for financial
and accounting matters as to the transactions and events subsequent to the date
of the latest audited financial statements of the Company, and a reading of the
minutes of meetings of the shareholders, the Board of Directors of the Company
and any committees of the Board of Directors, as set forth in the minute books
of the Company, nothing has come to its attention which, in its judgment, would
indicate that (A) during the period from the date of the latest financial
statements of the Company appearing in the Registration Statement and Prospectus
to a specified date not more than three business days prior to the date of such
letter, there have been any decreases in net current assets or net assets as
compared with amounts shown in such financial statements or decreases in net
sales or decreases [increases] in total or per share net income [loss] compared
with the corresponding period in the preceding year or any change in the
32
capitalization or long-term debt of the Company, except in all cases as set
forth in or contemplated by the Registration Statement and the Prospectus, and
(B) the unaudited interim financial statements of the Company, if any, appearing
in the Registration Statement and the Prospectus, 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 and practices on a basis substantially consistent
with the audited financial statements included in the Registration Statement or
the Prospectus; and (iii) it has compared specific dollar amounts, numbers of
shares, numerical data, percentages of revenues and earnings, and other
financial information pertaining to the Company set forth in the Prospectus
(with respect to all dollar amounts, numbers of shares, percentages and other
financial information contained in the Prospectus, to the extent that such
amounts, numbers, percentages and 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) There shall have been duly tendered to the Underwriter
certificates representing the Offered Shares to be sold on the Closing Date.
(h) The NASD shall have indicated that it has no objection to the
underwriting arrangements pertaining to the sale of the Shares by the
Underwriter.
(i) No action shall have been taken by the Commission or the NASD the
effect of which would make it improper, at any time prior to the Closing Date or
the Option Closing Date, as the case may be, for any member firm of the NASD to
execute transactions (as principal or as agent) in the Shares, and no
proceedings for the purpose of taking such action shall have been instituted or
shall be pending, or, to the best of the Underwriter's or the Company's
knowledge, shall be contemplated by the Commission or the NASD. Each of the
Company and each of the Selling Shareholders represent at the date hereof, and
shall represent as of the Closing Date or Option Closing Date, as the case may
be, that it has no knowledge that any such action is in fact contemplated by the
Commission or the NASD.
(j) The Company meets the current and any existing and proposed
criteria for inclusion of the Shares on Nasdaq SmallCap Market.
33
(k) All proceedings taken at or prior to the Closing Date or the
Option Closing Date, as the case may be, in connection with the authorization,
issuance and sale of the Shares shall be reasonably satisfactory in form and
substance to the Underwriter and to Underwriter's Counsel, and such counsel
shall have been furnished with all such documents, certificates and opinions as
they may reasonably request for the purpose of enabling them to pass upon the
matters referred to in Section 7(d) hereof and in order to evidence the accuracy
and completeness of any of the representations, warranties or statements of the
Company, the performance of any covenants of the Company and the Selling
Shareholders, or the compliance by the Company and the Selling Shareholders with
any of the conditions herein contained.
(l) As of the date hereof, the Company will have delivered to the
Underwriter the written undertakings of its officers, directors and
securityholders and/or registration rights holders, as the case may be, to the
effect of the matters set forth in Sections 6(l) and (q).
If any of the conditions specified in this Section 7 have not been
fulfilled, this Agreement may be terminated by the Underwriter on notice to the
Company.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Underwriter, each officer, director, partner, employee and agent of the
Underwriter, and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several (and actions in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Underwriter
and each such person, if any, for any legal or other expenses reasonably
incurred by them or any of them in connection with investigating or defending
any actions, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
(i) in the Registration Statement, in any Preliminary Prospectus or in the
Prospectus (or the Registration Statement or Prospectus as from time to time
amended or supplemented) or (ii) in any application or other document executed
by the Company, or based upon written information furnished by or on behalf of
the Company, filed in any jurisdiction in order to qualify the Shares under the
securities laws thereof (hereinafter "application"), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances under which they were
made, unless such untrue statement or omission was made in such Registration
34
Statement, Preliminary Prospectus, Prospectus or application in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by the Underwriter or any such person through the
Underwriter expressly for use therein; provided, however, that the indemnity
agreement contained in this Section 8(a) with respect to any Preliminary
Prospectus will not inure to the benefit of the Underwriter (or to the benefit
of any other person that may be indemnified pursuant to this Section 8(a)) if
(A) the person asserting any such losses, claims, damages, expenses or
liabilities purchased the Shares which are the subject thereof from the
Underwriter or other indemnified person; (B) the Underwriter or other
indemnified person failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person; and (C) the Prospectus did not contain any untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
cause, claim, damage, expense or liability.
(b) The Selling Shareholders agree to indemnify and hold harmless the
Underwriter, each officer, director, partner, employee and agent of any
Underwriter, the Company and each of its directors, each of its officers who
have signed the Registration Statement and each person, if any, who controls the
Underwriter or the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several (and actions in respect
thereof), to which they or any of them may become subject under the Act or under
any other statute or at common law or otherwise, and, except as hereinafter
provided, will reimburse each such indemnified persons for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon (A) any untrue statement or alleged
untrue statement of a material fact contained (i) in the Registration Statement,
in any Preliminary Prospectus or in the Prospectus (or the Registration
Statement of Prospectus as from time to time amended or supplemented) or (ii) in
any application (including any applicable for registration of the Shares under
state securities or Blue Sky laws), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by such Selling Shareholders expressly for use therein or (B) any
action taken by such Selling Shareholders in connection with the offering of the
Selling Shareholders' Shares (including, without limitation, the dissemination
of any written materials or the making of any oral statement).
35
(c) The Underwriter agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from
and against any and all losses, claims, damages, expenses or liabilities, joint
or several (and actions in respect thereof), to which they or any of them may
become subject under the Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse the Company and
each such director, officer or controlling person for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application (including any application for registration of the Shares under
state securities or Blue Sky laws), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by the Underwriter expressly for use therein.
(d) Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against any indemnifying
party under this Section 8, the indemnified party will notify the indemnifying
party in writing of the commencement thereof, and the indemnifying party will,
subject to the provisions hereinafter stated, assume the defense of such action
(including the employment of counsel satisfactory to the indemnified party and
the payment of expenses) insofar as such action relates to an alleged liability
in respect of which indemnity may be sought against the indemnifying party.
After notice from the indemnifying party of its election to assume the defense
of such claim or action, the indemnifying party shall no longer be liable to the
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
if, in the reasonable judgment of the indemnified party or parties, it is
advisable for the indemnified party or parties to be represented by separate
counsel, the indemnified party or parties shall have the right to employ a
single counsel to represent the indemnified parties who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the indemnified parties thereof against the indemnifying party, in which
event the fees and expenses of such separate counsel shall be borne by the
36
indemnifying party. Any party against whom indemnification may be sought under
this Section 8 shall not be liable to indemnify any person that might otherwise
be indemnified pursuant hereto for any settlement of any action effected without
such indemnifying party's consent, which consent shall not be unreasonably
withheld.
9. Contribution. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 8 hereof
(subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claim for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company (including, for this purpose, any contribution made
by or on behalf of any Selling Shareholder, any director of the Company, any
officer of the Company who signed the Registration Statement and any controlling
person of the Company) as one entity and the Underwriter (including, for this
purpose, any contribution by or on behalf of each person, if any, who controls
the Underwriter within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act and each officer, director, partner, employee and agent of the
Underwriter) as a second entity, shall contribute to the losses, liabilities,
claims, damages and expenses whatsoever to which any of them may be subject, so
that the Underwriter is responsible for the proportion thereof equal to the
percentage which the underwriting discount per Share set forth on the cover page
of the Prospectus represents of the initial public offering price per Share set
forth on the cover page of the Prospectus and the Company is responsible for the
remaining portion; provided, however, that if applicable law does not permit
such allocation, then, if applicable law permits, other relevant equitable
considerations such as the relative fault of the Company and the Underwriter in
connection with the facts which resulted in such losses, liabilities, claims,
damages and expenses shall also be considered. The relative fault, in the case
of an untrue statement, alleged untrue statement, omission or alleged omission,
shall be determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by a
Selling Shareholder or the Company or by the Underwriter, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement, alleged statement, omission or alleged omission. The
Company and the Selling Shareholders, on the one hand, and the Underwriter, on
the other hand, agree that it would be unjust and inequitable if the respective
obligations of the Company and the Selling Shareholders and of the Underwriter
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 9. No person guilty of a fraudulent misrepresentation (within
37
the meaning of Section 11(f) of the Act) will be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. For purposes
of this Section 8, each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee and agent of the Underwriter will have the
same rights to contribution as the Underwriter, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who has signed the
Registration Statement and each director of the Company will have the same
rights to contribution as the Company, subject in each case to the provisions of
this Section 9. Anything in this Section 9 to the contrary notwithstanding, no
party will be liable for contribution with respect to the settlement of any
claim or action effected without its written consent. This Section 9 is intended
to supersede, to the extent permitted by law, any right to contribution under
the Act or the Exchange Act or otherwise available.
10. Survival of Indemnities, Contribution, Warranties and Representations.
The respective indemnity and contribution agreements of the Company and the
Selling Shareholders and of the Underwriter contained in Sections 8 and 9
hereof, and the representations and warranties of the Company and the Selling
Shareholders contained herein shall remain operative and in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of the Underwriter, the Company or any of its
directors and officers, any of the Selling Shareholders or any controlling
person referred to in said Sections, and shall survive the delivery of, and
payment for, the Shares.
11. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the Underwriter,
or the Underwriter, by written or telegraphic notice to the Company, may
terminate this Agreement prior to the earlier of (i) 11:00 A.M., New York City
time, on the first full business day after the Effective Date; or (ii) the time
when the Underwriter, after the Registration Statement becomes effective,
releases the Offered Shares for public offering. The time when the Underwriter
"releases the Offered Shares for public offering" for the purposes of this
Section 11 means the time when the Underwriter releases for publication the
first newspaper advertisement, which is subsequently published, relating to the
Offered Shares, or the time when the Underwriter releases for delivery to
members of a selling group copies of the Prospectus and an offering letter or an
offering telegram relating to the Offered Shares, whichever will first occur.
(b) This Agreement, including without limitation, the obligation to
purchase the Shares and the obligation to purchase the Optional Shares after
exercise of the option referred to in Section 3 hereof, are subject to
38
termination in the absolute discretion of the Underwriter, by notice given to
the Company prior to delivery of and payment for all the Offered Shares or such
Optional Shares, as the case may be, if, prior to such time, any of the
following shall have occurred: (i) the Company withdraws the Registration
Statement from the Commission or the Company does not or cannot expeditiously
proceed with the public offering; (ii) the representations and warranties in
Section 4 or 5 hereof are not materially correct or cannot be complied with;
(iii) trading in securities generally on the New York Stock Exchange or the
American Stock Exchange will have been suspended; (iv) limited or minimum prices
will have been established on either such Exchange; (v) a banking moratorium
will have been declared either by federal or New York State authorities; (vi)
any other restrictions on transactions in securities materially affecting the
free market for securities or the payment for such securities, including the
Offered Shares or the Optional Shares, will be established by either of such
Exchanges, by the Commission, by any other federal or state agency, by action of
the Congress or by Executive Order; (vii) trading in any securities of the
Company shall have been suspended or halted by any national securities exchange,
the NASD or the Commission; (viii) there has been a materially adverse change in
the condition (financial or otherwise), prospects or obligations of the Company;
(ix) the Company will have sustained a material loss, whether or not insured, by
reason of fire, flood, accident or other calamity; (x) any action has been taken
by the government of the United States or any department or agency thereof
which, in the judgment of the Underwriter, has had a material adverse effect
upon the market or potential market for securities in general; or (xi) the
market for securities in general or political, financial or economic conditions
will have so materially adversely changed that, in the judgment of the
Underwriter, it will be impracticable to offer for sale, or to enforce contracts
made by the Underwriter for the resale of, the Offered Shares or the Optional
Shares, as the case may be.
(c) If this Agreement is terminated pursuant to Section 7 hereof or
this Section 11 or if the purchases provided for herein are not consummated
because any condition of the Underwriter's obligations hereunder is not
satisfied or because of any refusal, inability or failure on the part of the
Company or any Selling Shareholder to comply in any material respect with any of
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company or any of the Selling Shareholders shall be unable to or do
not perform all of their respective obligations in any material respect under
this Agreement, the Company will not be liable to the Underwriter for damages on
account of loss of anticipated profits arising out of the transactions covered
by this Agreement, but the Company will remain liable to the extent provided in
Sections 6(j), 8, 9 and 10 of this Agreement.
39
12. Information Furnished by the Underwriter to the Company. It is
hereby acknowledged and agreed by the parties hereto that for the purposes of
this Agreement, including, without limitation, Sections 4(f), 8(a), 8(b) and 9
hereof, the only information given by the Underwriter to the Company for use in
the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement appearing in the last paragraph on
page __ with respect to stabilizing the market price of Shares, the information
in the __ paragraph on page __ with respect to concessions and reallowances, and
the information in the ___ paragraph on page ___ with respect to the
determination of the public offering price, as such information appears in any
Preliminary Prospectus and in the Prospectus.
13. Confidentiality.
(a) The Underwriter agrees to treat as confidential any and all
business, financial, marketing, technical or other information concerning the
business, affairs or operations of the Company which is delivered to it by the
Company pursuant to the terms of this Agreement (collectively, the
"Information"). All Information shall be kept in confidence and not disclosed to
a third party or used by the Underwriter, except as required for the
consummation of the transactions contemplated by this Agreement or as provided
in Section 13(b) hereof. The Underwriter further agrees to reveal the
Information only to those of its representatives who need to know the
Information for the purposes of consummating the transactions contemplated by
this Agreement and who are informed of the confidential nature of the
Information.
(b) The restrictions set forth in Section 13(a) hereof do not apply
to any Information which: (a) is or becomes generally available to the public;
(b) was known to the Underwriter prior to its receipt of Information from the
Company; (c) the Underwriter obtained from an independent third party who
obtained such Information lawfully and was under no obligation of
confidentiality; or (d) is disclosed when such disclosure is compelled pursuant
to legal, judicial or administrative proceedings, or otherwise required by law,
subject to the Underwriter giving reasonable prior notice to the Company to
allow the Company to participate in such proceedings.
(c) The Underwriter acknowledges and agrees that a breach of this
Section 13 may result in irreparable and continuing harm to the Company for
which there may be no adequate remedy at law. In the event of a breach or a
threatened or intended breach of this Section 13 by the Underwriter, the
Underwriter hereby consents to the granting of, and the Company shall be
entitled to seek, preliminary injunctions unilaterally without notice, and final
injunctions with notice, enjoining and restraining such breach or threatened or
intended breach, and to such other rights and remedies as are available at law
or in equity to the Company.
14. Notices and Governing Law. All communications hereunder will be in
writing and, except as otherwise provided, will be delivered at, or mailed by
certified mail, return receipt requested, or telecopied to, the following
addresses: if to the Underwriter, to Whale Securities Co., L.P., Attention:
Xxxxxxx X. Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, with a copy to
Xxxxxx Xxxxxxxxxx LLP, Attention: Xxxxxx X. Xxxxxxx, Esq., 000 Xxxxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000; if to the Company, addressed to it at X-Xxxxxxx.xxx
Inc. 0000-000 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxx X0X 0X0, attention: Xxxxx Xxxxxxx,
Chairman, with a copy to Weil, Gotshal & Xxxxxx LLP, Attention: Xxxxxx Xxxxxxx,
Esq., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and to Xxxxxxx Xxxxxxx, Esq.,
Xxxxxx-Xxxxxxxxx, Hill & XxXxxxxxx, 00 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxx, Xxxxxxx
X0X 0X0; and if to a Selling Shareholder, at its address set forth on Schedule A
hereto.
This Agreement shall be deemed to have been made and delivered in New York
City and shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of New York. The
Company and the Selling Shareholders (1) agree that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (2) waive
any objection which any of them may have now or hereafter to the venue of any
such suit, action or proceeding, and (3) irrevocably consent to the jurisdiction
of the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York in any such suit, action or
proceeding. The Company and the Selling Shareholders further agree to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York and
agree that service of process upon the Company or the Selling Shareholders
mailed by certified mail to the Company's address shall be deemed in every
respect effective service of process upon the Company and the Selling
Shareholders, as the case may be, in any such suit, action or proceeding.
15. Parties in Interest. This Agreement is made solely for the benefit of
the Underwriter, the Company and the Selling Shareholders and, to the extent
expressed, any person controlling the Company or the Underwriter, each officer,
director, partner, employee and agent of the Underwriter, the directors of the
Company, its officers who have signed the Registration Statement, and their
respective executors, administrators, successors and assigns, and, no other
person will acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" will not include any purchaser of the Shares from
the Underwriter, as such purchaser.
41
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Underwriter in accordance with its terms.
Very truly yours,
X-XXXXXXX.XXX INC.
By_______________________
Name:
Title:
SELLING SHAREHOLDERS
-------------------------
Name:
----------------------
Name:
------------------------
Name:
Confirmed and accepted in
New York, N.Y., as of the
date first above written:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By_________________________
Name:
Title:
42
SCHEDULE A
Selling Shareholder Address Number of Shares
------------------- ------- ----------------
Clarion Finanz A.G. 5,392
Xxxxxx Dijkstal 5,392
Xxxx Xxxxxxxxxx 5,392
Hathaway II Limited Partnership 22,092
Xxxxxxx Xxxxxx 8,966
Xxxxx Xxxxxx 16,812
Xxxxx Xxxxxxx 16,539
SteppingStone Funding Partners I Inc. 10,783
SteppingStone Funding Partners II Inc. 27,468
Xxxxxx Xxxxxxx 1,110
Xxxxxxx Xxxxxxx 1,110
Securities Trading SA 10,783
43
