2,000,000 Shares of Common Stock
AUDIO BOOK CLUB, INC.
UNDERWRITING AGREEMENT
Boca Raton, Florida
__________, 1997
L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc.
Representative of the Several Underwriters
0000 Xxxxxxxxx Xxxxx, Xxxxx 00
Xxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Audio Book Club, Inc., a Florida corporation (the "Company"),
hereby agrees with L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc. ("L.H.
Friend") and each of the underwriters named in Schedule A hereto (collectively,
the "Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom L.H Friend is acting as
representative (in such capacity, L.H. Friend shall hereinafter be referred to
as "you" or the "Representative") with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective amount of shares set forth in said Schedule A of the Company's common
stock, no par value per share (the "Common Stock") which aggregate to 2,000,000
shares (the "Shares"). Upon your request, as provided in Section 2(b) of this
Agreement, a minority shareholder (the "Selling Shareholder") of the Company and
the Company shall also issue and sell to the Underwriters, acting severally and
not jointly, up to an additional 190,000 shares from the Selling Shareholder
and then 110,000 shares of Common Stock from the Company for the purpose of
covering over-allotments, if any. Such shares of Common Stock are hereinafter
referred to as the "Option Shares." The Company also proposes to issue and sell
to you warrants (the "Representative's Warrants") pursuant to the
Representative's Warrant Agreement (the "Representative's Warrant Agreement")
for the purchase of an additional 200,000 shares of Common Stock. The shares of
Common Stock issuable upon exercise of the Representative's Warrants are
hereinafter referred to as the "Representative's Shares." The Shares, Option
Shares, the Representative's Warrants, and the Representative's Shares are more
fully described in the Registration Statement and the Prospectus referred to
below.
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1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, if any, as follows:
(a) The Company has prepared and filed with the Securities
and Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (Registration No. 333-305),
including any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Shares, the Option Shares, the Representative's Warrants,
and the Representative's Shares (collectively, hereinafter referred to as the
"Registered Securities") under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Regulations (as defined below) of the Commission under the Act. Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the Regulations), is hereinafter called the "Registration
Statement," and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called the
"Prospectus." For purposes hereof, "Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory
authority, to the best of the Company's knowledge, has issued any order
preventing or suspending the use of any Preliminary Prospectus, the Registration
Statement or the Prospectus and no proceedings for a stop order suspending the
effectiveness of the Registration Statement have been instituted, or, to the
Company's knowledge, are threatened. Each of the Preliminary Prospectus, the
Registration Statement and the Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Act and
Regulations, and neither the Preliminary Prospectus, the Registration Statement
nor the Prospectus at the time of filing thereof contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein and 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 made in reliance upon
and in conformity with written information furnished to the Company with respect
to the Underwriters by or on behalf of the Underwriters expressly for use in
such Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and
at all times subsequent thereto up to the Closing Date (as defined in Section
2(c) hereof) and each Option Closing Date (as defined in Section 2(b) hereof),
if any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus, as amended or supplemented as
required, will contain all statements which are required to be stated therein in
accordance with the Act and
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the Regulations, and will conform in all material respects to the requirements
of the Act and the Regulations; neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information furnished
to the Company in writing by or on behalf of any Underwriter expressly for use
in the Registration Statement or the Prospectus or any amendment thereof or
supplement thereto.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. The Company does not own or control, directly or indirectly, any
corporation, partnership, trust, joint venture or other business entity other
than the subsidiaries listed in Exhibit 21 of the Registration Statement, if
any. The Company is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing of
any properties or the character of its operations require such qualification or
licensing and where the failure to do so qualify or be licensed could have a
material adverse effect on the financial condition, results of operations or
business of the Company. The Company has all requisite power and authority
(corporate and other), and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar matters), to
own or lease its properties and conduct its business as described in the
Prospectus, except where the failure to do so would not have a material adverse
effect on the financial condition, results of operations or business of the
Company; to the best of the Company's knowledge, the Company has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; and the Company has not received any notice
of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the business affairs, operations, properties, or
results of operations of the. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as contemplated
are correct in all material respects and do not omit to state a material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which they were made.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Securities" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and
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as described in the Prospectus. The Registered Securities and all other
securities issued or issuable by the Company conform or, when issued and paid
for, will conform, in all material respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. Except as
disclosed in or contemplated by the Prospectus and the financial statements of
the Company and the related notes thereto included in the Prospectus, the
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements and the options or other rights granted and
exercised thereunder as set forth in the Prospectus conforms in all material
respects with the requirements of the Act. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable, and the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company.
(f) The Registered Securities are not and will not be
subject to any preemptive or other similar rights of any shareholder, have been
duly authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and will
conform in all material respects to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely by
reason of being holders; all corporate action required to be taken for the
authorization, issue and sale of the Registered Securities has been duly and
validly taken; and the certificates representing the Registered Securities will
be in due and proper form. Upon the issuance and delivery pursuant to the terms
hereof of the Registered Securities to be sold by the Company hereunder, the
Underwriters or the Representative (assuming they are bona fide purchasers
within the meaning of the Uniform Commercial Code), as the case may be, will
acquire good and marketable title to such Registered Securities free and clear
of any lien, charge, claim, encumbrance, pledge, security interest, defect, or
other restriction or equity of any kind whatsoever. No shareholder of the
Company has any right which has not been waived in writing to require the
Company to register the sale of any shares owned by such shareholder under the
Act in the public offering contemplated by this Agreement. No further approval
or authority of the shareholders or the Board of Directors of the Company will
be required for the issuance and sale of the Shares, the Option Shares and the
Representative's Warrants to be sold by the Company as contemplated herein.
(g) The financial statements of the Company, together with
the related notes and schedules thereto, included in the Registration Statement,
each Preliminary Prospectus and the Prospectus fairly present the financial
position, changes in shareholders' equity and the results of operations of the
Company at the respective dates and for the respective periods to which they
apply and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Regulations, consistently
applied throughout the periods
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involved. Except as otherwise set forth in or contemplated by the Prospectus,
there has been no material adverse change or development involving a material
prospective change in the condition, financial or otherwise, or in the business,
affairs, operations, properties, or results of operation of the Company whether
or not arising in the ordinary course of business since the date of the
financial statements included in the Registration Statement and the Prospectus
and the outstanding debt, the property, both tangible and intangible, and the
business of the Company conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "Prospectus Summary -
Selected Financial Data," "Capitalization," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," fairly present, on
the basis stated in the Prospectus, the information set forth therein and have
been derived from or compiled on a basis consistent with that of the audited
financial statements included in the Prospectus.
(h) The Company (i) has paid all federal, state, local,
franchise, and foreign taxes for which it is liable, including, but not limited
to, withholding taxes and amounts payable under Chapters 21 through 24 of the
Internal Revenue Code of 198, as amended (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable, and
(iii) does not have any tax deficiency or claims outstanding, proposed or
assessed against it.
(i) No transfer tax, stamp duty or other similar tax is
payable by or on behalf of the Underwriters in connection with (i) the issuance
by the Company of the Registered Securities to be sold by the Company, (ii) the
purchase by the Underwriters of the Registered Securities from the Company and
the purchase by the Representative of the Representative's Warrants from the
Company, (iii) the consummation by the Company of any of its obligations under
this Agreement, or (iv) resales of the Registered Securities in connection with
the initial distribution contemplated hereby.
(j) To the best of the Company's knowledge, there is no
action, suit, proceeding, inquiry, arbitration, mediation, investigation,
litigation or governmental proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or foreign,
pending or threatened against (or circumstances that may give rise to the same),
or involving the properties or businesses of, the Company which (i) questions
the validity of the capital stock of the Company, this Agreement or the
Representative's Warrant Agreement, or any action taken or to be taken by the
Company pursuant to or in connection with this Agreement or the Representative's
Warrant Agreement, (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are summarized in
the Registration Statement are accurately summarized in all material respects),
or (iii) might materially and adversely affect the condition, financial or
otherwise, or the business, affairs, position, shareholders' equity, operation,
properties, or results of operations of the Company and its subsidiaries taken
as a whole.
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(k) The Company has the corporate power and authority to
enter into this Agreement and the Representative's Warrant Agreement, and to
consummate the transactions provided for in such agreements; and this Agreement
and the Representative's Warrant Agreement have each been duly and properly
authorized, executed, and delivered by the Company. Each of this Agreement and
the Representative's Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
respective terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution may be
limited by applicable law), and none of the Company's issue and sale of the
Registered Securities, execution, delivery or performance of this Agreement and
the Represent- ative's Warrant Agreement, its consummation of the transactions
contemplated herein and therein, or the conduct of its businesses as described
in the Registration Statement, the Prospectus, and any amendments or supplements
thereto, conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of any lien,
charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of (i) the
articles of incorporation or by-laws of the Company, as amended and restated,
(ii) any license, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which it is or may
be bound or to which its properties or assets (tangible or intangible) is or may
be subject, or any indebtedness, except for any such breach, violation or
default which would not have a material adverse effect on the Company, or (iii)
any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over the Company of any of their activities or properties.
(l) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Registered Securities
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement, the Representative's Warrant Agreement, and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Registered Securities, except such as have
been or may be obtained under the Act and the regulations, may be required under
state securities or Blue Sky laws or may be required by the NASD in connection
with the Underwriters' purchase and distribution of the Registered Securities to
be sold by the Company hereunder.
(m) All executed agreements, contracts or other documents
or copies of executed agreements, contracts or other documents filed as exhibits
to the Registration Statement
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to which the Company is a party or by which it may be bound or to which its
assets, properties or businesses may be subject have been duly and validly
authorized, executed and delivered by the Company and constitute the legal,
valid and binding agreements of the Company enforceable against the Company in
accordance with their respective terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law). The descriptions in the
Registration Statement of such agreements, contracts and other documents are
accurate in all material respects and fairly present the information required to
be shown with respect thereto by Form SB-2, and there are no contracts or other
documents which are required by the Act to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to be copies.
(n) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as described in
or specifically contemplated by the Prospectus (i) the Company has not incurred
any material liabilities or obligations, indirect, direct or contingent, or
entered into any material verbal or written agreement or other transaction which
is not in the ordinary course of business or which could result in a material
reduction in the future earnings of the Company; (ii) the Company has not
sustained any material loss or interference with its business or properties from
fire, flood, windstorm, accident or other calamity, whether or not covered by
insurance; (iii) the Company has not paid or declared any dividends or other
distributions with respect to its capital stock, and the Company is not in
default in the payment of principal or interest on any outstanding debt
obligations; (iv) there has not been any change in the capital stock (other than
upon the sale of the Shares, the Option Shares, the Representative's Shares
hereunder and the conversion of $5,975,200 of indebtedness into _____ shares of
Common Stock to the X. Xxxxxxx Irrevocable ABC Trust as described in the
Prospectus (the "Conversion Shares") and upon the exercise of options and
warrants described in the Registration Statement) of, or indebtedness material
to, the Company (other than in the ordinary course of business); (v) the Company
has not issued any securities or incurred any liability or obligation (which is
not in the ordinary course of business), primary or contingent, for borrowed
money; and (vi) there has not been any material adverse change in the condition
(financial or otherwise), business, properties, results of operations, or
prospects of the Company.
(o) Except as disclosed in or specifically contemplated by
the Prospectus, (i) the Company has sufficient trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations to
conduct its business as now conducted; (ii) the expiration of any trademarks,
trade names, patent rights, copyrights, licenses, approvals or governmental
authorizations would not have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company; (iii) the Company has no knowledge of any infringement by it or its
subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) the
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Company has no notice of any claim being made against the Company regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of the
Company.
(p) The Company is not, nor has the Company received notice
that another party is, in default of the due performance and observance of any
term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
shareholders agreement, note, loan or credit agreement, or any other material
agreement or instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a party or by
which the Company may be bound or to which the property or assets (tangible or
intangible) of the Company is subject or affected, other than any defaults which
would not have a material adverse effect on the Company.
(q) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or to its knowledge threatened against or involving the Company. To the
Company's knowledge, no representation question exists respecting the employees
of the Company. No collective bargaining agreement, or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or to its knowledge is imminent.
(r) Except as described in the Prospectus, the Company does
not maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("ERISA Plans"). The Company does not maintain or contribute to a
defined benefit plan, as defined in Section 3(35) of ERISA.
(s) None of the Company, nor any of its employees,
directors, shareholders, or affiliates (within the meaning of the Regulations)
of any of the foregoing has taken or will take directly or indirectly, any
action designed to or which has constituted or which might be expected to cause
or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Registered Securities.
(t) The Company does not own any real Property. The Company
has good title to all items of personal property stated in the Prospectus to be
owned or leased by it, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, or other restrictions or equities of
any kind whatsoever other than those referred to in the Prospectus,
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those which do not materially affect the value or transferability of such
property and do not interfere with the use of such property by the Company and
liens for taxes not yet due and payable.
(u) KPMG Peat Marwick LLP ("Peat Marwick"), whose report is
filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Regulations.
(v) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which all persons or entities
that directly or beneficially own Common Stock, as of the effective date of the
Registration Statement, have agreed not to, directly or indirectly, offer, offer
to sell, sell, grant any option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into Common Stock, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Regulations or otherwise) or dispose of any
interest therein for a period from the date of the Prospectus until thirteen
(13) months following the date that the Registration Statement becomes
effective, without the prior written consent of the Representative (the "Lock-up
Agreements"). The Company will cause the Transfer Agent (as defined herein) to
place "stop transfer" orders on the Company's stock ledgers in order to effect
the Lock-up Agreements.
(w) Neither the Company nor any of the its officers,
directors, shareholders, employees or affiliates are a party to any claims,
arrangements or understandings, whether oral or written, nor has the Company or
any such person made any payments, for services in the nature of a finder's or
origination fee with respect to the sale of the Registered Securities hereunder
that may affect the Underwriters' compensation as determined by the National
Association of Securities Dealers, Inc. (the "NASD").
(x) The Common Stock has been approved for quotation on
the American Stock Exchange.
(y) Neither the Company nor any of its officers, employees,
agents or any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency (domestic or foreign) or instrumentality of any
government (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist the Company in connection
with any actual or proposed transaction) which might subject the Company or any
other such person to any damage or penalty in any civil, criminal or
governmental litigation or proceeding (domestic or foreign). The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
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(z) Except as set forth in the Prospectus, an except that
certain "affiliates" of certain officers and directors of the Company have, from
time to tome, facilitated the Company without receiving compensation, no
officer, director or shareholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the
Regulations) of any of the foregoing persons or entities has or has had, either
directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficiary
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus there
are no existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions, between or
among the Company, and any officer, director, principal shareholder (as such
term is used in the Prospectus) of the Company, or any affiliate or associate of
any of the foregoing persons or entities which is required to be disclosed in
accordance with Regulation S-B promulgated under the Act.
(aa) The Company is not, and does not intend to conduct its
business in a manner in which it would become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(ab) Any certificate signed by any officer of the Company
and delivered to the Underwriters or to the Underwriters' Counsel (as defined in
Section 4(d) herein) shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(ac) The minute books of the Company have been made
available to the Underwriters and contain a complete summary of all meetings and
actions of the directors and shareholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(ad) The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares in this offering other than the Prospectus,
the Registration Statement and the other materials permitted by the Act. Except
as described in the Prospectus, no holders of any securities of the Company or
of any options, warrants or other convertible or exchangeable securities of the
Company have the right to include any securities issued by the Company as part
of the Registration Statement or to require the Company to file a registration
statement under the Act and no person or entity holds any anti-dilution rights
with respect to any securities of the Company.
(ae) The Company maintains insurance, directly or
indirectly, by insurers of recognized financial responsibility of the types and
in the amounts as are prudent, customary and adequate for the business in which
it is engaged, including, but not limited to, insurance covering real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against,
all of which
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insurance is in full force and effect. The Company has no reason to believe that
it will not be able to renew existing insurance coverage with respect to the
Company as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business, in either case,
at a cost that would not have a material adverse effect on the financial
condition, operations, business, assets or properties of the Company. The
Company has not failed to file any material claims, has no material disputes
with its insurance company regarding any material claims submitted under its
insurance policies, and has complied with all material provisions contained in
its insurance policies.
2. Purchase, Sale and Delivery of the Registered Securities.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter, and
each Underwriter, severally and not jointly agrees to purchase from the Company,
at a price equal to [$ ] per share, that number of Shares set forth in Schedule
A opposite the name of such Underwriter, subject to such adjustment as the
Representative in their discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional numbers of Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the terms
and conditions herein set forth, the Underwriters, severally and not jointly,
are hereby granted an option to purchase all or any part of the Option Shares at
a price equal to [$ ] per share. The option granted hereby will expire 45 days
after (i) the date the Registration Statement becomes effective, if the Company
has elected not to rely on Rule 430A under the Regulations, or (ii) the date of
this Agreement if the Company has elected to rely upon Rule 430A under the
Regulations, and may be exercised in whole or in part from time to time (but not
on more than two (2) occasions) only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the Shares
upon notice by the Representative to counsel for the Company (at the address for
copies of notices as set forth in Section 13 below), as agent for the Selling
Shareholder, setting forth the number of Option Shares as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Shares. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representative, but shall not
be sooner than three (3) business days, nor later than five (5) business days,
after the exercise of said option, nor in any event prior to the Closing Date,
as hereinafter defined, unless otherwise agreed upon by the Representative and
the Company. Nothing herein contained shall obligate the Underwriters to
exercise the over-allotment option described above. No Option Shares shall be
delivered unless the Shares shall be simultaneously delivered or shall
theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the offices of L.H. Friend, at
0000 Xxxxxxxxx Xxxxx, Xxxxx 00, Xxxxxx,
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California, or at such other place as shall be agreed upon by the Representative
and the Company. Such delivery and payment shall be made at [ ] _.m. (New York
time) on _________, 1997, or at such other time and date as shall be agreed upon
by the Representative and the Company, but no more than four (4) business days
after the date hereof (such time and date of payment and delivery being herein
called the "Closing Date"). In addition, in the event that any or all of the
Option Shares are purchased by the Underwriters, payment of the purchase price
for, and delivery of certificates for, such Option Shares shall be made at the
above mentioned office of L.H. Friend or at such other place as shall be agreed
upon by the Representative and the Company on each Option Closing Date as
specified in the notice from the Representative to the Company. Delivery of the
certificates for the Shares and the Option Shares, if any, shall be made to the
Underwriters against payment by the Underwriters, of the purchase price for the
Shares to the order of the Company and of the Option Shares, if any, to the
order of the Selling Shareholder, by wire transfer of same day funds. In the
event such option is exercised, each of the Underwriters, acting severally and
not jointly, shall purchase that proportion of the total number of Option Shares
then being purchased which the number of Shares set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Shares,
subject in each case to such adjustments as the Representative in their
discretion shall make to eliminate any sales or purchases of fractional shares.
Certificates for the Shares and the Option Shares, if any, shall be in
definitive, fully registered form, shall bear no restrictive legends and shall
be in such denominations and registered in such names as the Underwriters may
request in writing at least three (3) business days prior to Closing Date or the
relevant Option Closing Date, as the case may be. The certificates for the
Shares and the Option Shares, if any, shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging no later than 9:30 a.m. on the
last business day prior to Closing Date or the relevant Option Closing Date, as
the case may be.
(d) On the Closing Date, the Company shall issue and sell
to the Representative Representative's Warrants at a purchase price of $0.001
per warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 200,000 shares of Common Stock. The Representative's Warrants shall
expire five (5) years after the effective date of the Registration Statement and
shall be exercisable for a period of four (4) years commencing one (1) year from
the effective date of the Registration Statement at a price equaling 15% of the
initial public offering price of the Shares. The Representative's Warrant
Agreement and form of Warrant Certificate shall be substantially in the form
filed as Exhibit 4.2 to the Registration Statement. Payment for the
Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Shares. As soon after the
Registration Statement becomes effective as the Representative deem advisable,
the Underwriters shall make a public offering of the Shares (other than to
residents of or in any jurisdiction in which qualification of the Shares is
required and has not become effective) at the price and upon the other terms set
forth in the Prospectus. The Representative may from time to time, after the
initial public offering, increase or decrease the public offering price after
distribution of the Shares has been completed to such extent as the
Representative, in their sole discretion deem advisable; provided,
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however, that the foregoing shall not effect the per share purchase price from
the Company set forth in Section 2(a) above. The Underwriters may enter into one
or more agreements as the Underwriters, in each of their sole discretion, deem
advisable with one or more broker-dealers who shall act as dealers in connection
with such public offering.
4. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before completion of the initial distribution of
the offering of the Shares by the Underwriters of which the Representative shall
not previously have been advised and furnished with a copy, or to which the
Representative shall have objected or which is not in compliance with the Act,
the Exchange Act or the Regulations.
(b) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Representative and confirm the
notice in writing, (i) when the Registration Statement becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Prospectus, or
any amendment or supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Registered Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose, (iv) of the
receipt of any comments from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission or
any state securities commission authority shall enter a stop order or suspend
such qualification at any time, the Company will use its best efforts to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) in accordance with the
requirements of the Act.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Registered Securities
which differs from the corresponding prospectus on file at the Commission at the
time the Registration Statement becomes effective, whether or not such
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revised prospectus is required to be filed pursuant to Rule 424(b) of the
Regulations), and will furnish the Representative with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement to which the Representative or Camhy Xxxxxxxxx & Xxxxx LLP
("Underwriters' Counsel") shall reasonably object.
(e) The Company shall endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Registered Securities for offering
and sale under the securities laws of such jurisdictions as the Representative
may reasonably designate to permit the continuance of sales and dealings therein
for as long as may be necessary to complete the distribution, and shall make
such applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or become subject to service of process in
any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agree that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act, as now and hereafter amended,
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Registered Securities in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the Registered
Securities is required to be delivered under the Act, any event shall have
occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend or supplement the Prospectus to comply with
the Act, the Company will notify the Representative promptly and prepare and,
subject to Section 4(a) hereof, file with the Commission an appropriate
amendment or supplement in accordance with Section 10 of the Act, each such
amendment or supplement to be satisfactory to Underwriters' Counsel, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later
than 45 days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule
-14-
158(a) of the Regulations, which statement need not be audited unless required
by the Act, covering a period of at least 12 consecutive months after the
effective date of the Registration Statement.
(h) During a period of three (3) years after the date
hereof, the Company will furnish to its shareholders, as soon as practicable,
annual reports (including financial statements audited by independent public
accountants) and will make available to its shareholders unaudited quarterly
reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly
reports to its shareholders, statements of income of the
Company for each quarter in the form furnished to the
Company's shareholders;
(ii) concurrently with furnishing such annual reports
to its shareholders, a copy of such annual report;
(iii) as soon as they are available, copies of all
reports (financial or other) mailed to shareholders;
(iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with
the Commission, the American Stock Exchange or any securities
exchange on which the Shares are listed;
(v) every press release and every material news item
or article of interest to the financial community in respect
of the Company or its affairs which was released or prepared
by or on behalf of the Company; and
(vi) any additional information of a public nature
concerning the Company (and any future subsidiaries) or its
businesses which the Representative may reasonably request.
During such three-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiaries are
consolidated.
(i) The Company will maintain a transfer agent (the
"Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a registrar (which may be the same entity as the transfer agent)
for the Common Stock.
(j) The Company will furnish to the Representative or on
the Represen- tative's order, without charge, at such place as the
Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective amendments
thereto, each Preliminary Prospectus, the Prospectus, and all amendments and
supplements thereto, including any prospectus prepared after the effective date
of the
-15-
Registration Statement, in each case as soon as available and in such quantities
as the Representative may reasonably request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of duly
executed Lock-up Agreements. On or before the Closing Date, the Company shall
deliver instructions to the Transfer Agent authorizing it to place appropriate
stop transfer orders on the Company's ledgers.
(l) The Company shall use its best efforts to cause its
officers, directors, shareholders or affiliates (within the meaning of the
Regulations) not to take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company
during the initial distribution of the offering of the Shares.
(m) The Company shall apply the net proceeds from the sale
of the Shares substantially in the manner, and subject to the conditions, set
forth under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports, forms
or other documents as may be required (including, but not limited to, a Form SR
as may be required pursuant to Rule 43 under the Act) from time to time, under
the Act, the Exchange Act, and the Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Regulations.
(o) The Company shall cause the Common Stock to be quoted
on the American Stock Exchange, and for a period of two (2) years from the date
hereof shall use its best efforts to maintain the quotation of the Common Stock
on the American Stock Exchange or the Nasdaq Stock Market, Inc. to the extent
outstanding and to the extent so qualified.
(p) For a period of two (2) years from the Closing Date,
the Company shall cause its transfer agent to furnish to the Representative, if
so requested in writing, at the Company's sole expense, daily consolidated
transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the effective date
of the Registration Statement the Company shall, at the Company's sole expense,
take all necessary and appropriate actions to further qualify the Company's
securities in all jurisdictions of the United States in order to permit
secondary sales of such securities pursuant to the Blue-Sky laws of those
jurisdictions which do not require the Company to qualify as a foreign
corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing for
the registration of the Common Stock under the Exchange Act and (ii) as soon as
practicable, will use its best efforts to take all
-16-
necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and Xxxxx'x OTC Manual and to continue such inclusion
for a period of not less than five (5) years.
(s) The Company agrees that for a period of thirteen (13)
months following the effective date of the Registration Statement it will not,
without the prior written consent of the Representative, offer, issue, sell,
contract to sell, grant any option for the sale of or otherwise dispose of any
Common Stock, or securities convertible into Common Stock, the Representative's
Warrants, and shares of Common Stock issued upon the exercise of currently
outstanding warrants or options issued under any stock option plan in effect on
the Closing Date, shares of Common Stock automatically granted pursuant to any
stock option plan in effect on the Closing Date, shares of Common Stock issued
pursuant to any employee stock purchase plan in effect on the Closing Date or
the Conversion Shares.
(t) For a period of twenty-five (25) days from the
effective date of the Registration Statement, the Company shall not without the
prior written consent of the Representative or Underwriters' Counsel, issue,
directly or indirectly any press release or other communication or hold any
press conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the Company's business
consistent with past practices with respect to the Company's operations.
(u) For a period equal to the lesser of (i) five (5) years
from the date hereof, and (ii) the sale to the public of the Representative's
Shares, the Company will not take any action or actions which may prevent or
disqualify the Company's use of Form SB-2 (or other appropriate form) for the
registration under the Act of the Representative's Shares.
(v) The Company agrees that it shall use its best efforts,
which shall include, but shall not be limited to, the solicitation of proxies,
to elect one (1) designee of the Representative to the Company's Board of
Directors for a period of three (3) years following the Closing, provided that
such designee is reasonably acceptable to the Company. The Company shall use its
best efforts to insure that such designee serve from the time of election until
the expiration of such three-year period.
(w) The Company agrees that within one hundred twenty (120)
days after the Closing it shall retain a public relations firm which is
reasonably acceptable to the Representative. The Company shall keep such public
relations firm, or any replacement, for a period of two (2) years from the
Closing. Any replacement public relations firm shall be retained only with the
consent of the Representative.
(x) The Company agrees that any and all future transactions
between the Company and its officers, directors, principal shareholders and the
affiliates of the foregoing persons will be on terms no less favorable to the
Company than could reasonably be obtained in arm's length transactions with
independent third parties, and that any such such transactions requiring a
payment of more than $10,000 will be approved by a majority of the Company's
-17-
outside independent directors disinterested in the transaction. In addition,
companies affiliated with Xxxxxx Xxxxxxx which are presently providing certain
accounting, administrative and general office services to, and obtaining
insurance coverage for, the Company at cost may continue to provide such
services to the Company at cost.
(y) The Company shall prepare and deliver to the
Representative, at the Company's sole expense, four bound volumes containing all
correspondence with regulatory officials, agreements, documents and all other
materials in connection with the offering.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing
Date and each Option Closing Date (to the extent not previously paid) all
expenses and fees (other than fees of Underwriters' Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement and the Representative's Warrant Agreement, including,
without limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing, delivery and mailing (including the
payment of postage with respect thereto) of the Registration Statement and the
Prospectus and any amendments and supplements thereto and the duplication,
mailing (including the payment of postage with respect thereto) and delivery of
this Agreement, the Agreement Among Underwriters, the Selected Dealers
Agreements, the Powers of Attorney, and related documents, including the cost of
all copies thereof and of the Preliminary Prospectuses and of the Prospectus and
any amendments thereof or supplements thereto supplied to the Underwriters and
such dealers as the Underwriters may request, in quantities as hereinabove
stated, (iii) the printing, engraving, issuance and delivery of the certificates
representing the Registered Securities, (iv) the qualification of the Registered
Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws (not
to exceed $25,000 plus any filing fees), including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum," the "Final Blue Sky Memorandum" and "Legal Investments Survey," if
any, and including reasonable disbursements and fees of counsel in connection
therewith, (v) expense of tombstone advertisements and other advertising costs
and expenses (not to exceed $10,000 in the aggregate), (vi) costs and expenses
in connection with the "road show," (vii) costs and expenses of any independent
counsel or consultant retained (provided that the Company approves in writing of
the retention of such independent counsel or consultants in advance), (viii)
fees and expenses of the transfer agent and registrar, (ix) the fees payable to
the Commission and the NASD and (x) the fees and expenses incurred in connection
with the listing of the Registered Securities on the American Stock Exchange and
any other market or exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section , Section 10(a) or Section 12, the
Company shall reimburse and indemnify the Representative for all of their actual
out-of-pocket expenses in an amount not to exceed $50,000, including the fees
and disbursements of Underwriters' Counsel, less any
-18-
amounts already paid pursuant to Section 5(c) hereof. In no event, however, will
the Representative, in the event the offering is terminated, be entitled to
retain or receive more than an amount equal to their actual accountable
out-of-pocket expenditures.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense allowance equal to three
percent (3%) of the gross proceeds received by the Company from the sale of the
Shares, less $50,000 which has been paid to date. In the event the
Representative elect to exercise the over-allotment option described in Section
2(b) hereof, the Selling Shareholder further agrees to pay to the Representative
on the Option Closing Date (by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the offering of the
Option Shares) a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company (or the Selling Shareholder) from
the sale of the Option Shares.
6. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they had been made on and as of the Closing Date or each Option Closing Date,
as the case may be; the accuracy on and as of the Closing Date or Option Closing
Date, as the case may be, if any, of the statements of officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective
not later than 5:00 p.m., New York City time, on the date prior to the date of
this Agreement or such later date and time as shall be consented to in writing
by the Representative, and, at Closing Date and each Option Closing Date, if
any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Underwriters' Counsel. If the
Company has elected to rely upon Rule 430A of the Regulations, the price of the
Shares and any price-related information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) of the Regulations within the
prescribed time period, and prior to Closing Date the Company shall have
provided evidence satisfactory to the Representative of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A of
the Regulations.
(b) The Representative shall not have advised the Company
that the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which,
-19-
in the opinion of Underwriters' Counsel, is material, or omits to state a fact
which, in the opinion of Underwriters' Counsel, is material and is required to
be stated therein or is necessary to make the statements therein not misleading,
or that the Prospectus, or any supplement thereto, contains an untrue statement
of fact which, in the reasonable opinion of Underwriter's Counsel, is material,
or omits to state a fact which, in the reasonable opinion of Underwriter's
Counsel, is material and is required to be stated therein or is necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(c) On or prior to the Closing Date, the Underwriters
shall have received from Underwriters' Counsel such opinion or opinions with
respect to the organization of the Company, the validity of the Registered
Securities, the Registration Statement, the Prospectus and other related matters
as the Representative may request.
(d) At the Closing Date, the Underwriters shall have
received the opinions of Xxxxxx Xxxxxxxxxx LLP ("Xxxxxx Xxxxxxxxxx"), counsel to
the Company, and Atlas, Xxxxxxxx, Tropt & Borkson, P.A., special Florida
counsel, each dated the Closing Date, addressed to the Underwriters and in form
and substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and
is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation, (B) is duly
qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which its ownership or
leasing of any properties or the character of its
operations requires such qualification or licensing, and
(C) to the best of such counsel's knowledge, has all
requisite corporate power and authority and has obtained
any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from
all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction
over environmental or similar matters), to own or lease its
properties and conduct its business as described in the
Prospectus.
(ii) except as described in the Prospectus, and to
the best of such counsel's knowledge after reasonable
investigation, the Company does not own an interest in any
corporation, limited liability company, partnership, joint
venture, trust or other business entity;
(iii) the Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus,
and any amendment or supplement thereto, under
"Capitalization" and "Description of Securities," and to
the knowledge of such counsel, the Company is not a party
to or bound by any instrument, agreement or other
arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for
this Agreement, the Representative's Warrant Agreement, and
as described in the Prospectus. The Registered Securities
and all other
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securities issued or issuable by the Company conform in all
material respects to the statements with respect thereto
contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof are not subject to
personal liability by reason of being such holders; and
none of such securities were issued in violation of the
preemptive rights of any holders of any security of the
Company. The Registered Securities to be sold by the
Company hereunder and under the Representative's Warrant
Agreement are not and will not be subject to any preemptive
or other similar rights of any shareholder, have been duly
authorized and, when issued, paid for and delivered in
accordance with their terms, will be validly issued, fully
paid and non-assessable and conform in all material
respects to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale
of the Registered Securities has been duly and validly
taken; and the certificates representing the Registered
Securities are in due and proper form. The Representative's
Warrants constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and
payment therefor, the number and type of securities of the
Company called for thereby (except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by
applicable law). Upon the issuance and delivery pursuant to
this Agreement of the Registered Securities to be sold by
the Company, the Company will convey, against payment
therefor as provided herein, to the Underwriters and the
Representative, respectively, good and marketable title to
the Registered Securities free and clear of all liens and
other encumbrances;
(iv) the Registration Statement is effective under the
Act, and, if applicable, filing of all pricing information
has been timely made in the appropriate form under Rule
430A, and no stop order suspending the use of the
Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or, to the best of such counsel's knowledge,
threatened or contemplated under the Act;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any
amendments or supplements thereto (other than the financial
statements and other financial and statistical data
included therein as to which no opinion need be rendered)
comply as to form in all
-21-
material respects with the requirements of the Act and the
Regulations. Such counsel shall state that such counsel has
participated in conferences with officers and other
representative of the Company and the Representative and
representative of the independent public accountants for
the Company, at which conferences the contents of the
Preliminary Prospectus, the Registration Statement, the
Prospectus, and any amendments or supplements thereto were
discussed, and, although such counsel is not passing upon
and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement and
Prospectus, and any amendments or supplements thereto, on
the basis of the foregoing, no facts have come to the
attention of such counsel which lead them to believe that
either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became
effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such
opinion contained any untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading (it being understood that such counsel need
express no opinion with respect to the financial statements
and schedules and other financial and statistical data
included in the Preliminary Prospectus, the Registration
Statement or Prospectus, and any amendments or supplements
thereto);
(vi) to the best of such counsel's knowledge after
reasonable investigation, (A) there are no agreements,
contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus
and filed as exhibits to the Registration Statement other
than those described in the Registration Statement and the
Prospectus and filed as exhibits thereto; (B) the
descriptions in the Registration Statement and the
Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a
party or by which it is bound are accurate in all material
respects and fairly represent the information required to
be shown by Form SB-2; (C) there is not pending or
threatened against the Company any action, arbitration,
suit, proceeding, litigation, governmental or other
proceeding (including, without limitation, those having
jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against the
Company which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement
are accurately summarized in all material respects), (y)
questions the validity of the capital stock of the Company
or this Agreement, or the Representative's Warrant
Agreement, or of any action taken or to be taken by the
Company pursuant to or in connection with any of the
foregoing; and (D) there is no action, suit or proceeding
pending or threatened against the Company before any
-22-
court or arbitrator or governmental body, agency or
official in which there is a reasonable possibility of an
adverse decision which may result in a material adverse
change in the financial condition, business, affairs,
shareholders' equity, operations, properties, business or
results of operations of the Company, which could adversely
affect the present or prospective ability of the Company to
perform its obligations under this Agreement or the
Representative's Warrant Agreement or which in any manner
draws into question the validity or enforceability of this
Agreement or the Representati- ve's Warrant Agreement;
(vii) the Company has the corporate power and
authority to enter into each of this Agreement and the
Representative's Warrant Agreement and to consummate the
transactions provided for therein; and each of this
Agreement and the Representative's Warrant Agreement has
been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Representative's
Warrant Agreement, assuming due authorization, execution
and delivery by each other party thereto, constitutes a
legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its
terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to
or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or
contribution may be limited by applicable law), and none of
the Company's execution, delivery or performance of this
Agreement and the Representative's Warrant Agreement, its
consummation of the transactions contemplated herein or
therein, or the conduct of its business as described in the
Registration Statement, the Prospectus, and any amendments
or supplements thereto conflicts with or results in any
breach or violation of any of the terms or provisions of,
or constitutes a default under, or result in the creation
or imposition of any lien, charge, claim, encumbrance,
pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the
terms of (A) the articles of incorporation or by-laws of
the Company, as amended, (B) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement,
shareholders' agreement, note, loan or credit agreement or
any other agreement or instrument known to such counsel to
which the Company is a party or by which it is bound, or
(C) any federal, state or local statute, rule or regulation
applicable to the Company or any judgment, decree or order
known to such counsel of any arbitrator, court, regulatory
body or administrative agency or other governmental agency
or body (including, without limitation, those having
jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company
or any of its activities or properties;
-23-
(viii) no consent, approval, authorization or order,
and no filing with, any court, regulatory body, government
agency or other body (other than such as may be required
under federal securities or Blue Sky laws, as to which no
opinion need be rendered) is required in connection with
the issuance of the Registered Securities pursuant to the
Prospectus, and the Registration Statement, the performance
of this Agreement and the Representative's Warrant
Agreement, and the transactions contemplated hereby and
thereby;
(ix) to the best of such counsel's knowledge after
reasonable investigation, the properties and business of
the Company conform in all material respects to the
description thereof contained in the Registration Statement
and the Prospectus;
(x) to the best knowledge of such counsel, and
except as disclosed in Registration Statement and the
Prospectus, the Company is not in breach of, or in default
under, any term or provision of any license, contract,
indenture, mortgage, installment sale agreement, deed of
trust, lease, voting trust agreement, shareholders'
agreement, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for
borrowed money, or any other agreement or instrument to
which the Company is a party or by which the Company is
bound or to which the property or assets (tangible or
intangible) of the Company is subject; and the Company is
not in violation of any term or provision of its articles
of incorporation or by-laws, as amended, and to the best of
such counsel's knowledge after reasonable investigation,
not in violation of any franchise, license, permit,
judgment, decree, order, statute, rule or regulation;
(xi) the statements in the Prospectus under "Dividend
Policy," "Description of Securities," and "Shares Eligible
for Future Sale" have been reviewed by such counsel, and
insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
(xii) the Common Stock has been accepted for quotation
on the American Stock Exchange;
(xiii) to the best of such counsel's knowledge and
based upon a review of the outstanding securities and the
contracts furnished to such counsel by the Company, no
person, corporation, trust, partnership, association or
other entity has the right to include and/or register any
securities of the Company in the Registration Statement,
require the Company to file any registration statement or,
if filed, to include any security in such registration
statement;
-24-
(xiv) assuming due execution by the parties thereto
other than the Company, each Lock-up Agreement is a legal,
valid and binding obligation of the party thereto,
enforceable against the party and any subsequent holder of
the securities subject thereto in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting
enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be
limited by applicable law);
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws, rules and
regulations of the United States and the laws, rules and regulations of the
State of Florida, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written statements
of officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested. The opinion of such counsel shall state that
knowledge shall not include the knowledge of a director or officer of the
Company who is affiliated with such firm in his or her capacity as an officer or
director of the Company. The opinion of such counsel for the Company shall state
that the opinion of any such other counsel is in form satisfactory to such
counsel.
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of Xxxxxx Xxxxxxxxxx, counsel to the
Company, dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel confirming as of such
Option Closing Date the statements made by Xxxxxx Xxxxxxxxxx in their opinion
delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section , or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
(f) Prior to each of the Closing Date and each Option
Closing Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, shareholders' equity or the business activities of the
Company, whether or not in the business, from the latest dates as of which such
condition is set forth in the Registration Statement and Prospectus; (ii) there
shall have been no
-25-
transaction, not in the ordinary course of its business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is adverse to
the Company; (iii) the Company shall not be in default under any provision of
any instrument relating to any outstanding indebtedness which default has not
been waived or which would not have a material adverse effect on the Company;
(iv) the Company shall not have issued any securities (other than the Registered
Securities and the Conversion Shares) or declared or paid any dividend or made
any distribution in respect of its capital stock of any class and there has not
been any change in the capital stock, or any material increase in the debt (long
or short term) or liabilities or obligations (other than any increase in its
short-term borrowings in the ordinary course of business) of the Company
(contingent or otherwise); (v) no material amount of the assets of the Company
shall have been pledged or mortgaged, except as set forth in the Registration
Statement and Prospectus; (vi) no action, suit or proceeding, at law or in
equity, shall have been pending or threatened (or circumstances giving rise to
same) against the Company, or affecting any of its respective properties or
businesses before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; and (vii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(g) At each of the Closing Date and each Option Closing
Date, if any, the Underwriters shall have received a certificate of the Company
signed on behalf of the Company by the principal executive officer of the
Company, dated the Closing Date or Option Closing Date, as the case may be, to
the effect that such executive has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and
as of the Closing Date or the Option Closing Date, as the
case may be, and the Company has complied with all
agreements and covenants and satisfied all conditions
(unless waived) contained in this Agreement on its part to
be performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued,
and no proceedings for that purpose have been instituted or
are pending or, to the best of each of such person's
knowledge after due inquiry, are contemplated or threatened
under the Act;
(iii) The Registration Statement and the Prospectus
and, if any, each amendment and each supplement thereto,
contain all statements and information required by the Act
to be included therein, and none of the
-26-
Registration Statement, the Prospectus nor any
post-effective amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading and neither the
Preliminary Prospectus or any supplement thereto, as of
their respective dates, included any untrue statement of a
material fact or omitted to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (a) the Company has not incurred up to and
including the Closing Date or the Option Closing Date, as
the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct
or contingent; (b) the Company has not paid or declared any
dividends or other distributions on its capital stock; (c)
the Company has not entered into any transactions not in
the ordinary course of its business; (d) there has not been
any change in the capital stock or material increase in
long-term debt or any increase in the short-term borrowings
(other than any increase in the short-term borrowings in
the ordinary course of business) of the Company, (e) the
Company has not sustained any material loss or damage to
its property or assets, whether or not insured, (f) there
is no litigation which is pending or, to each of such
person's knowledge, threatened (or circumstances giving
rise to same) against the Company or any affiliated party
of any of the foregoing which is required to be set forth
in an amended or supplemented Prospectus which has not been
set forth, and (g) there has occurred no event required to
be set forth in an amended or supplemented Prospectus which
has not been set forth.
(h) By the Closing Date, the Underwriters will have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters.
(i) At the time this Agreement is executed, the
Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory in all respects (including the
non-material nature of the changes or decreases, if any, referred to in clause
(iii) below) to the Underwriters and Underwriters' Counsel, from Peat Marwick:
(i) confirming that they are independent certified
public accountants with respect to the Company within the
meaning of the Act and the applicable Rules and
Regulations;
(ii) stating that it is their opinion that the
financial statements (and supporting schedules, if any) of
the Company included in the Registration
-27-
Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the
Regulations thereunder and that the Representative may rely
upon the opinion of Peat Marwick with respect to the
financial statements (and supporting schedules, if any)
included in the Registration Statement;
(iii) stating that, on the basis of a limited review
which included a reading of the latest available unaudited
interim financial statements of the Company (with an
indication of the date of the latest available unaudited
interim financial statements), a reading of the latest
available minutes of the shareholders and board of
directors and the various committees of the board of
directors of the Company, consultations with officers and
other employees of the Company responsible for financial
and accounting matters and other specified procedures and
inquiries, nothing has come to their attention which would
lead them to believe that (A) the unaudited financial
statements and supporting schedules of the Company included
in the Registration Statement, if any, do not comply as to
form in all material respects with the applicable
accounting requirements of the Act and the Regulations or
are not fairly presented in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements of the Company included in the Registration
Statement, or (B) at a specified date not more than five
(5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock
or material increase in long-term debt of the Company, or
any material decrease in the shareholders' equity or net
current assets or net assets of the Company as compared
with amounts shown in the ___________, 199_, balance sheet
included in the Registration Statement, other than as set
forth in or contemplated by the Registration Statement, or,
if there was any change or decrease, setting forth the
amount of such change or decrease.
(iv) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and
earnings, statements and other financial information
pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from
the general accounting records, including work sheets, of
the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and
other appropriate procedures (which procedures do not
constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and
found them to be in agreement; and
-28-
(v) statements as to such other material matters
incident to the transaction contemplated hereby as the
Representative may reasonably request.
(j) At the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received from Peat Marwick a letter, dated as
of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section , except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (v) of Subsection (i) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Representative and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(k) On each of Closing Date and Option Closing Date, if
any, there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Registered Securities.
(l) No order suspending the sale of the Registered
Securities in any jurisdiction designated by the Representative pursuant to
subsection (e) of Section 4 hereof shall have been issued on either the Closing
Date or the Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or shall be contemplated.
(m) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement, substantially in the form filed as Exhibit 4.2, to the Registration
Statement, in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company in writing.
(n) On or before Closing Date, the Common Stock shall have
been duly approved for quotation on American Stock Exchange.
(o) On or before Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements in final form and
substance satisfactory to Underwriters' Counsel.
If any condition to the Underwriters' obligations hereunder
to be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may terminate
this Agreement or, if the Representative so elect, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
-29-
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
of the Underwriters (for purposes of this Section 7 "Underwriters" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented); or
(B) in any application or other document or communication (in this Section 7
collectively called "application") executed by or on behalf of the Company or
based upon written information furnished by or on behalf of the Company in any
jurisdiction in order to qualify the Registered Securities under the securities
laws thereof or filed with the Commission, any state securities commission or
agency, The American Stock Exchange or any securities exchange; or any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be; or (ii) any breach of any material representation, warranty, covenant or
agreement of the Company contained in this Agreement. Notwithstanding anything
to the contrary, the indemnity agreement in this Section 7(a) with respect to
any Preliminary Prospectus will not inure to the benefit of the Underwriters (or
to the benefit of any other person that may be indemnified pursuant to this
Section 7(a)) if (A) the person asserting any such losses, claims, damages,
expenses or liabilities purchased the Shares which are the subject thereof from
an Underwriter or other indemnified person; (B) such 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. The indemnity agreement in this
subsection (a) shall be in addition to any liability which the Company may have
at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company, within the
-30-
meaning of the Act, to the same extent as the foregoing indemnity from the
Company to the Underwriters but only with respect to statements or omissions, if
any, made in any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any application
made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to any Underwriter by such Underwriter or
the Representative expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any such application, provided that such written information or
omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the transactions
effected by the Underwriters in connection with this Offering. The Company
acknowledges that the statements with respect to the public offering of the
Registered Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the Underwriters
expressly for use therein and constitute the only information furnished in
writing by or on behalf of the Underwriters or the Representative for inclusion
in the Prospectus.
(c) Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, suit or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against one or more indemnifying parties under this Section 7, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure to so notify an indemnifying party shall not relieve it
from any liability which it may have otherwise or which it may have under this
Section 7, except to the extent that it has been prejudiced in any material
respect by such failure). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties will be entitled to
participate therein, and to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action at the expense of the indemnifying
party, (ii) the indemnifying parties shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties and that
it is a conflict of interest for the indemnified party or parties to be
represented by such counsel (in which case the indemnifying parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events the reasonable fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no event
shall the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
-31-
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
unreasonably withheld.
(d) In order to provide for just and equitable contribution
in any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) (A) in such proportion as is appropriate to reflect
the relative benefits received by each of the contributing parties, on the one
hand, and the party to be indemnified on the other hand, from the offering of
the Registered Securities or (B) if the allocation provided by clause (A) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. In any case
where the Company is a contributing party and the Underwriters are the
indemnified party, the relative benefits received by the Company on the one
hand, and the Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Registered
Securities (before deducting expenses other than underwriting discounts and
commissions) bear to the total underwriting discounts received by the
Underwriters hereunder, in each case as set forth in the table on the Cover Page
of the Prospectus. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this
subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Registered Securities
purchased by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to this subparagraph (d). Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in
-32-
respect to which a claim for contribution may be made against another party or
parties under this subparagraph (d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements of the Company
at the Closing Date and the Option Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and the respective
indemnity and contribution agreements contained in Section 7 hereof shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, any controlling person of any of
the Underwriters or the Company, and shall survive termination of this Agreement
or the issuance and delivery of the Registered Securities to the Underwriters
and the Representative, as the case may be.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m.,
New York City time, on the date hereof. For purposes of this Section 9, the
Shares to be purchased hereunder shall be deemed to have been so released upon
the earlier of dispatch by the Representative of telegrams to securities dealers
releasing such shares for offering or the release by the Representative for
publication of the first newspaper advertisement which is subsequently published
relating to the Shares.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has disrupted, or in the
Representative's reasonable opinion will in the immediate future disrupt the
financial markets; or (ii) any material adverse change in the financial markets
shall have occurred; or (iii) if trading on the New York Stock Exchange, the
American Stock Exchange, or in the over-the-counter market shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or
maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iv) if the United States shall
have become involved in a war or major hostilities, or if there shall have been
an escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; or (vi) if the Company shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which,
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whether or not such loss shall have been insured, will, in the Representative's
reasonable opinion, make it inadvisable to proceed with the delivery of the
Shares; or (vii) if there shall have been such a material adverse change in the
prospects or conditions of the Company, or such material adverse change in the
general market, political or economic conditions, in the United States or
elsewhere as in the Representative's reasonable judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the Registered
Securities.
(b) If this Agreement is terminated by the Representative
in accordance with any of the provisions of Section , Section 10(a)(i) - (v), or
Section 12, the Company shall promptly reimburse and indemnify the Underwriters
pursuant to Section 5(b) hereof. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of this
Agreement (including, without limitation, pursuant to Sections , 10, 11 and 12
hereof), and whether or not this Agreement is otherwise carried out, the
provisions of Section 5 and Section 7 shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement or
any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section , Section 10 or
Section 12 hereof) to purchase the Registered Securities which it or they are
obligated to purchase on such date under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, within 24 hours
thereafter, to make arrangement for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, the Representative shall not have completed
such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed
10% of the total number of Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of
the total number of Shares, this Agreement shall terminate without liability on
the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in
a termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
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12. Default by the Company. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver the
number of Registered Securities which it is obligated to sell hereunder on such
date, then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Shares to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Shares from the Company on such date) without any liability on
the part of any non-defaulting party other than pursuant to Section 5, Section 7
and Section 10 hereof. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except
as herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc., 0000
Xxxxxxxxx Xxxxx, Xxxxx 00, Xxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx X.
Xxxxxxx, with a copy, which shall not constitute notice, to Camhy Xxxxxxxxx &
Xxxxx LLP, 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx
X. Annex, Esq. Notices to the Company shall be directed to the Company at 0000
Xxxxxxxxx Xxxx., X.X., Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, Attention: CEO,
with a copy, which shall not constitute notice, to Xxxxxx Xxxxxxxxxx LLP, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxxx X. Xxxxxxx, Esq.
14. Parties. This Agreement shall inure solely to the benefit
of and shall be binding upon the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof and their
respective successors, legal representative and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Registered Securities from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
17. Entire Agreement; Amendments. This Agreement and the
Representative's Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representative
and the Company.
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If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
AUDIO BOOK CLUB, INC.
By:______________________________________
Name:
Title:
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CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
L.H. FRIEND, WEINRESS, XXXXXXXX & XXXXXXX, INC.
By:__________________________________________________
Name:
Title:
For themselves and as Representative of the Underwriters named in Schedule A
hereto.
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SCHEDULE A
Number of
Shares to be
Name of Underwriters Purchased
-------------------- ------------
L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc.................
TOTAL................................... 2,000,000
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