EXHIBIT 1.1
[_____________] Shares1
EARTH AND OCEAN SPORTS, INC.
Common Stock
FORM OF UNDERWRITING AGREEMENT
___________, 1997
H.C. Wainwright & Co., Inc.
Cruttenden Roth Incorporated
As Representatives of the several Underwriters
c/o H.C. Wainwright & Co., Inc.
One Boston Place
Boston, Massachusetts 02108
Dear Sirs and Madams:
Earth and Ocean Sports, Inc., a Massachusetts corporation (the
"Company"), proposes to issue and sell [__________] shares (the "Firm Shares")
of its authorized but unissued Common Stock. In addition, the Company proposes
to grant to the Underwriters (as defined below) an option to purchase up to
[_________] additional shares of Common Stock (the "Optional Shares" and, with
the Firm Shares, collectively, the "Shares"). The Common Stock is more fully
described in the Registration Statement and the Prospectus hereinafter
mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the Shares by the several underwriters, for whom you are acting,
named in Schedule I hereto (collectively, the "Underwriters," which term shall
also include any underwriter purchasing Common Stock pursuant to Section 2(b)
hereof). You represent and warrant that you have been authorized by each of the
other Underwriters to enter into this Underwriting Agreement (the "Agreement")
on its behalf and to act for it in the manner herein provided.
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the several Underwriters as of the date hereof
and as of each Closing Date (as defined below) that:
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-_____), including
the related preliminary prospectus, for the registration under the Securities
Act of 1933, as amended (the "Securities Act") of the Shares. Copies of such
registration statement and of each amendment thereto, if any, including the
related preliminary prospectus (meeting the requirements of Rule 430A of the
rules and regulations of the Commission) heretofore filed by the Company with
the Commission have been delivered to you.
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1 Plus an option to purchase from the Company up to [______] additional
shares to cover over-allotments.
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The term Registration Statement as used in this Agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Shares (a "Rule 462(b)
registration statement"), and, in the event of any amendment thereto after the
effective date of such registration statement (the "Effective Date"), shall also
mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) registration statement). The
term Prospectus as used in this Agreement shall mean the prospectus relating to
the Shares first filed with the Commission pursuant to Rule 424(b) and Rule 430A
(or if no such filing is required, as included in the Registration Statement)
and, in the event of any supplement or amendment to such prospectus after the
Effective Date, shall also mean (from and after the filing with the Commission
of such supplement or the effectiveness of such amendment) such prospectus as so
supplemented or amended. The term Preliminary Prospectus as used in this
Agreement shall mean each preliminary prospectus included in such registration
statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement
and the Prospectus and as being conducted, and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which the character of
the property owned or leased or the nature of the business transacted by it
makes qualification necessary (except where the failure to be so qualified would
not have a material adverse effect on the business, business prospects,
properties, condition (financial or otherwise) or results of operations of the
Company. The Company does not own or control, directly or indirectly, any
corporation, association or other entity.
Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any material
adverse change in the business, business prospects, properties, condition
(financial or otherwise) or results of operations of the Company, whether or not
arising from transactions in the ordinary course of business, other than as set
forth in the Registration Statement and the Prospectus, and since such dates,
except in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement and the
Prospectus.
The Registration Statement and the Prospectus comply and on the Closing
Date (as hereinafter defined) and any later date on which Optional Shares are to
be purchased, the Prospectus will comply, in all material respects, with the
provisions of the Securities Act and the rules and regulations of the Commission
thereunder; on the Effective Date, the Registration Statement did not contain
any untrue statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; and, on the Effective Date the Prospectus did not and,
on the Closing Date and any later date on which Optional Shares are to be
purchased, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that none of the representations and warranties in this
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paragraph shall apply to statements in, or omissions from, the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information herein or otherwise furnished in writing to the Company by or on
behalf of the Underwriters for use in the Registration Statement or the
Prospectus.
The Company has authorized and outstanding capital stock and
outstanding long term-debt as set forth under the heading "Capitalization" in
the Prospectus. The issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities. 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 any outstanding
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, set forth in the
Prospectus accurately and fairly presents the information required by the
Securities Act and the rules and regulations promulgated thereunder ("Rules and
Regulations") to be shown with respect to such plans, arrangements, options and
rights.
The Shares are duly authorized, will be (when issued and sold to the
Underwriters as provided herein) validly issued, fully paid and nonassessable
and conform to the description thereof in the Prospectus. No further approval or
authority of the stockholders or the Board of Directors of the Company will be
required for the issuance and sale of the Shares to be sold by the Company as
contemplated herein.
The Warrants (as defined in Section 5 below) will conform to the
description thereof in the Prospectus and, when sold to and paid for by the
Representatives in accordance with the Warrant Agreement (as defined in Section
5 below), will be duly authorized and validly issued and will be valid and
binding obligations of the Company entitled to all the benefits of the Warrant
Agreement. The Warrant Shares (as defined in Section 5 below) will be duly
authorized and reserved for issuance upon exercise of the Warrants and, when
issued upon such exercise in accordance with the terms of the Warrants and the
Warrant Agreement, will be duly and validly issued, fully paid and
nonassessable, free of preemptive rights and will conform to the description
thereof in the Prospectus.
PRIOR TO THE CLOSING DATE, (I) THE SHARES TO BE ISSUED AND SOLD BY THE
COMPANY AND (II) THE WARRANT SHARES, WILL BE AUTHORIZED FOR LISTING ON THE
NASDAQ NATIONAL MARKET UPON OFFICIAL NOTICE OF ISSUANCE.
The Shares to be sold by the Company will be sold free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest, and
will conform to the description thereof contained in the Prospectus. No
preemptive right, co-sale right, registration right, right of first refusal or
other similar right to subscribe for or purchase securities of the Company
exists with respect to the issuance and sale of the Shares by the Company
pursuant to this Agreement. No person or entity has any right which has not been
waived, or complied with, to require the Company to register the sale of any
shares of Common Stock under the Securities Act in the public offering
contemplated by this Agreement and, except as described in the Prospectus, no
person or entity holds a right to require the Company to register the sale of
any shares of Common Stock at any other time.
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The Company has full corporate power and authority to enter into this
Agreement and perform the transactions contemplated hereby and thereby. This
Agreement and the Warrant Agreement have been duly authorized, executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable in accordance with their terms, except as enforceability may
be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium laws affecting creditors' rights generally and except
as to those provisions relating to indemnity or contribution for liabilities
arising under federal and state securities laws. The making and performance of
this Agreement and the Warrant Agreement by the Company and the consummation of
the transactions contemplated hereby and thereby (i) will not violate any
provisions of the Articles of Organization, Bylaws or other organizational
documents of the Company, and (ii) will not conflict with, result in a material
breach or violation of, or constitute, either by itself or upon notice or the
passage of time or both, a material default under (A) any agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which the Company is a party or by which the Company or any of its properties
may be bound or affected, or (B) any statute or any authorization, judgment,
decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its properties. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body that
has not already been obtained is required for the execution and delivery of this
Agreement and the Warrant Agreement or the consummation of the transactions
contemplated by this Agreement and the Warrant Agreement, except for compliance
with the Securities Act, the Blue Sky laws applicable to the public offering of
the Shares by the several Underwriters and the clearance of such offering with
the National Association of Securities Dealers, Inc. (the "NASD").
The consolidated financial statements and schedules of the Company and
the related notes thereto included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the
respective dates of such financial statements and schedules, and the results of
operations and cash flows of the Company for the respective periods covered
thereby. Such statements, schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods specified, as certified by the independent
accountants named in subsection 8(f). No other financial statements or schedules
are required to be included in the Registration Statement. The selected
financial data set forth in the Prospectus under the captions "Capitalization"
and "Selected Consolidated Financial Information" fairly present the information
set forth therein on the basis stated in the Registration Statement.
The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The representations and warranties given by the Company and its
officers to its independent public accountants for the purpose of supporting the
letters referred to in Sections 8(f) and (g) are true and correct.
The Company is not (i) in violation or default of any provision of its
Articles of Organization, Bylaws or other organizational documents, or (ii) in
material breach of, or default with respect to, any provision of any agreement,
judgment, decree, order, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which it is a party or by which it or
any of its properties are
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bound; and there does not exist any state of facts which, with notice or lapse
of time or both, would constitute such a breach or default on the part of the
Company.
There are no contracts or other documents required to be described in
the Registration Statement or to be filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have not
been described or filed as required. The contracts so described in the
Prospectus are in full force and effect on the date hereof.
Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or threatened to which the
Company is or is threatened to be made a party or of which property owned or
leased by the Company is or has been threatened to be made the subject, which
actions, suits or proceedings could, individually or in the aggregate, prevent
or adversely affect the transactions contemplated by this Agreement or the
Warrant Agreement or result in a material adverse change in the business,
business prospects, properties, condition (financial or otherwise), or results
of operations of the Company; there are no outstanding claims, asserted or
otherwise, against the Company, or any of its officers or directors, for
violations of any federal or state securities laws, or any other applicable
laws, relating to any purchase, sale, or redemption of, or other transaction
with respect to, the Common Stock; and no labor disturbance by the employees of
the Company exists or is imminent which could materially adversely affect the
business, business prospects, properties, condition (financial or otherwise), or
results of operations of the Company. The Company is not a party or subject to
the provisions of any material injunction, judgment, decree or order of any
court, regulatory body, administrative agency or other governmental body. Except
as disclosed in the Prospectus, there are no material legal or governmental
actions, suits or proceedings pending or, to the Company's knowledge, threatened
against any executive officers or directors of the Company.
The Company has good and marketable title to all the properties and
assets reflected as owned in the financial statements hereinabove described (or
elsewhere in the Prospectus), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in such financial
statements (or elsewhere in the Prospectus), or (ii) those which are not
material in amount to the Company, and do not adversely affect the use made and
proposed to be made of such property by the Company. The Company holds its
leased properties under valid and binding leases. Except as described in the
Prospectus, the Company owns or leases all such properties as are necessary to
its operations as now conducted or as proposed to be conducted.
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 (A)
incurred any liabilities or obligations, indirect, direct or contingent, or (B)
entered into any oral or written agreement or other transaction, which in the
case of (A) or (B) is not in the ordinary course of business; (ii) the Company
has not sustained any material loss or interference with its businesses 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 of the Company (other than upon the sale of the Shares hereunder or upon
the exercise of any options or warrants disclosed in the Prospectus); (v) there
has not been any material increase in the short- or long-term debt of the
Company; and (vi) there has not been any material adverse change or any
development involving or which may reasonably be expected to involve a
prospective material adverse change, in the business, business prospects,
condition (financial or otherwise), properties, or results of operations of the
Company.
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The Company is conducting business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business, except where the failure to be so in compliance would not have a
material adverse effect on the business, business prospects, properties,
condition (financial or otherwise) or results of operations of the Company.
The Company has filed all necessary federal, state and foreign income
and franchise tax returns, and all such tax returns are complete and correct in
all material respects, and the Company has not failed to pay any taxes which
were payable pursuant to said returns or any assessments with respect thereto.
The Company has no knowledge of any tax deficiency which has been or is likely
to be threatened or asserted against the Company.
The Company has not distributed, and will not distribute prior to the
later to occur of (i) completion of the distribution of the Shares, or (ii) the
expiration of any time period within which a dealer is required under the
Securities Act to deliver a prospectus relating to the Shares, any offering
material in connection with the offering and sale of the Shares other than the
Prospectus, the Registration Statement and any other materials permitted by the
Securities Act and consented to by the Underwriters.
The Company maintains insurance of the types and in the amounts
generally deemed adequate for their business, including, but not limited to,
directors' and officers' insurance, 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
insurance is in full force and effect. The Company has not been refused any
insurance coverage sought or applied for, and the Company has no reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
adversely affect the business, business prospects, properties, condition
(financial or otherwise) or results of operations of the Company.
The Company nor, to the best of the Company's knowledge, any of its
employees or agents has at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
foreign, federal or state governmental officer or official or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof.
The Company has not taken and will not take, directly or indirectly,
any action designed to or that might be reasonably expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares.
The Company has caused (i) each of its executive officers and directors
as set forth in the Prospectus and (ii) the holders of all of the outstanding
Common Stock, options therefor, warrants or other security of the Company to
furnish to the Underwriters an agreement in form and substance satisfactory to
H.C. Wainwright & Co., Inc. pursuant to which each such party has agreed that
during the period of one hundred eighty (180) days after the date the
Registration Statement becomes effective, without the prior written consent of
H.C. Wainwright & Co., such party will not, directly or indirectly, offer, sell,
pledge, contract to sell, grant any option to purchase or otherwise dispose of
any shares of Common Stock beneficially owned or otherwise held by such party
(including, without limitation, shares of Common Stock which may be deemed to be
beneficially owned by such party in accordance
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with the rules and regulations of the Securities and Exchange Commission and
shares of Common Stock which may be issued upon exercise of a stock option or
warrant) or any securities convertible into, derivative of or exercisable or
exchangeable for such Common Stock; provided, however, that if such party is an
individual, he or she may transfer any or all of the Common Stock held by such
party either during his or her lifetime or on death, by gift, will or intestacy,
to his or her immediate family or to a trust the beneficiaries of which are
exclusively such party and/or a member or members of his or her immediate
family; provided, that in any such case the transferee executes a lock-up
agreement in substantially the same form covering the remainder of the lock-up
period.
Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba.
Except as specifically disclosed in the Prospectus, the Company has
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals and governmental authorizations to conduct their businesses as now
conducted; the expiration of any trademarks, trade names, patent rights,
copyrights, licenses, approvals or governmental authorizations would not have a
material adverse effect on the business, business prospects, properties,
condition (financial or otherwise) or results of operations of the Company; the
Company does not have any knowledge of any infringement by the Company of
trademark, trade name rights, patent rights, copyrights, licenses, trade secret
or other similar rights of others; and no claims have been made or are
threatened against the Company regarding trademark, trade name, patent,
copyright, license, trade secret or other infringement which could have a
material adverse effect on the business, business prospects, properties,
condition (financial or otherwise) or results of operations or prospects of the
Company, nor, to the best of the Company's knowledge, is there any basis
therefore.
Except as disclosed in the Prospectus, (i) the Company is in compliance
in all material respects with all rules, laws and regulation relating to the
use, treatment, storage and disposal of toxic substances and protection of
health or the environment ("Environmental Laws") which are applicable to its
business, (ii) the Company has not received any notice from any governmental
authority or third party of an asserted claim under Environmental Laws, (iii) no
facts currently exist that will require the Company to make future material
capital expenditures to comply with Environmental Laws, and (iv) to the
knowledge of the Company, no property which is or has been owned, leased or
occupied by the Company has been designated as a Superfund site pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. ss. 9601, et seq.), or otherwise designated as a contaminated
site under applicable state or local law.
The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 2. PURCHASE OF THE SHARES BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
the [_________] Firm Shares to the several Underwriters, and each of the
Underwriters agrees to purchase from the Company the respective aggregate number
of Firm Shares set forth opposite its name in Schedule I. The price at which
such Firm Shares shall be sold by the Company and purchased by the several
Underwriters shall be $___ per share. The obligation of each Underwriter to the
Company shall be to purchase from the Company that number of Firm Shares which
represents the same proportion of the total number of Firm Shares to be sold by
the Company pursuant to this Agreement as the number of Firm Shares set
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forth opposite the name of such Underwriter in Schedule I hereto represents of
the total number of Firm Shares to be purchased by all Underwriters pursuant to
this Agreement, as adjusted by you in such manner as you deem advisable to avoid
fractional shares. In making this Agreement, each Underwriter is contracting
severally and not jointly; except as provided in paragraphs (b) and (c) of this
Section 2, the agreement of each Underwriter is to purchase only the respective
number of shares of the Firm Shares specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of Shares agreed to be purchased by such Underwriter or
Underwriters, the Company shall immediately give notice thereof to you, and the
non-defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon between you
and such purchasing Underwriter or Underwriters and upon the terms herein set
forth, all or any part of Shares which such defaulting Underwriter or
Underwriters agreed to purchase. If the non-defaulting Underwriters fail so to
make such arrangements with respect to all such shares and portion, the number
of Shares which each non-defaulting Underwriter is otherwise obligated to
purchase under this Agreement shall be automatically increased on a pro rata
basis to absorb the remaining shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase; provided, however, that the
non-defaulting Underwriters shall not be obligated to purchase the portion which
the defaulting Underwriter or Underwriters agreed to purchase if the aggregate
number of such Shares exceeds 10% of the total number of Shares which all
Underwriters agreed to purchase hereunder. If the total number of Shares which
the defaulting Underwriter or Underwriters agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such Shares and portion on the terms herein
set forth. In any such case, either you or the Company shall have the right to
postpone the Closing Date determined as provided in Section 4 hereof for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to Section 4 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If neither the non-defaulting Underwriters nor the Company shall
make arrangements within the 24-hour periods stated above for the purchase of
all of the Shares which the defaulting Underwriter or Underwriters agreed to
purchase hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company to any non-defaulting
Underwriter and without any liability on the part of any non-defaulting
Underwriter to the Company. Nothing in this paragraph (b), and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly up to [________] Optional Shares from the Company at
the same price per share as the Underwriters shall pay for the Firm Shares. Said
option may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters and may be exercised in whole or in part at any time
on or before the thirtieth day after the date of this Agreement upon written or
telegraphic notice by you to the Company setting forth the aggregate number of
Optional Shares as to which the several Underwriters are exercising the option.
Delivery of certificates for the Optional Shares, and payment therefor, shall be
made as provided in Section 4 hereof. The number of Optional Shares to be
purchased by each Underwriter shall be the same
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percentage of the total number of Optional Shares to be purchased by the several
Underwriters as such Underwriter is purchasing of the Firm Shares, as adjusted
by you in such manner as you deem advisable to avoid fractional shares.
SECTION 3. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of the
Shares to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information (insofar as such information relates to the
Underwriters) set forth in the last paragraph on the front cover page and under
"Underwriting" in the Registration Statement, any Preliminary Prospectus and the
Prospectus relating to the Shares constitutes the only information furnished by
the Underwriters to the Company for inclusion in the Registration Statement, any
Preliminary Prospectus, and the Prospectus, and you on behalf of the respective
Underwriters represent and warrant to the Company that the statements made
therein are correct.
SECTION 4. DELIVERY OF AND PAYMENT FOR THE SHARES.
(a) Delivery of certificates for the Firm Shares, the Optional Shares
(if the option granted by Section 2(c) hereof shall have been exercised not
later than 10:00 A.M., Boston time, on the date two business days preceding the
Closing Date), and the Warrant Shares, and payment therefor, shall be made at
the office of Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts
at 10:00 a.m., Boston time, on the fourth business day after the date of this
Agreement, or at such time on such other day, not later than seven full business
days after such fourth business day, as shall be agreed upon in writing by the
Company and you. The date and hour of such delivery and payment (which may be
postponed as provided in Section 2(b) hereof) are herein called the "Closing
Date".
(b) If the option granted by Section 2(c) hereof shall be exercised
after 10:00 a.m., Boston time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Optional Shares, and
payment therefor, shall be made at the office of Goodwin, Procter & Hoar LLP,
Exchange Place, Boston, Massachusetts at 10:00 a.m., Boston time, on the third
business day after the exercise of such option.
(c) Payment for the Shares and the Warrants purchased from the Company
shall be made to the Company or its order by (i) certified or official bank
check in next day funds (and the Company agrees not to deposit any such check in
the bank on which drawn until the day following the date of its delivery to the
Company) or (ii) federal funds wire transfer. Such payment shall be made upon
delivery of certificates for the Shares and the Warrants to you for your account
and the respective accounts of the several Underwriters (including without
limitation by "full-fast" electronic transfer by Depository Trust Company)
against receipt therefor signed by you. Certificates for the Shares and the
Warrants to be delivered to you shall be registered in such name or names and
shall be in such denominations as you may request at least one business day
before the Closing Date, in the case of Firm Shares and the Warrants, and at
least one business day prior to the purchase thereof, in the case of the
Optional Shares. Such certificates will be made available to the Underwriters
for inspection, checking and packaging at the offices of H.C. Wainwright & Co.,
Inc.'s clearing agent, __________________________, on the business day prior to
the Closing Date or, in the case of the Optional Shares, by 3:00 p.m., New York
time, on the business day preceding the date of purchase.
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It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later date on which Optional Shares
are purchased for the account of such Underwriter. Any such payment by you shall
not relieve such Underwriter from any of its obligations hereunder.
SECTION 5. COVENANTS OF THE COMPANY. The Company covenants and agrees
as follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you
a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial
10
public offering of the Shares by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Shares may be sold by the
several Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Shares in accordance with the
applicable provisions of the Securities Act and the Rules and Regulations
thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Shares for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will, from time to
time, prepare and file such statements, reports, and other documents as are or
may be required to continue such qualifications in effect for so long a period
as you may reasonably request for distribution of the Shares.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission (including the Report on Form SR required by Rule 463 of the
Commission under the Securities Act).
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing
11
and filing with the Commission and the NASD of the Registration Statement, any
Preliminary Prospectus and the Prospectus, (ii) the furnishing to the
Underwriters and, if applicable, the persons designated by them of copies of any
Preliminary Prospectus and of the several documents required by paragraph (c) of
this Section 5 to be so furnished, (iii) the printing of this Agreement and
related documents delivered to the Underwriters, (iv) the preparation, printing
and filing of all supplements and amendments to the Prospectus referred to in
paragraph (d) of this Section 5, (v) the furnishing to you and the Underwriters
of the reports and information referred to in paragraph (g) of this Section 5
and (vi) the printing and issuance of stock certificates, including the transfer
agent's fees.
(j) The Company agrees to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including counsel
fees and disbursements and cost of printing memoranda for the Underwriters) paid
by or for the account of the Underwriters or their counsel in qualifying the
shares under state securities or blue sky laws and in the review of the offering
by the NASD.
(k) The Company hereby agrees that, without the prior written consent
of H.C. Wainwright & Co., Inc., the Company will not, for a period of 180 days
following the date the Registration Statement becomes effective, directly or
indirectly, offer, sell, pledge, contract to sell, grant any option to purchase
or otherwise dispose of any shares of Common Stock owned beneficially or
otherwise (including, without limitation, shares of Common Stock which may be
deemed to be beneficially owned in accordance with the rules and regulations of
the Securities and Exchange Commission and shares of Common Stock which may be
issued upon exercise of a stock option or warrant) or any securities convertible
into, derivative of or exercisable or exchangeable for such Common Stock, except
for the issuance of shares of Common Stock upon the exercise of options to
purchase Common Stock which are outstanding on the date hereof.
(l) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the shares has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(m) The Company is familiar with the Investment Company Act of 1940, as
amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
(n) The Company agrees to maintain directors' and officers' insurance
customary for the size and nature of the Company's business for a period of two
years from the date of this Agreement.
(o) At the Closing Date, the Company will further issue and sell to the
Representatives or, at their direction, to their bona fide officers or partners,
as described below, for a total purchase price of $_____, warrants (the
"Warrants") entitling the holders thereof to purchase up to an aggregate of
__________ shares of Common Stock (subject to adjustment) (the "Warrant Shares")
for a period of four (4) years, such period to commence one year after the
effective date of the Registration Statement (except as otherwise set forth in
the Warrant Agreement referred to below). Said Warrants shall contain terms and
provisions set forth in the Warrant Agreement of even date among the Company and
the Representatives (the "Warrant Agreement"). As provided in the Warrant
Agreement, the Representatives may designate that some of all of the Warrants be
issued in varying amounts directly to their bona fide officers or partners and
not to the Representatives. Such designation will be made by the Representatives
only if they determine that such issuances would not violate the rules and
interpretations of the Board of Governors of the NASD relating to the review of
corporate financing arrangements and subject to applicable federal and state
securities laws. As further provided, no transfer, assignment or hypothecation
of the Warrants shall be made by the Representatives for a period of 12 months
from the issuance of the Warrants, except to their bona fide officers or
partners and subject to applicable federal and state securities laws.
12
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 6, the
Company agrees to indemnify and hold harmless each Underwriter and each person
(including each partner or officer thereof) who controls any Underwriter within
the meaning of Section 15 of the Securities Act from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
common law or otherwise, and the Company agrees to reimburse each such
Underwriter and controlling person for any legal or other expenses (including,
except as otherwise hereinafter provided, reasonable fees and disbursements of
counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding which may
be brought against, the respective indemnified parties, in each case arising out
of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the Prospectus
as part thereof and any Rule 462(b) registration statement) or any
post-effective amendment thereto (including any Rule 462(b) registration
statement), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreement of the Company
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission describe in
clauses (i) or (ii) was made in reliance upon and in conformity with information
furnished as herein stated in writing to the Company by or on behalf of any
Underwriter for use in any Preliminary Prospectus or the Registration Statement
or the Prospectus or any such amendment thereof or supplement thereto, and (2)
the indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Shares which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with subparagraphs (ii) and (iii) of paragraph (c) of Section 5
hereof. The indemnity agreement of the Company contained in this paragraph (a)
and the representations and warranties of the Company contained in Section 1
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Shares.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act, or the common law
or otherwise and to reimburse each of them for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
13
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, if such statement
or omission described in clauses (i) and (ii) was made in reliance upon and in
conformity with information furnished as herein stated in writing to the Company
by or on behalf of such indemnifying Underwriter for use in the Registration
Statement or the Prospectus or any such amendment thereof or supplement thereto.
The indemnity agreement of each Underwriter contained in this paragraph (b)
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the shares.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 6 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (the "Notice") of such service
or notification to the party or parties from whom indemnification may be sought
hereunder. No indemnification provided for in such paragraphs shall be available
to any party who shall fail so to give the Notice if the party to whom such
Notice was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related and was prejudiced by the
failure to give the Notice, but the omission so to notify such indemnifying
party or parties of any such service or notification shall not relieve such
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of such
indemnity agreement. Any indemnifying party shall be entitled at its own expense
to participate in the defense of any action, suit or proceeding against, or
investigation or inquiry of, an indemnified party. Any indemnifying party shall
be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (the "Notice of Defense") to the indemnified
party, to assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation, inquiry or
proceeding, in which event such defense shall be conducted, at the expense of
the indemnifying party or parties, by counsel chosen by such indemnifying party
or parties and reasonably satisfactory to the indemnified party or parties;
provided, however, that (i) if the indemnified party or parties reasonably
determine that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses available to such indemnified party or parties different
from or in addition to those available to the indemnifying party or parties,
then counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be necessary
to protect the interests of the indemnified party or parties and (ii) in any
event, the indemnified party or parties shall be entitled to have counsel chosen
by such indemnified party or parties participate in, but not conduct, the
defense. If, within a reasonable time after receipt of the Notice, an
indemnifying party gives a Notice
14
of Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under paragraphs (a) through (c) of this
Section 6 for any legal or other expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear the legal and other expenses incurred in connection with the
conduct of the defense as referred to in clause (i) of the proviso to the
preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 6, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 6 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Shares or (ii) if the allocation
provided by clause (i) 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 indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same respective proportions as the total net proceeds from the offering
of the shares received by the Company and the total underwriting discount
received by the Underwriters, as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the shares. 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 each
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may
15
be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in paragraph (c) of this Section 6).
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or proceeding.
SECTION 7. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to its other
obligations under Section 6 of this Agreement, the Company hereby agrees to
reimburse on a monthly basis the Underwriters for all reasonable legal and other
expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 5 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 6 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
SECTION 8. TERMINATION. This Agreement may be terminated by you at any
time prior to the Closing Date by giving written notice to the Company in
accordance with Section 9, or if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States on
or after the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States or the
Company's industry sector would, in the Underwriters' reasonable judgment, make
the offering or delivery of the shares impracticable, (iii) suspension of
trading in securities generally or a material adverse decline in value of
securities generally on the New York Stock Exchange, the American Stock
Exchange, or The Nasdaq Stock Market, or limitations on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such exchange or system, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of, or
commencement of any proceeding or investigation by, any court, legislative body,
agency or other governmental authority which in the Underwriters' reasonable
opinion materially and adversely affects or will materially or adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in the Underwriters' reasonable opinion has a
material adverse effect on the securities markets in the United States. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company to the Underwriters and no liability of the
Underwriters to the Company; provided, however, that in the event of any such
termination, the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of the
Company under this Agreement, including all costs and expenses referred to in
paragraphs (i) and (j) of Section 5 hereof.
16
SECTION 9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Shares shall be subject to
the performance by the Company of all its obligations to be performed hereunder
at or prior to the Closing Date or any later date on which Optional Shares are
to be purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Shares hereunder
and the validity and form of the certificates representing the Shares, all
corporate proceedings and other legal matters incident to the foregoing, and the
form of the Registration Statement and of the Prospectus (except as to the
financial statements contained therein), shall have been approved at or prior to
the Closing Date by Goodwin, Procter & Hoar LLP, counsel for the Underwriters.
(c) You shall have received from Testa, Hurwitz & Thibeault, LLP,
counsel for the Company, an opinion, addressed to the Underwriters and dated the
Closing Date, covering the matters set forth in Annex A hereto, and if Optional
Shares are purchased at any date after the Closing Date, additional opinions
from such counsel, addressed to the Underwriters and dated such later date,
confirming that the statements expressed as of the Closing Date in such opinion
remains valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct, and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading; (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment; (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein;
(iv) the Commission has not issued any order preventing or suspending the use of
the Prospectus or any Preliminary Prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending the effectiveness
of the Registration Statement has been issued; and to the best knowledge of the
respective signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act; (v) the Company does not have
any material contingent obligations which are not disclosed in the Registration
Statement and the Prospectus; (vi) there are not any pending or known threatened
legal proceedings to which the Company is a party or of which property of the
Company is the subject which are material and which are not disclosed in the
Registration Statement and the Prospectus; (vii) there are not any franchises,
contracts, leases or other documents which are required to be filed as exhibits
to the Registration Statement which have not been filed as required; and (vii)
the representations and warranties of the Company herein are true and correct in
all material respects as of the Closing Date or any later date on which Optional
Shares are to be purchased, as the case may be.
17
(e) You shall have received on the Closing Date and on any later date
on which Optional Shares are purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (viii) of paragraph (d) of this Section 9 are true and
correct.
(f) You shall have received from Arthur Andersen LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Optional Shares are purchased, confirming that they are
independent public accountants with respect to the Company within the meaning of
the Securities Act and the applicable published rules and regulations thereunder
and based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (the "Original Letter"), but
carried out to a date not more than three business days prior to the Closing
Date or such later date on which Optional Shares are purchased (i) confirming,
to the extent true, that the statements and conclusions set forth in the
Original Letter are accurate as of the Closing Date or such later date, as the
case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of the Original Letter or to reflect the availability of more recent
financial statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company which, in your sole judgment, makes it
impractical or inadvisable to proceed with the public offering of the Shares or
the purchase of the Optional Shares as contemplated by the Prospectus.
(g) You shall have received from Arthur Andersen LLP, a letter stating
that their review of the Company's system of internal accounting controls, to
the extent they deemed necessary in establishing the scope of their examination
of the Company's financial statements as at [October 31, 1996], did not disclose
any weakness in internal controls that they considered to be material
weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 4 hereof.
(i) Prior to the Closing Date, the Shares and the Warrant Shares shall
have been duly authorized for listing by the Nasdaq National Market upon
official notice of issuance.
(j) The Warrant Agreement and the Warrants shall have been executed and
delivered to the Representatives on behalf of the Company.
(k) On or prior to the Closing Date, you shall have received agreements
from all executive officers and directors as set forth in the Prospectus and the
holders of all shares of outstanding Common Stock or options therefor, warrants
or other security of the Company, in form reasonably satisfactory to H.C.
Wainwright & Co., Inc., stating that without the prior written consent of H. C.
Wainwright & Co., Inc., such person or entity will not, for a period of 180 days
following the date the Registration Statement became effective, directly or
indirectly, offer, sell, pledge, contract to sell, grant any option to purchase
or otherwise dispose of any shares of Common Stock beneficially owned or
otherwise held by such person or entity (including, without limitation, shares
of Common Stock
18
which may be deemed to be beneficially owned by such person or entity in
accordance with the rules and regulations of the Securities and Exchange
Commission and shares of Common Stock which may be issued upon exercise of a
stock option or warrant) or any securities convertible into, derivative of or
exercisable or exchangeable for such Common Stock; provided, however, that, in
the case of any such person, he or she may transfer any or all of the Common
Stock held by such person either during his or her lifetime or on death, by
gift, will or intestacy, to his or her immediate family or to a trust the
beneficiaries of which are exclusively such person and/or a member or members of
his or her immediate family; provided, that in any such case the transferee
executes a lock-up agreement in substantially the same form covering the
remainder of the lock-up period.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Goodwin, Procter & Hoar LLP, counsel for the
Underwriters, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 5 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the transactions
contemplated hereby.
SECTION 10. CONDITIONS OF THE COMPANY'S OBLIGATION. The obligation of
the Company to deliver the Shares shall be subject to the conditions that (a)
the Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not
be fulfilled, this Agreement may be terminated by the Company by giving notice
to you. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 5 hereof.
SECTION 11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 6 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 6, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the shares from any of the several Underwriters.
19
SECTION 12. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing or by telegraph and, if to the
Underwriters, shall be mailed, telegraphed or delivered to H.C. Wainwright &
Co., Inc., One Boston Place, Boston, Massachusetts 02108, Attention:
___________; and if to the Company, shall be mailed, telegraphed or delivered to
it at its office, 70 Airport Road, Hyannis, Massachusetts 02601, Attention: Jon
Anthony Glydon. All notices given by telegraph shall be promptly confirmed by
letter.
SECTION 13. MISCELLANEOUS. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or its directors or officers, and (c) delivery and payment
for the Shares under this Agreement; provided, however, that if this Agreement
is terminated prior to the Closing Date, the provisions of paragraphs (k), (l)
and (m) of Section 5 hereof shall be of no further force or effect.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 16. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of The Commonwealth of Massachusetts.
SECTION 17. GENERAL. This Agreement and the Warrant Agreement
constitute the entire agreement of the parties to this Agreement and the Warrant
Agreement and supersede all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof and thereof. This Agreement may be executed in several counterparts, each
one of which shall be an original, and all of which shall constitute one and the
same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and you.
20
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company and the several Underwriters,
including you, all in accordance with its terms.
Very truly yours,
EARTH AND OCEAN SPORTS, INC.
By:
-------------------------------------
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted
by us in Boston, Massachusetts as of
the date first above written.
H.C. WAINWRIGHT & CO., INC.
CRUTTENDEN ROTH INCORPORATED
By: H.C. Wainright & Co., Inc.
By:
------------------------------------
Principal
Acting for ourselves and on behalf of the
several Underwriters named in the attached
Schedule A
21
SCHEDULE I
UNDERWRITERS
Number of Firm
Underwriters Shares to be Purchased
H.C. Wainwright & Co., Inc....................................................
Cruttenden Roth Incorporated..................................................
Total ..............................................................
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ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF TESTA, HURWITZ & THIBEAULT, LLP
COUNSEL FOR THE COMPANY
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified as a foreign corporation and in good standing
in each state of the United States of America in which the nature of its
business or its ownership or leasing of property requires such qualification
(except where the failure to be so qualified would not have a material adverse
effect on the business, properties, financial condition or results of operations
of the Company) and has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
(ii) the authorized capital stock of the Company consists of
[_________] shares of Preferred Stock, $.01 par value, none of which are
outstanding, and [_________] shares of Common Stock, $.01 par value, of which
there are outstanding [_________] shares; all of the outstanding shares of such
capital stock (including the Firm Shares and the Optional Shares issued, if any)
have been duly authorized and validly issued and are fully paid and
nonassessable; any Optional Shares purchased after the Closing Date have been
duly authorized and, when issued and delivered to, and paid for by, the
Underwriters as provided in the Underwriting Agreement, will be validly issued
and fully paid and nonassessable; and no preemptive rights of, or rights of
refusal in favor of, stockholders exist with respect to the Shares, or the issue
and sale thereof, pursuant to the Articles of Organization or Bylaws of the
Company or any other instrument and, to the knowledge of such counsel, there are
no contractual preemptive rights that have not been waived, rights of first
refusal or rights of co-sale which exist with respect to the issuance and sale
of the Shares by the Company;
(iii) the Registration Statement has become effective under the
Securities Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act, and with the
rules and regulations of the Commission thereunder;
(v) such counsel have no reason to believe that the Registration
Statement (except as to the financial statements and schedules and other
financial and statistical data contained therein, as to which such counsel need
not express any opinion or belief) at the Effective Date 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, or
that the Prospectus (except as to the financial statements and schedules and
other financial and statistical data contained therein, as to which such counsel
need not express any opinion or belief) as of its date or at the Closing Date
(or any later date on which Optional Shares are purchased), contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel) and
11(c) of Form S-1 is, to such counsel's knowledge,
I-2
accurately and adequately set forth therein in all material respects or no
response is required with respect to such Items, and the description of the
Company's stock option plan and the options granted and which may be granted
thereunder in the Prospectus accurately and fairly presents the information
required to be shown with respect to said plan and options to the extent
required by the Securities Act and the rules and regulations of the Commission
thereunder;
(vii) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion of
such counsel are of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement, which are not described and filed as required;
(viii) there are no outstanding claims, asserted or otherwise, against
the Company or any of its officers or directors, for violations of any federal
or state securities laws, or any other applicable laws, relating to any
purchase, sale, or redemption of, or other transaction with respect to, the
Common Stock;
(ix) the Underwriting Agreement and the Warrant Agreement have been
duly authorized, executed and delivered by the Company;
(x) the Company has full corporate power and authority to enter into
the Underwriting Agreement and the Warrant Agreement and to sell and deliver the
Shares and the Warrants to be sold by it to the several Underwriters;
(xi) the issue and sale by the Company of the Shares and the Warrants
sold by the Company as contemplated by the Underwriting Agreement and the
Warrant Agreement will not conflict with, or result in a breach of, or
constitute a default under the Articles of Organization or Bylaws of the Company
or any agreement or instrument known to such counsel to which the Company is a
party or by which any of its properties may be bound or any applicable law or
regulation, or so far as is known to such counsel, any order, writ, injunction
or decree, of any jurisdiction, court or governmental instrumentality;
(xii) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;
(xiii) good and marketable title to the Shares under the Underwriting
Agreement, free and clear of all liens, encumbrances, equities, security
interests and claims, has been transferred to the Underwriters who have
severally purchased such Shares under the Underwriting Agreement, assuming for
the purpose of this opinion that the Underwriters purchased the same in good
faith without notice of any adverse claims;
(xiv) good and marketable title to the Warrants under the Warrant
Agreement, free and clear of all liens, encumbrances, equities, security
interests and claims, has been transferred to the Representative who has
purchased such Warrants under the Warrant Agreement, assuming for the purpose of
this opinion that the Representative purchased the same in good faith without
notice of any adverse claims;
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(xv) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been obtained
under the Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Shares by
the Underwriters and the clearance of the offering with the NASD;
(xvi) the Shares issued and sold by the Company and the WARRANT SHARES
will be duly authorized for listing by the Nasdaq National Market upon official
notice of issuance.
(xvi) The Warrants conform to the description thereof in the Prospectus
(it being understood that with respect to the fair presentation of such
description and whether it is an accurate summary such counsel's opinion is
limited to that set forth in clause (vi) above) and have been duly authorized
and validly issued and are valid and binding obligations of the Company entitled
to all the benefits of the Warrant Agreement and are enforceable against the
Company, (except (1) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium, fraudulent transfer, or
other similar laws now or hereinafter in effect relating to or affecting
creditors' rights generally and by general principles of equity, (2) that the
remedies of specific performance and injunctive and other forms of relief are
subject to general equitable principles, whether such enforcement is sought at
law or in equity, and such enforcement may be subject to the discretion of the
court before which any proceedings therefor may be brought and (3) as rights to
indemnity and contribution may be limited by state or federal laws or by
policies underlying such laws). The Warrant Shares have been duly authorized and
reserved for issuance upon exercise of the Warrants and, when issued upon such
exercise in accordance with the terms of Warrants and the Warrant Agreement,
will be duly and validly issued, fully paid and nonassessable, free of
preemptive rights and will conform to the description thereof in the Prospectus.
------------------------------------
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