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EXHIBIT 1.1
9/30/96
1,000,000 SHARES OF COMMON STOCK
AND 1,000,000 REDEEMABLE WARRANTS
FUNDEX GAMES, LTD.
UNDERWRITING AGREEMENT
Indianapolis, Indiana
October ___, 1996
National Securities Corporation
As Representative of the Several Underwriters
1001 Fourth Avenue, Suite 2200
Seattle, Washington 98154
Ladies and Gentlemen:
Fundex Games, Ltd., a Nevada corporation (the "Company"),
hereby agrees with National Securities Corporation ("National") and each of the
underwriters named in Schedule A hereto (collectively, the "Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 11), for whom National is acting as representative (in such
capacity, National shall hereinafter be referred to as "you" or the
"Representative") with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective amount of
shares (the "Shares") set forth in said Schedule A of the Company's common
stock, par value $.001 per share (the "Common Stock"), and redeemable common
stock purchase warrants (the "Redeemable Warrants"), each to purchase one share
of Common Stock, set forth in Schedule A hereto. The aggregate 1,000,000
Shares and 1,000,000 Redeemable Warrants will be separately tradeable upon
issuance and are hereinafter referred to as the "Firm Securities." Each
Redeemable Warrant is exercisable commencing on _________, 1997 until
_________, 2001, unless previously redeemed by the Company, at an initial
exercise price of $_______ per share of Common Stock. The Redeemable Warrants
may be redeemed by the Company at a redemption price of $.05 per Redeemable
Warrant at any time after _________, 1997 on thirty (30) days' prior written
notice, provided that the closing sale price of the Common Stock equals or
exceeds $_________ per share (subject to
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adjustment under certain circumstances), for any twenty (20) trading
days within a period of thirty (30) consecutive trading days ending on the
fifth trading day prior to the notice of redemption, all in accordance with the
terms and conditions of the Warrant Agreement (herein defined).
Upon your request, as provided in Section 2(b) of this
Agreement, the Company shall also issue and sell to the Underwriters, acting
severally and not jointly, up to an additional 150,000 shares of Common Stock
and/or 150,000 Redeemable Warrants for the purpose of covering over-allotments,
if any. Such 150,000 shares of Common Stock and 150,000 Redeemable Warrants
are hereinafter collectively to as the "Option Securities." The Company also
proposes to issue and sell to you warrants (the "Representative's Warrants")
pursuant to the Representative's Warrant Agreement (the "Representative's
Warrant Agreement") for the purchase of an additional 100,000 shares of Common
Stock and/or 100,000 Redeemable Warrants. The shares of Common Stock and
Redeemable Warrants issuable upon exercise of the Representative's Warrants are
hereinafter referred to as the "Representative's Securities." The Firm
Securities, the Option Securities, the Representative's Warrants and the
Representative's Securities (collectively, hereinafter referred to as the
"Securities") are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company. The
Company represents and warrants to, and agrees with, each of the Underwriters
as of the date hereof, and as of the Closing Date and the Option Closing Date,
if any, as follows:
(a) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement,
and an amendment or amendments thereto, on Form SB-2 (No.333-_______________),
including any related preliminary prospectus (the "Preliminary Prospectus"),
for the registration of the Firm Securities, the Option Securities and the
Representative's Securities under the Securities Act of 1933, as amended (the
"Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
Regulations (as defined below) of the Commission under the Act. The Company
will not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430(A) of the Regulations), is hereinafter called the "Registration
Statement," and the form of prospectus in the form first filed with the
Commission pursuant to Rule 424(b) of the
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Regulations, is hereinafter called the "Prospectus." For purposes ____________
hereof, "Regulations" mean the rules and regulations adopted by the Commission
under either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Preliminary Prospectus, the Registration Statement or the Prospectus and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement have been instituted, or, to the Company's knowledge, are threatened.
Each of the Preliminary Prospectus, the Registration Statement and the
Prospectus at the time of filing thereof conformed in all material
respects with the requirements of the Act and Regulations, and none of the
Preliminary Prospectus, the Registration Statement or the Prospectus at the
time of filing thereof contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein and necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except that this representation and warranty does
not apply to statements made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters by or on
behalf of the Underwriters expressly for use in such Preliminary Prospectus,
Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date (as defined in
Section 2(c) hereof) and each Option Closing Date (as defined in Section 2(b)
hereof), if any, and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriters or a
dealer, the Registration Statement and the Prospectus, as amended or
supplemented as required, will contain all statements which are required to be
stated therein in accordance with the Act and the Regulations, and will conform
in all material respects to the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
csupplement thereto, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with information furnished to the Company in writing by
or on behalf of any Underwriter expressly for use in the Registration Statement
or the Prospectus or any amendment thereof or supplement thereto.
(d) The Company and each of its subsidiaries have
been duly organized and are validly existing as corporations in good standing
under the laws of the respective states of their incorporation. The Company
does not own or control, directly or indirectly, any corporation, partnership,
trust, joint venture or other business
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entity other than the subsidiaries listed in Exhibit 21 of the
Registration Statement. Each of the Company and its subsidiaries is duly
qualified and licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing, except
where the failure to be so qualified or licensed would not have a material and
adverse effect on the condition, financial or otherwise, or the business
affairs, operations, properties, or results of operations of the Company and
its subsidiaries, taken as a whole (the "Business"). Each of the Company and
its subsidiaries has all requisite power and authority (corporate and other),
and has obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental or
regulatory officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease its
properties and conduct its business as described in the Prospectus; the Company
and each of its subsidiaries have been doing business in compliance in all
material respects with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and foreign
laws, rules and regulations; and neither the Company nor any of its
subsidiaries have received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the Business. The disclosures in the Registration Statement
concerning the effects of federal, state, local, and foreign laws, rules and
regulations on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not misleading
in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Securities" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company is
not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or other
securities, except for this Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company conform
or, when issued and paid for, will conform, in all material respects to all
statements with respect thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. 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, neither the Company nor any subsidiary has
outstanding any options to purchase, or any
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preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Company's stock
option, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder as set forth in the Prospectus
conforms in all material respects with the requirements of the Act. All issued
and outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and the holders thereof have no
rights of rescission with respect thereto and are not subject to personal
liability by reason of being such holders; and none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company.
(f) The Securities are not and will not be subject to
any preemptive or other similar rights of any stockholder, have been
duly authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable and will
conform in all material respects to the description thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities will be in due and proper form. Upon
the issuance and delivery pursuant to the terms hereof of the Securities to be
sold by the Company hereunder, the Underwriters or the Representative, as the
case may be, will acquire good and marketable title to such Securities free and
clear of any lien, charge, claim, encumbrance, pledge, security interest,
defect, or other restriction or equity of any kind whatsoever. No stockholder
of the Company has any right which has not been waived in writing to require
the Company to register the sale of any shares owned by such stockholder under
the Act in the public offering contemplated by this Agreement. 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, the Option
Shares and the Representative's Warrants to be sold by the Company as
contemplated herein.
(g) The financial statements of the Company, together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present the
financial position, changes in stockholders' equity and the results of
operations of the Company at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Regulations,
consistently applied throughout the periods involved. There has been no
material adverse change or development involving a material prospective change
in the Business, whether or not arising in the ordinary course of business
since the date of
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the financial statements included in the Registration Statement and the
Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company and its subsidiaries taken as a
whole conform in all material respects to the descriptions thereof contained in
the Registration Statement and the Prospectus. Financial information set forth
in the Prospectus under the headings "Prospectus Summary - Selected Financial
Data," "Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in
the Prospectus, the information set forth therein and have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(h) The Company (i) has paid all federal, state,
local, franchise, and foreign taxes for which it is liable, including, but not
limited to, withholding taxes and amounts payable under Chapters 21 through 24
of the Internal Revenue Code of 1986, as amended (the "Code"), and has
furnished all information returns it is required to furnish pursuant to the
Code, (ii) has established adequate reserves for such taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims outstanding,
proposed or assessed against it.
(i) No transfer tax, stamp duty or other similar tax
is payable by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Securities, (ii) the purchase by the
Underwriters of the Firm Securities and the Option Securities from the Company
and the purchase by the Representative of the Representative's Warrants from
the Company, (iii) the consummation by the Company of any of its obligations
under this Agreement, or (iv) resales of the Firm Securities and the Option
Securities in connection with the distribution contemplated hereby.
(j) There is no action, suit, proceeding, inquiry,
arbitration, mediation, investigation, litigation or governmental proceeding
(including, without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties or
businesses of, the Company which (i) questions the validity of the capital
stock of the Company, this Agreement or the Representative's Warrant Agreement,
or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Representative's Warrant Agreement, (ii)
is required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration Statement
are accurately summarized in all material respects), or (iii) might materially
and adversely affect the condition, financial or otherwise, or the business,
affairs, position, stockholders' equity, operation, properties, or results of
operations of the Company and its subsidiaries taken as a whole.
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(k) The Company has the corporate power and authority
to authorize, issue, deliver, and sell the Securities and to enter into this
Agreement, the Warrant Agreement, and the Representative's Warrant Agreement,
and to consummate the transactions provided for in such agreements; and this
Agreement, the Warrant Agreement and the Representative's Warrant Agreement
have each been duly and properly authorized, executed, and delivered by the
Company. Each of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its respective terms (except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or equitable,
and except as rights to indemnity or contribution may be limited by applicable
law), and none of the issue and sale of the Securities, execution by the
Company, delivery or performance of this Agreement, the Warrant Agreement, and
the Representative's Warrant Agreement, the consummation by the Company of the
transactions contemplated herein and therein, or the conduct of the Company's
businesses as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or result in
the creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company pursuant
to the terms of (i) the articles of incorporation or by-laws of the Company, as
amended and restated, (ii) any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a
party or by which it is or may be bound or to which its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (iii)
any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company of any of their activities or properties.
(l) No consent, approval, authorization or order of,
and no filing with, any court, regulatory body, government agency or other
body, domestic or foreign, is required for the issuance of the Securities
pursuant to the Prospectus and the Registration Statement, the performance of
this Agreement, the Warrant Agreement, the Representative's Warrant Agreement,
and the transactions contemplated hereby and thereby, including without
limitation, any waiver of any preemptive, first refusal or other rights that
any entity or person may have for the issue and/or sale of any of the
Securities, except such as have been or may be obtained under the Act or may be
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required under state securities or Blue Sky laws in connection with the
Underwriters' purchase and distribution of the Firm Securities, the Option
Securities, and the Representative's Warrants to be sold by the Company
hereunder.
(m) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents filed
as exhibits to the Registration Statement to which the Company is a party or by
which it may be bound or to which its assets, properties or businesses may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application
of equitable principles in any action, legal or equitable, and except as rights
to indemnity or contribution may be limited by applicable law). The
descriptions in the Registration Statement of such agreements, contracts and
other documents are accurate in all material respects and fairly present the
information required to be shown with respect thereto by Form SB-2, and there
are no contracts or other documents which are required by the Act to be
described in the Registration Statement or filed as exhibits to the
Registration Statement which are not described or filed as required, and the
exhibits which have been filed are complete and correct copies of the documents
of which they purport to be copies.
(n) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, and except
as described in or specifically contemplated by the Prospectus (i) the Company
has not incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or which could
result in a material reduction in the future earnings of the Company; (ii) the
Company has not sustained any material loss or interference with its business
or properties from fire, flood, windstorm, accident or other calamity, whether
or not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock, and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the capital
stock (other than upon the sale of the Firm Securities, the Option Securities
and the Representative's Warrants hereunder and upon the exercise of options
and warrants described in the Registration Statement) of, or indebtedness
material to, the Company (other than in the ordinary course of business); (v)
the Company has not issued any securities or incurred any liability or
obligation, primary or contingent, for borrowed money; and (vi) there has not
been any material adverse change in the condition (financial or otherwise),
business, properties, results of operations, or prospects of the Company and
its subsidiaries.
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(o) No default exists in the due performance and
observance of any term, covenant or condition of any material license,
contract, indenture, mortgage, installment sale agreement, lease, deed of
trust, voting trust agreement, stockholders agreement, note, loan or credit
agreement, or any other material agreement or instrument evidencing an
obligation for borrowed money, or any other material agreement or instrument to
which the Company is a party or by which the Company may be bound or to which
the property or assets (tangible or intangible) of the Company is subject or
affected, except for such defaults, if any, which individually and in the
aggregate would not have a material adverse effect on the Business.
(p) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or to its knowledge threatened against or involving the
Company. No representation question exists respecting the employees of the
Company. No collective bargaining agreement, or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the Company
exists or to its knowledge is imminent.
(q) Except as described in the Prospectus, the
Company does not maintain, sponsor or contribute to any program or arrangement
that is an "employee pension benefit plan," an "employee welfare benefit plan,"
or a "multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute
to a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan
(or any trust created thereunder) has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, which
could subject the Company to any tax penalty on prohibited 8 transactions and
which has not adequately been corrected. Each ERISA Plan is in compliance with
all material reporting, disclosure and other requirements of the Code and ERISA
as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan
which is intended to comply with Code Section 401(a), stating that such ERISA
Plan and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
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(r) None of the Company, nor any of its employees,
directors, stockholders, or affiliates (within the meaning of the Regulations)
of any of the foregoing has taken or will take directly or indirectly, any
action designed to or which has constituted or which might be expected to cause
or result in unlawful stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities.
(s) The Company has good and marketable title to, or
valid and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, free and clear
of all liens, charges, claims, encumbrances, pledges, security interests, or
other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and payable.
(t) BDO Seidman, LLP ("BDO Seidman"), whose report is
filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Regulations.
(u) The Company has caused to be duly executed
legally binding and enforceable agreements pursuant to which all persons or
entities, other than David Ross who has entered into a modified agreement as
described in the Prospectus, that directly or beneficially own Common Stock, as
of the effective date of the Registration Statement, have agreed not to,
directly or indirectly, offer, offer to sell, sell, grant any option for the
sale of, transfer, assign, pledge, hypothecate or otherwise encumber or dispose
of any shares of Common Stock or securities convertible into Common Stock,
exercisable or exchangeable for or evidencing any right to purchase or
subscribe for any shares of Common Stock (either pursuant to Rule 144 of the
Regulations or otherwise) or dispose of any interest therein for a period from
the date of the Prospectus until thirteen (13) months following the date that
the Registration Statement becomes effective, without the prior written consent
of National (the "Lock-up Agreements"). The Company will cause the Transfer
Agent (as defined herein) to place "stop transfer" orders on the Company's stock
ledgers in order to effect the Lock-up Agreements.
(v) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments or
issuance with respect to the Company or any of its officers, directors,
stockholders, employees or affiliates that may affect the Underwriters'
compensation as determined by the Commission and the National Association of 9
Securities Dealers, Inc. (the "NASD").
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(w) The Securities have been approved for quotation
on the American Stock Exchange.
(x) Neither the Company nor any of its officers,
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which might subject the Company or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign). The Company's internal accounting controls
are sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(y) Except as set forth in the Prospectus, no
officer, director or stockholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under the
Regulations) of any of the foregoing persons or entities has or has had, either
directly or indirectly, (i) an interest in any person or entity which (A)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Company, or (B) purchases from or sells
or furnishes to the Company any goods or services, or (ii) a beneficiary
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus there
are no existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions, between or
among the Company, and any officer, director, principal shareholder (as such
term is used in the Prospectus) of the Company, or any affiliate or associate
of any of the foregoing persons or entities which are required to be disclosed
in the Prospectus.
(z) The Company is not, and does not intend to
conduct its business in a manner in which it would become an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(aa) Any certificate signed by any officer of the
Company and delivered to the Underwriters or to the Underwriters' Counsel (as
defined in Section 4(d) herein) shall be deemed a representation and warranty
by the Company to the Underwriters as to the matters covered thereby.
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(ab) The minute books of the Company have been made
available to the Underwriters and contain a complete summary of all meetings
and actions of the directors and stockholders of the Company, since the time of
its incorporation, and reflect all transactions referred to in such minutes 10
accurately in all material respects.
(ac) The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares in this offering other than the Prospectus,
the Registration Statement and the other materials permitted by the Act.
Except as described in the Prospectus, no holders of any securities of the
Company or of any options, warrants or other convertible or exchangeable
securities of the Company have the right to include any securities issued by
the Company as part of the Registration Statement or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ad) Each of the Company and its subsidiaries
maintains insurance by insurers of recognized financial responsibility of the
types and in the amounts as the Company believes are prudent and adequate for
the business in which it is engaged, including, but not limited to, insurance
covering real and personal property owned or leased by the Company and its
subsidiaries 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 delivered to the Underwriter's Counsel full
summaries of these insurance policies. The Company has no reason to believe
that it will not be able to renew existing insurance coverage with respect to
the Company as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business, in either
case, at a cost that would not have a material adverse effect on the financial
condition, operations, business, assets or properties of the Company. The
Company has not failed to file any material claims, has no material disputes
with its insurance company regarding any claims submitted under its insurance
policies, and has complied in material respects with all material provisions
contained in its insurance policies.
2. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
and each Underwriter, severally and not jointly agrees to purchase from the
Company, at a price equal to $_______________ per Share and $_____________ per
Redeemable Warrant, that number of Firm Securities set forth in Schedule A
opposite the name of such Underwriter, subject to such adjustment as the
Representative in its discretion shall make to eliminate any sales or purchases
of
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fractional shares, plus any additional numbers of Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option to
the Underwriters, severally and not jointly, to purchase all or any part of an
11 additional 150,000 shares of Common Stock at a price of $__________ per
share of Common Stock and/or an additional 150,000 Redeemable Warrants at a
price of $__________ per Redeemable Warrant. The option granted hereby will
expire 45 days after (i) the date the Registration Statement becomes effective,
if the Company has elected not to rely on Rule 430A under the Regulations, or
(ii) the date of this Agreement if the Company has elected to rely upon Rule
430A under the Regulations, and may be exercised in whole or in part from time
to time (but not on more than two (2) occasions) only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment
and delivery for any such Option Securities. Any such time and date of
delivery (an "Option Closing Date") shall be determined by the Representative,
but shall not be later than three full business days after the exercise of said
option, nor in any event prior to the Closing Date, as hereinafter defined,
unless otherwise agreed upon by the Representative and the Company. Nothing
herein contained shall obligate the Underwriters to exercise the over-allotment
option described above. No Option Securities shall be delivered unless the
Firm Securities shall be simultaneously delivered or shall theretofore have
been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of
National, at 1001 Fourth Avenue, Suite 2200, Seattle, Washington, or at such
other place as shall be agreed upon by the Representative and the Company.
Such delivery and payment shall be made at 9:00 a.m. (New York time) on
______________, 1996, or at such other time and date as shall be agreed upon by
the Representative and the Company, but no more than four (4) business days
after the date hereof (such time and date of payment and delivery being herein
called the "Closing Date"). In addition, in the event that any or all of the
Option Securities are purchased by the Underwriters, payment of the purchase
price for, and delivery of certificates for, such Option Securities shall be
made at the above mentioned office of National or at such other place as shall
be agreed upon by the Representative and the Company on each Option Closing
Date as specified in the notice from the Representative to the Company.
Delivery of the certificates for the Firm Securities and the Option Securities,
if any, shall be made to the Underwriters against payment by the Underwriters,
of the purchase price for the Firm Securities and the
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Option Securities, if any, to the order of the Company. In the event
such option is exercised, each of the Underwriters, acting severally and not
jointly, shall purchase that proportion of the total number of Option
Securities then being purchased which the number of Firm Securities set forth
in Schedule A hereto opposite the name of such Underwriter bears to the total
number of Firm Securities, subject in each case to such adjustments as the
Representative in their discretion shall make to eliminate any sales or
purchases of fractional shares. Certificates for the Firm Securities and the
Option Securities, if any, shall be in definitive, fully registered form, shall
bear no restrictive legends and shall be in such denominations and registered
in such names as the Underwriters may request in writing at least three (3)
business days prior to Closing Date or the relevant Option Closing Date, as the
case may be. The 12 certificates for the Firm Securities and the Option
Securities, if any, shall be made available to the Representative at such
office or such other place as the Representative may designate for inspection,
checking and packaging no later than 9:30 a.m. on the last business day prior
to Closing Date or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and
sell to the Representative Representative's Warrants at a purchase price of
$0.0001 per warrant, which warrants shall entitle the holders thereof to
purchase an aggregate of 100,000 shares of Common Stock and/or 100,000
Redeemable Warrants. The Representative's Warrants shall expire five (5) years
after the effective date of the Registration Statement and shall be exercisable
for a period of four (4) years commencing one (1) year from the effective date
of the Registration Statement at a price equaling one hundred twenty percent
(120%) of the initial public offering price of the Shares. The
Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 4.2 to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Shares and the Redeemable
Warrants. As soon after the Registration Statement becomes effective as the
Representative deems advisable, the Underwriters shall make a public offering
of the Shares and the Redeemable Warrants (other than to residents of or in any
jurisdiction in which qualification of the Shares and the Redeemable Warrants
is required and has not become effective) at the price and upon the other terms
set forth in the Prospectus. The Representative may from time to time increase
or decrease the public offering price after distribution of the Shares and the
Redeemable Warrants has been completed to such extent as the Representative, in
its sole discretion, deems advisable. The Underwriters may enter into one or
more agreements as the Underwriters, in each of their sole discretion, deem
advisable with one or more broker-dealers who shall act as dealers in
connection with such public offering.
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4. Covenants of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
effective as promptly as practicable and will not at any time, whether beore or
aftr the Registration Statement or supplement to Prospectus or file any
document under the Act or Exchange Act before termination of the offering of
the Shares by the Underwriters of which the Representative shallnot previously
have been advised and furnished with a copy, or to which the Representative
shall have objected or which is not in compliance with the Act, the Exchange
Act or the Regulations.
(b) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Representative and confirm the
notice in writing, (i) when the Registration Statement, as amended, becomes
effective, if the provisions of Rule 430A promulgated under the Act will be
relied upon, 13 when the Prospectus has been filed in accordance with said Rule
430A and when any post-effective amendment to the Registration Statement
becomes effective, (ii) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceeding, suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any of
the Securities for offering or sale in any jurisdiction or of the initiation,
or the threatening, of any proceeding for that purpose, (iv) of the receipt of
any comments from the Commission; and (v) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information. If the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the Company will use its best efforts to obtain
promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) in accordance with the
requirements of the Act.
(d) The Company will give the Representative notice of
its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the corresponding prospectus on file at the Commission at the time
the Registration
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Statement becomes effective, whether or not such revised prospectus is
required to be filed pursuant to Rule 424(b) of the Regulations), and will
furnish the Representative with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file any such amendment or supplement to which the
Representative or Camhy Karlinsky & Stein LLP ("Underwriters' Counsel") shall
reasonably object.
(e) The Company shall endeavor in good faith, in
cooperation with the Representative, at or prior to the time the Registration
Statement becomes effective, to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as the Representative may
reasonably designate to permit the continuance of sales and dealings therein
for as long as may be necessary to complete the distribution, and shall make
such applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be required
to qualify as a foreign corporation or become subject to service of process in
any such jurisdiction. In each jurisdiction where such qualification shall be
effected, the Company will, unless the Representative agrees that such action is
not at the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act, as now and hereafter amended,
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Securities in accordance
with the provisions hereof and the Prospectus, or any amendments or supplements
thereto. If at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or Underwriters'
Counsel, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters copies
of such amendment or supplement as soon as available and in such quantities as
the Underwriters may request.
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(g) As soon as practicable, but in any event not later
than 45 days after the end of the 12-month period beginning on the day after
the end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is the end of the Company's fiscal year), the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of the Regulations, and to the Representative, an earnings statement
which will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Regulations,
which statement need not be audited unless required by the Act, covering a
period of at least 12 consecutive months after the effective date of the
Registration Statement.
(h) During a period of five (5) years after the date
hereof, the Company will furnish to its stockholders, as soon as practicable,
annual reports (including financial statements audited by independent public
accountants) and will make available to its stockholders unaudited quarterly
reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such
quarterly reports to its stockholders, statements of income of
the Company for each quarter in the form furnished to the
Company's stockholders;
(ii) concurrently with furnishing such annual
reports to its stockholders, a balance sheet of the Company as
at the end of the preceding fiscal year, together with
statements of operations, stockholders' equity, and cash flows
of the Company for such fiscal year, accompanied by a copy of
the report thereon of independent certified public
accountants;
(iii) as soon as they are available, copies of
all reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of
all reports and financial statements furnished to or filed
with the Commission, the Nasdaq SmallCap Market or any
securities exchange;
(v) every press release and every material
news item or article of interest to the financial community in
respect of the Company or its affairs which was released or
prepared by or on behalf of the Company; and
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(vi) any additional information of a public
nature concerning the Company (and any future subsidiaries) or
its businesses which the Representative may reasonably
request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent (the
"Transfer Agent") and, if necessary under the jurisdiction of incorporation of
the Company, a registrar (which may be the same entity as the transfer agent)
for the Common Stock and the Representative's Warrants.
(j) The Company will furnish to the Representative or
on the Representative's order, without charge, at such place as the
Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre- effective or post-effective amendments
thereto (two of which copies will be signed and will include all financial
statements and exhibits), each Preliminary Prospectus, the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Representative may reasonably request.
(k) On or before the effective date of the
Registration Statement, the Company shall provide the Representative with true
copies of duly executed Lock-up Agreements. On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent authorizing it to
place appropriate stop transfer orders on the Company's ledgers.
(l) The Company shall use its best efforts to cause
its officers, directors, stockholders or affiliates (within the meaning of the
Regulations) not to take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
unlawful stabilization or manipulation of the price of any securities of the
Company.
(m) The Company shall apply the net proceeds from the
conditions, set forth under "Use of Proceeds" in the Prospectus, sale
16 of the Securities substantially in the manner, and subject to the
conditions, set forth under "Use of Proceeds" in the Prospectus.
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19
(n) The Company shall timely file all such reports,
forms or other documents as may be required (including, but not limited to, a
Form SR as may be required pursuant to Rule 463 under the Act) from time to
time, under the Act, the Exchange Act, and the Regulations, and all such
reports, forms and documents filed will comply as to form and substance with
the applicable requirements under the Act, the Exchange Act, and the
Regulations.
(o) The Company shall cause the Securities to be
quoted on the Nasdaq SmallCap Market, and for a period of two (2) years from
the date hereof shall use its best efforts to maintain the quotation of the
Securities to the extent outstanding.
(p) For a period of two (2) years from the Closing
Date, the Company shall furnish to the Representative, at the Company's sole
expense, monthly consolidated transfer sheets relating to the Common Stock and
Redeemable Warrants.
(q) For a period of five (5) years after the
effective date of the Registration Statement the Company shall, at the
Company's sole expense, take all necessary and appropriate actions to further
qualify the Company's securities in all jurisdictions of the United States in
order to permit secondary sales of such securities pursuant to the Blue Sky
laws of those jurisdictions which do not require the Company to qualify as a
foreign corporation or to file a general consent to service of process.
(r) The Company (i) prior to the effective date of
the Registration Statement, has filed a Form 8-A with the Commission providing
for the registration of the Common Stock and Redeemable Warrants under the
Exchange Act and (ii) as soon as practicable, will use its best efforts to take
all necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions and Moody's OTC Manual and to continue such inclusion
for a period of not less than five (5) years.
(s) The Company agrees that for a period of thirteen
(13) months following the effective date of the Registration Statement it will
not, without the prior written consent of National, offer, issue, sell,
contract to sell, grant any option for the sale of or otherwise dispose of any
Common Stock, or securities convertible into Common Stock, except for the
issuance of the Option Securities, the Representative's Warrants, and shares of
Common Stock issued upon the exercise of currently outstanding warrants or
options, or options and warrants granted in the ordinary course of business
consistent with prior practice.
(t) Until the completion of the distribution of the
Securities, the Company shall not without the prior written consent of National
or Underwriters' Counsel, issue, directly or indirectly any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering
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20
contemplated hereby, other than 17 trade releases issued in the
ordinary course of the Company's business consistent with past practices with
respect to the Company's operations.
(u) For a period equal to the lesser of (i) five (5)
years from the date hereof, and (ii) the sale to the public of the
Representative's Securities, the Company will not take any action or actions
which may prevent or disqualify the Company's use of an appropriate form for
the registration under the Act of the Representative's Securities.
(v) The Company agrees that it shall use its best
efforts, which shall include, but shall not be limited to, the solicitation of
proxies, to elect one (1) designee of National to the Company's Board of
Directors for a period of three (3) years following the Closing, provided that
such designee is reasonably acceptable to the Company and that such director
may be excluded from consideration of certain confidential matters which, in
the good faith judgment of a majority of the other directors, such director's
presence would not be appropriate.
(w) The Company agrees that within forty-five (45)
days after the Closing it shall retain a public relations firm which is
reasonably acceptable to National. The Company shall keep such public
relations firm, or any replacement, for a period of two (2) years from the
Closing. Any replacement public relations firm shall be retained only with the
consent of National, which shall not be unreasonably withheld.
(x) The Company agrees that any and all future
transactions between the Company and its officers, directors, principal
stockholders and the affiliates of the foregoing persons will be on terms no
less favorable to the Company than could reasonably be obtained in arm's length
transactions with independent third parties, and that any such transactions
also be approved by a majority of the Company's outside independent directors
disinterested in the transaction.
(y) The Company shall prepare and deliver, at the
Company's sole expense, to National within the one hundred and twenty (120) day
period after the later of the effective date of the Registration Statement or
the latest Option Closing Date, as the case may be, one bound volume containing
all correspondence with regulatory officials, agreements, documents and all
other materials in connection with the offering as requested by the
Underwriters' Counsel.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the
Closing Date and each Option Closing Date (to the extent not previously paid)
all expenses and
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fees (other than fees of Underwriters' Counsel, except as provided in
(iv) below) incident to the performance of the obligations of the Company under
this Agreement, the Warrant Agreement, and the Representative's Warrant
Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses incurred
in connection with the preparation, duplication, printing, filing, delivery 18
and mailing (including the payment of postage with respect thereto) of the
Registration Statement and the Prospectus and any amendments and supplements
thereto and the duplication, mailing (including the payment of postage with
respect thereto) and delivery of this Agreement, the Warrant Agreement, the
Agreement Among Underwriters, the Selected Dealers Agreements, the Powers of
Attorney, and related documents, including the cost of all copies thereof and
of the Preliminary Prospectuses and of the Prospectus and any amendments
thereof or supplements thereto supplied to the Underwriters and such dealers as
the Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the certificates representing the
Securities, (iv) the qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of word processing
and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and reasonable
disbursements and fees of counsel in connection therewith, (v) advertising
costs and expenses, including but not limited to the costs and expenses
incurred by the Company and the Representative in connection with the "road
show," information meetings and presentations, bound volumes and prospectus
memorabilia and "tombstone" advertisement expenses, (vi) experts, (vii) fees
and expenses of the transfer agent and registrar, (viii) the fees payable to
the Commission and the NASD, (ix) issue and transfer taxes, if any and (x) the
fees and expenses incurred in connection with the listing of the Common Stock
on the Nasdaq National Market and any other market or exchange.
(b) If this Agreement is terminated by the
Underwriters in accordance with the provisions of Section 6, Section 10(a) or
Section 11, the Company shall reimburse and indemnify the Representative for
all of its actual out-of-pocket expenses on an accountable basis, including the
fees and disbursements of Underwriters' Counsel, less any amounts already paid
pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to
the expenses payable pursuant to subsection (a) of this Section 5, it will pay
to the Representative on the Closing Date by certified or bank cashier's check
or, at the election of the Representative, by deduction from the proceeds of
the offering contemplated herein a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received by the Company from the sale
of the Firm Securities, $25,000.00 of which has been paid to date. In the
event the Representative elects to exercise the
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over-allotment option described in Section 2(b) hereof, the Company
further agrees to pay to the Representative on the Option Closing Date (by
certified or bank cashier's check or, at the Representative's election, by
deduction from the proceeds of the offering) a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds received by the
Company from the sale of the Option Securities.
(d) Conditions of the Underwriters' Obligations. The
obligations of the Underwriters hereunder shall be subject to the continuing
accuracy of the representations and warranties of the Company herein as of the
date hereof and as of the Closing Date and each Option Closing Date, if any, as
if they 19 had been made on and as of the Closing Date or each Option Closing
Date, as the case may be; the accuracy on and as of the Closing Date or Option
Closing Date, if any, of the statements of officers of the Company made
pursuant to the provisions hereof; and the performance by the Company on and as
of the Closing Date and each Option Closing Date, if any, of its covenants and
obligations hereunder and to the following further conditions:
(e) The Registration Statement shall have become effective
not later than 5:00 p.m., New York City time, on the date prior to the date of
this Agreement or such later date and time as shall be consented to in writing
by the Representative, and, at Closing Date and each Option Closing Date, if
any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Underwriters' Counsel. If
the Company has elected to rely upon Rule 430A of the Regulations, the price of
the Shares and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the
Regulations within the prescribed time period, and prior to Closing Date the
Company shall have provided evidence satisfactory to the Representative of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Regulations.
(f) The Representative shall not have advised the Company
that the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein
not misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's reasonable opinion, is
material, or omits to state a fact which, in the Representative's reasonable
opinion, is material and is required to be stated therein or
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is necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(g) On or prior to the Closing Date, the Underwriters
shall have received from Underwriters' Counsel such opinion or opinions with
respect to the organization of the Company, the validity of the Securities, the
Registration Statement, the Prospectus and other related matters as the
Representative may request and Underwriters' Counsel shall have received from
the Company such papers and information as they request to enable them to pass
upon such matters.
(h) At Closing Date, the Underwriters shall have
received the favorable opinion of Much Shelist Freed Denenberg Ament Bell &
Rubinstein, P.C. ("Much, Shelist"), counsel to the Company, dated the Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized
and is validly existing as a corporation in good
standing under the laws of its jurisdiction of
incorporation, (B) is duly qualified and licensed and in
good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any
properties or the character of its operations requires
such qualification or licensing, and (C) to the best of
such counsel's knowledge, has all requisite corporate
power and authority and has obtained any and all
necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all
governmental or regulatory officials and bodies
(including, without limitation, those having
jurisdiction over environmental or similar matters), to
own or lease its properties and conduct its business as
described in the Prospectus.
(ii) except as described in the Prospectus, and
to the best of such counsel's knowledge after reasonable
investigation, the Company does not own an interest in
any corporation, limited liability company, partnership,
joint venture, trust or other business entity;
(iii) the Company has a duly authorized, issued
and outstanding capitalization as set forth in the
Prospectus, and any amendment or supplement thereto,
under "Capitalization" and "Description of Securities,"
and to the knowledge of such counsel, the Company is not
a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities,
except for this
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Agreement, the Warrant Agreement, the Representative's
Warrant Agreement, and as described in the Prospectus.
The Securities and all other securities issued or
issuable by the Company conform in all material respects
to the statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and
nonassessable; the holders thereof are not subject to
personal liability by reason of being such holders; and
none of such securities were issued in violation of the
preemptive rights of any holders of any security of the
Company. The Securities to be sold by the Company
hereunder, under the Warrant Agreement, and under the
Representative's Warrant Agreement are not and will not
be subject to any preemptive or other similar rights of
any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with their
terms, will be validly issued, fully paid and
nonassessable and will conform in all material respects
to the description thereof contained in the Prospectus;
the holders thereof will not be subject to any liability
solely as such holders; all corporate action required to
be taken for the authorization, issue and sale of the
Securities has been duly and validly taken; and the
certificates representing the Securities are in due and
proper form. The Representative's Warrants and the
Redeemable Warrants constitute valid and binding
obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and
type of securities of the Company called for thereby
(except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating
to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal
or equitable, and except as rights to indemnity or
contribution may be limited by applicable law). Upon
the issuance and delivery pursuant to this Agreement of
the Securities to be sold by the Company, the Company
will convey, against payment therefor as provided
herein, to the Underwriters and the Representative,
respectively, good and marketable title to the
Securities free and clear of all liens and other
encumbrances;
(iv) the Registration Statement is effective
under the Act, and, if applicable, filing of all pricing
information has been timely made in the appropriate form
under Rule 430A, and no stop order suspending the use of
the Preliminary Prospectus, the Registration Statement
or Prospectus or any part of any thereof or suspending
the
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effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such
counsel's knowledge, threatened or contemplated under
the Act;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any
amendments or supplements thereto (other than the
financial statements and other financial and statistical
data included therein as to which no opinion need be
rendered) comply as to form in all material respects
with the requirements of the Act and the Regulations.
Such counsel shall state that such counsel has
participated in conferences with officers and other
representatives of the Company and the Representative
and representatives of the independent public
accountants for the Company, at which conferences the
contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and any amendments or
supplements thereto were discussed, and, although such
counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or
fairness of the statements contained in the Preliminary
Prospectus, the Registration Statement and Prospectus,
and any amendments or supplements thereto, on the basis
of the foregoing, no facts have come to the attention of
such counsel which lead them to believe that either
the Registration Statement or any amendment thereto, at
the time such Registration Statement or amendment became
effective or the Preliminary Prospectus or Prospectus or
amendment or supplement thereto as of the date of such
opinion contained any untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading (it being understood that such
counsel need express no opinion with respect to the
financial statements and schedules and other financial
and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus,
and any amendments or supplements thereto);
(vi) to the best of such counsel's knowledge
after reasonable investigation, (A) there are no
agreements, contracts or other documents required by the
Act to be described in the Registration Statement and
the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits
thereto; (B) the descriptions in the Registration
Statement and the
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Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a
party or by which it is bound are accurate in all
material respects and fairly represent the information
required to be shown by Form SB-2; (C) there is not
pending or threatened against the Company any action,
arbitration, suit, proceeding, litigation, governmental
or other proceeding (including, without limitation,
those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened
against the Company which (x) is required to be
disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the
Registration Statement are accurately summarized in all
material respects), (y) questions the validity of the
capital stock of the Company or this Agreement, the
Warrant Agreement, or the Representative's Warrant
Agreement, or of any action taken or to be taken by the
Company pursuant to or in connection with any of the
foregoing; and (D) there is no action, suit or
proceeding pending or threatened against the Company
before any court or arbitrator or governmental body,
agency or official in which there is a reasonable
possibility of an adverse decision which may result in a
material adverse change in the financial condition,
business, affairs, stockholders' equity, operations,
properties, business or results of operations of the
Company, which could adversely affect the present or
prospective ability of the Company to perform its
obligations under this Agreement, the Warrant Agreement,
or the Representative's Warrant Agreement, or which in
any manner draws into question the validity or
enforceability of this Agreement, the Warrant Agreement
or the Representative's Warrant Agreement;
(vii) the Company has the corporate power
and authority to enter into each of this Agreement, the
Warrant Agreement, and the Representative's Warrant
Agreement and to consummate the transactions provided
for therein; and each of this Agreement, the Warrant
Agreement, and the Representative's Warrant Agreement
has been duly authorized, executed and delivered by the
Company. Each of this Agreement, the Warrant Agreement,
and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other
party thereto, constitutes a legal, valid and binding
obligation of the Company enforceable against the
Company in accordance with its terms (except as the
enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other laws of general
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application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and except
as rights to indemnity or contribution may be limited by
applicable law), and none of the Company's execution,
delivery or performance of this Agreement, the Warrant
Agreement, and the Representative's Warrant Agreement,
the consummation by the Company of the transactions
contemplated herein or therein, or the conduct of the
Company's business as described in the Registration
Statement, the Prospectus, and any amendments or
supplements thereto conflicts with or results in any
breach or violation of any of the terms or provisions
of, or constitutes a default under, or result in the
creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the
Company pursuant to the terms of (A) the articles of
incorporation or by-laws of the Company, as amended, (B)
any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement,
note, loan or credit agreement or any other agreement or
instrument known to such counsel to which the Company is
a party or by which it counsel to which the Company is a
party or by which it is bound, or (C) any federal, state
or local statute, rule or regulation applicable to the
Company or any judgment, decree or order known to such
counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or
body (including, without limitation, those having
jurisdiction over environmental or similar matters),
domestic or foreign, having jursidiction over the
Company or any of its activities or properties;
(viii) no consent, approval, authorization
or order, and no filing with, any court, regulatory
body, government agency or other body (other than
such as may be required under Blue Sky laws, as to which
no opinion need be rendered or under federal securities
laws, as to which no opinion need be rendered pursuant
to this subsection (viii) is required in connection with
the issuance of the Securities pursuant to the
Prospectus, and the Registration Statement, the
performance of this Agreement, the Warrant Agreement,
and the Representative's Warrant Agreement, and the
transactions contemplated hereby and thereby;
(ix) to the best of such counsel's knowledge
after reasonable investigation, the properties and
business of the Company conform
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in all material respects to the description thereof
contained in the Registration Statement and the
Prospectus;
(x) to the best knowledge of such counsel, and
except as disclosed in Registration Statement and the
Prospectus, the Company is not in breach of, or in
default under, any term or provision of any license,
contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement,
stockholders' agreement, note, loan or credit agreement
or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which
the Company is bound or to which the property or assets
(tangible or intangible) of the Company is subject; and
the Company is not in violation of any term or provision
of its articles of incorporation or by-laws, as amended,
and to the best of such counsel's knowledge after
reasonable investigation, not in violation of any
franchise, license, permit, judgment, decree, order,
statute, rule or regulation;
(xi) the statements in the Prospectus under
"Dividend Policy," "Description of Securities," and
"Shares Eligible for Future Sale" have been reviewed by
such counsel, and insofar as they refer to statements of
law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all
material respects;
(xii) the Common Stock has been accepted for
quotation on the American Stock Exchange;
(xiii) to the best of such counsel's
knowledge and based upon a review of the outstanding
securities and the contracts furnished to such counsel
by the Company, no person, corporation, trust,
partnership, association or other entity has the right
to include and/or register any securities of the Company
in the Registration Statement, require the Company to
file any registration statement or, if filed, to include
any security in such registration statement;
(xiv) assuming due execution by the parties
thereto other than the Company, each Lock-up Agreement
is a legal, valid and binding obligation of the party
thereto, enforceable against the party and any
subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or
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other laws of general application relating to or
affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal
or equitable, and except as rights to indemnity or
contribution may be limited by applicable law);
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws, rules and
regulations of the United States and the laws, rules and regulations of the
State of Nevada, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in form and
substance satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel if requested. The opinion of such counsel
shall state that knowledge shall not include the knowledge of a director or
officer of the Company who is affiliated with such firm in his or her capacity
as an officer or director of the Company. The opinion of such counsel for the
Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of Much Shelist, counsel to the Company,
dated the Option Closing Date, addressed to the Underwriters and in form and
substance satisfactory to Underwriters' Counsel confirming as of such Option
Closing Date the statements made by Much Shelist in its opinion delivered on
the Closing Date.
(e) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
(f) Prior to each of the Closing Date and each Option
Closing Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company, from the latest date as
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of which the financial condition of the Company is set forth in the
Registration Statement and Prospectus which is adverse to the Company; (iii)
the Company shall not be in default under any provision of any instrument
relating to any outstanding indebtedness which default has not been waived;
(iv) the Company shall not have issued any securities (other than the
Securities) or declared or paid any dividend or made any distribution in
respect of its capital stock of any class and there has not been any change in
the capital stock, or any material increase in the debt (long or short term) or
liabilities or obligations of the Company (contingent or otherwise); (v) no
material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus;
(vi) no action, suit or proceeding, at law or in equity, shall have been
pending or threatened (or circumstances giving rise to same) against the
Company, or affecting any of its respective properties or businesses before or
by any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; and (vii) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated, threatened or
contemplated by the Commission.
(g) At each of the Closing Date and each Option Closing
Date, if any, the Underwriters shall have received a certificate of the Company
signed on behalf of the Company by the principal executive officer of the
Company, dated the Closing Date or Option Closing Date, as the case may be, to
the effect that such executive has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if
made on and as of the Closing Date or the Option Closing
Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be
performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness
of the Registration Statement or any part thereof has
been issued, and no proceedings for that purpose have
been instituted or are pending or, to the best of each
of such person's knowledge after due inquiry, are
contemplated or threatened under the Act;
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(iii) The Registration Statement and the
Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and
information required by the Act to be included therein,
and none of the Registration Statement, the Prospectus
nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state
any material fact required to be stated therein or
necessary to make the statements therein not misleading
and neither the Preliminary Prospectus or any
supplement, as of their respective dates, thereto
included any untrue statement of a material fact or
omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not misleading; and
(iv) Subsequent to the respective dates as of
which information is given in the Registration Statement
and the Prospectus, (a) the Company has not incurred up
to and including the Closing Date or the Option Closing
Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has
not paid or declared any dividends or other
distributions on its capital stock; (c) the Company has
not entered into any transactions not in the ordinary
course of business; (d) there has not been any change in
the capital stock or material increase in long-term debt
or any increase in the short-term borrowings (other than
any increase in the short-term borrowings in the
ordinary course of business) of the Company, (e) the
Company has not sustained any loss or damage to its
property or assets, whether or not insured, (f) there is
no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company
or any affiliated party of any of the foregoing which is
required to be set forth in an amended or supplemented
Prospectus which has not been set forth, and (g) there
has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been
set forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable
to the Underwriters.
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(i) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory in all respects (including the non-material
nature of the changes or decreases, if any, referred to in clause (iii) below)
28 to the Underwriters and Underwriters' Counsel, from BDO Seidman:
(i) confirming that they are independent
certified public accountants with respect to the Company
within the meaning of the Act and the applicable Rules
and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the
Company included in the Registration Statement comply as
to form in all material respects with the applicable
accounting requirements of the Act and the Regulations
thereunder and that the Representative may rely upon the
opinion of BDO Seidman with respect to the financial
statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited
review which included a reading of the latest available
unaudited interim financial statements of the Company
(with an indication of the date of the latest available
unaudited interim financial statements), a reading of
the latest available minutes of the stockholders and
board of directors and the various committees of the
board of directors of the Company, consultations with
officers and other employees of the Company responsible
for financial and accounting matters and other specified
procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the
unaudited financial statements and supporting schedules
of the Company included in the Registration Statement,
if any, do not comply as to form in all material
respects with the applicable accounting requirements of
the Act and the Regulations or are not fairly presented
in conformity with generally accepted accounting
principles applied on a basis substantially consistent
with that of the audited financial statements of the
Company included in the Registration Statement, or (B)
at a specified date not more than five (5) days prior to
the effective date of the Registration Statement, there
has been any change in the capital stock or material
increase in long-term debt of the Company, or any
material decrease in the stockholders' equity or net
current assets or net assets of the Company as compared
with amounts shown in the _____________,
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1996 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by
the Registration Statement, or, if there was any change
or decrease, setting forth the amount of such change or
decrease.
(iv) stating that they have compared specific
dollar amounts, numbers of shares, percentages of
revenues and earnings, statements and other financial
information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may
be derived from the general accounting records,
including work sheets, of the Company and excluding any
questions requiring an interpretation by legal counsel,
with the results obtained from the application of
specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an
examination in accordance with generally accepted
auditing standards) set forth in the letter and found
them to be in agreement; and
(iv) statements as to such other material
matters incident to the transaction contemplated hereby
as the Representative may reasonably request.
(j) At the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received from BDO Seidman a letter, dated as
of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Subsection (i) of this Section 6, except that the specified date referred to
shall be a date not more than five (5) days prior to Closing Date or the Option
Closing Date, as the case may be, and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they have
carried out procedures as specified in clause (iv) of Subsection (i) of this
Section 6 with respect to certain amounts, percentages and financial
information as specified by the Representative and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such amounts,
percentages and financial information to be in agreement with the records
specified in such clause (iv).
(k) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Securities.
(l) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative pursuant to subsection (e) of
Section 4 hereof shall
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have been issued on either the Closing Date or the Option Closing Date,
if any, and no proceedings for that purpose shall have been instituted or shall
be contemplated.
(m) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's Warrant
Agreement, substantially in the form filed as Exhibit 4(b), to the Registration
Statement, in final form and substance satisfactory to the Representative, and
(ii) the Representative's Warrants in such denominations and to such designees
as shall have been provided to the Company.
(n) On or before Closing Date, the Common Stock shall have
been duly approved for quotation on American Stock Exchange.
(o) On or before Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements in final form and
substance satisfactory to Underwriters' Counsel.
(p) If any condition to the Underwriters' obligations
hereunder to be fulfilled prior to or at the Closing Date or the relevant
Option Closing Date, as the case may be, is not so fulfilled, the
Representative may terminate this Agreement or, if the Representative so elect,
they may waive any such conditions which have not been fulfilled or extend the
time for their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each of the Underwriters (for purposes of this Section 7 "Underwriters" shall
include the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, from and against any and
all loss, liability, claim, damage, and expense whatsoever (including, but not
limited to, reasonable attorneys' fees and any and all reasonable expense
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation provided that the
indemnified persons may not agree to any such settlement without the prior
written consent of the Company), as and when incurred, arising out of, based
upon or in connection with (i) any untrue statement or alleged untrue statement
of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended and
supplemented); or (B) in any application or other document or communication (in
this Section 7 collectively called "application") executed by or on
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behalf of the Company or based upon written information furnished by
or on behalf of the Company in any jurisdiction in order to qualify the
Securities under the securities laws thereof or filed with the Commission, any
state securities commission or agency, The Nasdaq Stock Market, Inc. or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment thereof or supplement thereto, or in
any application, as the case may be; or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but
not jointly, to indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the Registration Statement, and each other
person, if any, who controls the Company, within the meaning of the Act, to the
same extent as the foregoing indemnity from the Company to the Underwriters but
only with respect to statements or omissions, if any, made in any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any application made in reliance
upon, and in strict conformity with, written information furnished to the
Company with respect to any Underwriter by such Underwriter or the
Representative expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any such application, provided that such written information or
omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the transactions
effected by the Underwriters in connection with this Offering. The Company
acknowledges that the statements with respect to the public offering of the
Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters or the Representative for inclusion in the
Prospectus.
(c) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action, suit or
proceeding, such indemnified party shall, if a claim in respect thereof is to
be made against one or more indemnifying parties under this Section 7, notify
each party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure to so notify an indemnifying party shall
not relieve it from any liability which it may have otherwise or which it may
have under this Section 7, except to the extent that it has
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been prejudiced in any material respect by such failure). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the reasonable fees and
expenses of one additional counsel shall be borne by the indemnifying parties.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their
own counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. Anything in this Section 7 to
the contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable
contribution in any case in which (i) an indemnified party makes claim for
indemnification pursuant to this Section 7, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that the express provisions of this Section 7 provide for indemnification
in such case, or (ii) contribution under the Act may be required on the part of
any indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause
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(i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses other than underwriting
discounts and commissions) bear to the total underwriting discounts received by
the Underwriters hereunder, in each case as set forth in the table on the Cover
Page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to above in
this subdivision (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subdivision (d) the Underwriters shall not be required to contribute any amount
in excess of the underwriting discount applicable to the Securities purchased
by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the Company
who has signed the Registration Statement, and each director of the Company
shall have the same rights to contribution as the Company, subject in each
case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution may
be made against another party or parties under this subparagraph (d), notify
such party or parties from whom contribution may be sought, but the omission so
to notify such party or parties shall not relieve the party or parties from
whom contribution may be sought from any obligation it or they may have
hereunder or otherwise than under this subparagraph (d), or to the extent that
such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements of the Company
at the Closing Date
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and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the respective indemnity and
contribution agreements contained in Section 7 hereof shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter, the Company, any controlling person of either the
Underwriter or the Company, and shall survive termination of this Agreement or
the issuance and delivery of the Securities to the Underwriters and the
Representative, as the case may be.
9. Effective Date.
(a) This Agreement shall become effective at 5:00
p.m., New York City time, on the date hereof. For purposes of this Section 9,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Representative of telegrams to
securities dealers releasing such shares for offering or the release by the
Representative for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, if
between the date of this Agreement and the Closing Date or the Option Closing
Date, as the case may be, (i) if any domestic or international event or act or
occurrence has materially disrupted, or in the Representative's reasonable
opinion will in the immediate future materially disrupt the financial markets;
or (ii) any material adverse change in the financial markets shall have
occurred; or (iii) if trading on the New York Stock Exchange, the American
Stock Exchange, or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required on the over-the-counter
market by the NASD or by order of the Commission or any other government
authority having jurisdiction; or (iv) if the United States shall have
become involved in a war or major hostilities, or if there shall have been an
escalation in an existing war or major hostilities or a national emergency
shall have been declared in the United States; or (v) if a banking moratorium
has been declared by a state or federal authority; or (vi) if the Company shall
have sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representative's opinion, make it inadvisable to proceed with the delivery of
the Securities; or (viii) if there shall have been such a material adverse
change in the prospects or conditions of the Company, or such material adverse
change in the general market, political or economic conditions, in the United
States or elsewhere as in the Representative's
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judgment would make it inadvisable to proceed with the offering, sale
and/or delivery of the Securities.
(b) If this Agreement is terminated by the
Representative in accordance with any of the provisions of Section 6, Section
10(a) or Section 11, the Company shall promptly reimburse and indemnify the
Underwriters pursuant to Section 5(b) hereof. Notwithstanding any contrary
provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10, 11 and 12 hereof), and whether or not this Agreement is
otherwise carried out, the provisions of Section 5 and Section 7 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth. If, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the total number of Firm Securities to be purchased on such date,
the non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10%
of the total number of Firm Securities to be purchased on such date, this
Agreement shall terminate without liability on the part of any nondefaulting
Underwriters.
No action taken pursuant to this Section shall relieve
any defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result
in a termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required
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changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at
the Closing Date or any Option Closing Date, as applicable, to sell and deliver
the number of Securities which it is obligated to sell hereunder on such date,
then this Agreement shall terminate (or, if such default shall occur with
respect to any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section
shall relieve the Company from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder,
except as herein otherwise specifically provided, shall be in writing and shall
be deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o National Securities Corporation, 1001 Fourth Avenue, Suite
2200, Seattle, Washington 98154, Attention: Steven A. Rothstein, with a copy,
which shall not constitute notice, to Camhy Karlinsky & Stein LLP, 1740
Broadway, 16th Floor, New York, New York 10019, Attention: Alan I. Annex, Esq.
Notices to the Company shall be directed to the Company at Fundex Games, Ltd.,
3750 W. 16th Street, Indianaplois, Indiana 46222, with a copy, which shall not
constitute notice, to Much Shelist Freed Denenberg, Ament Bell & Rubinstein,
P.C., 200 N. LaSalle Street, Chicago, Illinois 60601- 1095, Attn: Steven
Schwartz.
14. Parties. This Agreement shall inure solely to the
benefit of and shall be binding upon the Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which taken together shall be deemed to be one and the same
instrument.
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17. Entire Agreement; Amendments. This Agreement, the
Warrant Agreement, and the Representative's Warrant Agreement constitute the
entire agreement of the parties hereto and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing, signed by the
Representative and the Company.
If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
FUNDEX GAMES, LTD.
By:__________________________________
Name: Carl E. Voigt, IV
Title: President
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
NATIONAL SECURITIES CORPORATION
By: ________________________________
Name: Steven A. Rothstein
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule
A hereto.
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SCHEDULE A
NUMBER OF SHARES OF COMMON NUMBER OF WARRANTS
NAME OF UNDERWRITERS STOCK TO BE PURCHASE TO BE PURCHASED
-------------------- -------------------- ---------------
National Securities Corporation
TOTAL 1,000,000 1,000,000
SCH. A-1