Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2 Registration of Securities by a Small-Business 61 288K
Issuer
2: EX-1.1 Underwriting Agreement 28 130K
3: EX-2.1 Plan of Acquisition, Reorganization, Arrangement, 2 11K
Liquidation or Succession
4: EX-3.1 Articles of Incorporation/Organization or By-Laws 5 22K
5: EX-3.2 Articles of Incorporation/Organization or By-Laws 9 43K
6: EX-4.2 Instrument Defining the Rights of Security Holders 9 34K
7: EX-5.1 Opinion re: Legality 1 11K
8: EX-10.1 Material Contract 11 45K
9: EX-10.2 Material Contract 13 40K
10: EX-10.3 Material Contract 12 35K
11: EX-10.6 Material Contract 2 15K
12: EX-23.1 Consent of Experts or Counsel 1 7K
13: EX-27 Financial Data Schedule (Pre-XBRL) 2 9K
14: EX-99.1 Miscellaneous Exhibit 1 8K
15: EX-99.2 Miscellaneous Exhibit 1 8K
16: EX-99.3 Miscellaneous Exhibit 1 8K
EX-1.1 — Underwriting Agreement
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1,325,000 SHARES OF COMMON STOCK
DAG MEDIA, INC.
UNDERWRITING AGREEMENT
__________, 1999
Paulson Investment Company, Inc.
As Representative of the
Several Underwriters
c/o Paulson Investment Company, Inc.
811 SW Naito Parkway
Portland, Oregon 97204
Gentlemen:
DAG Media, Inc., a New York corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
for whom you are acting as Representative (the "Representative") an aggregate of
1,250,000 shares ("Shares") of the Company's Common Stock, $.001 par value
("Common Stock") and Assaf Ran (the "Selling Stockholder") proposes to sell to
the Underwriters an aggregate of 75,000 shares of common stock. The respective
amounts of the shares to be so purchased by the several Underwriters ("Firm
Shares") are set forth opposite their names in Schedule I hereto. The Company
also proposes to grant to the Underwriters an option to purchase in the
aggregate up to 198,750 additional Shares (the "Option Shares"), as set forth
below. The offer and sale of the Firm Shares and the Option Shares pursuant to
this Agreement is referred to as the "Offering."
As the Representative, you have advised the Company (a) that you are
authorized to enter into this Agreement for yourself as Representative and on
behalf of the several Underwriters, and (b) that the several Underwriters are
willing, acting severally and not jointly, to purchase the numbers of Firm
Shares set forth opposite their respective names in Schedule I. The Firm Shares
and the Option Shares (to the extent the aforementioned option is exercised) are
herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
STOCKHOLDER.
(a) The Company represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form SB-2 (File No.
333-______) with respect to the Shares has been carefully prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission. Copies of such registration statement, including
any amendments thereto, the preliminary prospectuses (meeting the requirements
of the Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or (b) the last
preliminary prospectus included in the Registration Statement filed prior to the
time it becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of New
York, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. Except as
described in the Prospectus, the Company does not own and never has owned a
controlling interest in any corporation or other business entity that has or
ever has had any material assets, liabilities or operations. The Company is duly
qualified to transact business in all jurisdictions in which the conduct of its
business requires such qualification.
(iii) The outstanding shares of Common Stock of the Company,
including all Firm Shares to be sold by the Selling Stockholder, have been duly
authorized and validly issued and are fully paid and non-assessable and have
been issued and sold by the Company in compliance in all material respects with
applicable securities laws; the Common Stock has been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully paid
and non-assessable; and no preemptive rights of stockholders exist with respect
to any security of the Company or the issue and sale thereof. Neither the filing
of the Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any shares
of Common Stock or other securities of the Company.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. The Common Stock
conforms to the description thereof contained in the Registration Statement. The
form of certificates for the Common Stock conforms to the corporate law of the
jurisdiction of the Company's incorporation.
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(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares and has not instituted proceedings for that purpose. The Registration
Statement contains, and the Prospectus and any amendments or supplements thereto
will contain, all statements which are required to be stated therein by, and
will conform, to the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representative, specifically for use in
the preparation thereof.
(vi) The financial statements of the Company, together with
related notes and schedules as set forth in the Registration Statement, present
fairly the financial position and the results of operations and cash flows of
the Company at the indicated dates and for the indicated periods. Such financial
statements and related schedules have been prepared in accordance with generally
accepted principles of accounting, consistently applied throughout the periods
involved, except as disclosed herein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data of the Company included in the Registration Statement
present fairly the information shown therein and such data have been compiled on
a basis consistent with the financial statements presented therein and the books
and records of the Company.
(vii) Arthur Andersen LLP, who have audited certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the Company before any
court or administrative agency or otherwise which if determined adversely to the
Company might result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company or to prevent the consummation of the
transactions contemplated hereby, except as set forth in the Registration
Statement.
(ix) The Company has good and marketable title to all of the
properties and assets reflected in the financial statements (or as described in
the Registration Statement) hereinabove described, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except those reflected in such
financial statements (or as described in the Registration Statement) or which
are not material in amount. The Company occupies its leased properties under
valid
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and binding leases conforming in all material respects to the description
thereof set forth in the Registration Statement.
(x) The Company has filed all federal, state, local and
foreign income tax returns which have been required to be filed and has paid all
taxes indicated by said returns and all assessments received by it to the extent
that such taxes have become due and are not being contested in good faith. All
tax liabilities have been adequately provided for in the financial statements of
the Company.
(xi) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company, whether or not occurring in the
ordinary course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement, as it may be
amended or supplemented. The Company has no material contingent obligations
which are not disclosed in the Company's financial statements included in the
Registration Statement or elsewhere in the Prospectus.
(xii) The Company is not, nor, with the giving of notice or
lapse of time or both, will it be, in violation of or in default under its
articles of incorporation or bylaws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
or the business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company. The execution and delivery
of this Agreement and the consummation of the transactions herein contemplated
and the fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company is a party, or of the articles of incorporation or bylaws of the Company
or any order, rule or regulation applicable to the Company of any court or of
any regulatory body or administrative agency or other governmental body having
jurisdiction.
(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(xiv) The Company holds all material patents, patent rights
trademarks, trade names, copyrights, trade secrets and licenses of any of the
foregoing (collectively, "Intellectual
4
Property Rights") that are necessary to the conduct of its business; there is no
claim pending or, to the best knowledge of the Company, threatened against the
Company alleging any infringement of Intellectual Property Rights, or any
violation of the terms of any license relating to Intellectual Property Rights,
nor does the Company know of any basis for any such claim. The Company knows of
no material infringement by others of Intellectual Property Rights owned by or
licensed to the Company. The Company has obtained, is in compliance in all
material respects with and maintains in full force and effect all material
licenses, certificates, permits, orders or other, similar authorizations granted
or issued by any governmental agency (collectively, "Government Permits")
required to conduct its business as it is presently conducted. All applications
for additional Government Permits described in the Prospectus as having been
made by the Company have been properly and effectively made in accordance with
the applicable laws and regulations with respect thereto and such applications
constitute, in the best judgment of the Company's management, those reasonably
required to have been made in order to carry out the Company's business plan as
described in the Prospectus. No proceeding to revoke, limit or otherwise
materially change any Government Permit has been commenced or, to the Company's
best knowledge, is threatened against the Company or any supplier to the Company
with respect to materials supplied to the Company, and the Company has no reason
to anticipate that any such proceeding will be commenced against the Company or
any such supplier. Except as disclosed or contemplated in the Prospectus, the
Company has no reason to believe that any pending application for a Government
Permit will be denied or limited in a manner inconsistent with the Company's
business plan as described in the Prospectus.
(xv) The Company is in all material respects in compliance
with all applicable Environmental Laws. The Company has no knowledge of any
past, present or, as anticipated by the Company, future events, conditions,
activities, investigation, studies, plans or proposals that (i) would interfere
with or prevent compliance with any Environmental Law by the Company or (ii)
could reasonably be expected to give rise to any common law or other liability,
or otherwise form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving the Company and related in any way to Hazardous
Substances or Environmental Laws. Except for the prudent and safe use and
management of Hazardous Substances in the ordinary course of the Company's
business, (i) no Hazardous Substance is or has been used, treated, stored,
generated, manufactured or otherwise handled on or at any Facility and (ii) to
the Company's best knowledge, no Hazardous Substance has otherwise come to be
located in, on or under any Facility. No Hazardous Substances are stored at any
Facility except in quantities necessary to satisfy the reasonably anticipated
use or consumption by the Company. No litigation, claim, proceeding or
governmental investigation is pending regarding any environmental matter for
which the Company has been served or otherwise notified or, to the knowledge of
the Company threatened or asserted against the Company, or the officers or
directors of the Company in their capacities as such, or any Facility or the
Company's business. There are no orders, judgments or decrees of any court or of
any governmental agency or instrumentality under any Environmental Law which
specifically apply to the Company, any Facility or any of the Company's
operations. The Company has not received from a governmental authority or other
person (1) any notice that it is a potentially responsible person for any
Contaminated site or (2) any request for information about a site alleged to be
Contaminated or regarding the disposal of Hazardous Substances. There is no
litigation or proceeding against any other person by the Company regarding any
environmental matter. The
5
Company has disclosed in the Prospectus or made available to the Underwriters
and their counsel true, complete and correct copies of any reports, studies,
investigations, audits, analysis, tests or monitoring in the possession of or
initiated by the Company pertaining to any environmental matter relating to the
Company, its past or present operations or any Facility.
For the purposes of the foregoing paragraph, "Environmental Laws" means
any applicable federal, state or local statute, regulation, code, rule,
ordinance, order, judgment, decree, injunction or common law pertaining in any
way to the protection of human health or the environment, including without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Toxic Substances
Control Act, the Clean Air Act, the Federal Water Pollution Control Act and any
similar or comparable state or local law; "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or waste as
defined, listed or regulated under any Environmental Law; "Contaminated" means
the actual existence on or under any real property of Hazardous Substances, if
the existence of such Hazardous Substances triggers a requirement to perform any
investigatory, remedial, removal or other response action under any
Environmental Laws or if such response action legally could be required by any
governmental authority; "Facility" means any property currently owned, leased or
occupied by the Company.
(xvi) Neither the Company, nor to the Company's best
knowledge, any of its affiliates, has taken or intends to take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(xvii) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations of the Commission thereunder.
(xviii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xix) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its business
and the value of its properties and as is customary for companies engaged in
similar industries.
(xx) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
6
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Section 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification.
(xxi) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH CUBA, and the Company
further agrees that if it commences engaging in business with the government of
Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Commission or
with the Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported or incorporated by reference in
the Prospectus, if any, concerning the Company's business with Cuba or with any
person or affiliate located in Cuba changes in any material way, the Company
will provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department.
(xxii) The Company is in material compliance with all laws,
rules, regulations, orders of any court or administrative agency, operating
licenses or other requirements imposed by any governmental body applicable to
it, including, without limitation, all applicable laws, rules, regulations,
licenses or other governmental standards applicable to the industry in which the
Company operates; and the conduct of the business of the Company, as described
in the Prospectus, will not cause the Company to be in violation of any such
requirements.
(xxiii) The Representative's Warrants (as defined in Paragraph
(d) of Section 2 hereof) have been authorized for issuance to the Representative
and will, when issued, possess rights, privileges, and characteristics as
represented in the most recent form of Representative's Warrants filed as an
exhibit to the Registration Statement; the securities to be issued upon exercise
of the Representative's Warrants, when issued and delivered against payment
therefor in accordance with the terms of the Representative's Warrants, will be
duly and validly issued, fully paid, nonassessable and free of preemptive
rights, and all corporate action required to be taken for the authorization and
issuance of the Representative's Warrants, and the securities to be issued upon
their exercise, have been validly and sufficiently taken.
(xxiv) Except as disclosed in the Prospectus, neither the
Company nor any of its officers, directors or affiliates have caused any person,
other than the Underwriters, to be entitled to reimbursement of any kind,
including, without limitation, any compensation that would be includable as
underwriter compensation under the NASD's Corporate Financing Rule with respect
to the offering of the Shares, as a result of the consummation of such offering
based on any activity of such person as a finder, agent, broker, investment
adviser or other financial service provider.
7
(b) The Selling Stockholder represents and warrants to each of
the Underwriters as follows:
(i) The Selling Stockholder now has and at the
Closing Date will have good and marketable title to the Firm Shares to be sold
by the Selling Stockholder, free and clear of any liens, encumbrances, equities
and claims, and full right, power and authority to effect the sale and delivery
of such Firm Shares; and upon the delivery of, against payment for, such Firms
Shares pursuant to this Agreement, the Underwriters will acquire good and
marketable title thereto, free and clear of any liens, encumbrances, equities
and claims.
(ii) The Selling Stockholder has full right, power
and authority to execute and deliver this Agreement and the Custody Agreement
(as defined in Section 1(b)(v) and to perform its obligations under such
agreements. The execution and delivery of this Agreement and consummation by the
Selling Stockholder of the transactions herein contemplated and the fulfillment
by the Selling Stockholder of the terms hereof will note require any consent,
approval, authorization, or other order of any court, regulatory body,
administrative agency of other governmental body (except as may be required
under the Act, state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Selling Stockholder is a party, or of any order, rule or regulation applicable
to the Selling Stockholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(iii) The Selling Stockholder has not taken,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Stockholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
(iv) Without having undertaken to determine
independently the accuracy or completeness of either the representations and
warranties of the Company contained herein or the information contained in the
Registration Statement, the Selling Stockholder has no reason to believe that
the representations and warranties of the Company contained in this Section 1
are not true, correct and compete, is familiar with the Registration Statement
and has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement which has adversely affected, or may
adversely affect, the business of the Company and the sale of the Firm Shares by
the Selling Stockholder pursuant hereto is not prompted by any information
concerning the Company or any of its subsidiaries which is not set forth in the
Registration Statement. The information pertaining to the Selling Stockholder in
the Prospectus is true, correct and complete.
(v) Certificates in negotiable form for the Firms
Shares to be sold hereunder by the Selling Stockholder have been placed in
custody with _______________, as custodian ("Custodian") pursuant to a custody
agreement executed by the Selling Stockholder for delivery of all Shares to be
sold hereunder by the Selling Stockholder (the "Custody Agreement"). The Selling
Stockholder specifically agrees that the Shares represented by the
8
certificates held in custody for the Selling Stockholder under the Custody
Agreement are subject to the interests of the Representative, that the
arrangements made by the Selling Stockholder for such custody are irrevocable,
and that the obligations of the Selling Stockholder hereunder shall not be
terminable by any act or deed of the Selling Stockholder (or by any other
person, firm or corporation including the Company, the Custodian or the
Representative) or by operation of law (including the death of the Selling
Stockholder) or by the occurrence of any other event or events, except as set
forth in the Custody Agreement. If any such event should occur prior to the
delivery to the Representative of the Firm Shares to be sold by the Selling
Stockholder hereunder, certificates for such Firm Shares shall be delivered by
the Custodian in accordance with the terms and conditions of this Agreement as
if such event had not occurred, regardless of whether or not the Custodian shall
have received notice of such death, incapacity or other event. The Custodian is
authorized to receive and acknowledge receipt of the proceeds of sale of such
Firm Shares held by it against delivery of such Firm Shares.
(vi) No consent, approval, authorization or order of
any court or governmental agency or body is required for the consummation by the
Selling Stockholder of the transactions contemplated herein, except such as may
have been obtained under the Act and such as may be required under the Blue Sky
Laws of any jurisdiction in connection with the purchase and distribution of the
Firm Shares by the Underwriters and such other approvals as have been obtained.
(vii) Neither the sale of the Firm Shares being sold
by the Selling Stockholder nor the consummation of any other of the transactions
contemplated herein by the Selling Stockholder or the fulfillment of the terms
hereof by the Selling Stockholder will conflict with, result in breach of, or
constitute a default under, the terms of any indenture or other agreement or
instrument to which the Selling Stockholder is a party or bound, or any order or
regulation applicable to the Selling Stockholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction over
the Selling Stockholder.
(viii) In respect of any statements in or omissions
from the Registration Statement or the Prospectus or any amendment or supplement
thereto made in reliance upon and in conformity with information furnished in
writing to the Company by the Selling Stockholder specifically for use in
connection with the preparation thereof, the Selling Stockholder hereby makes
the same representations and warranties to each Underwriter as the Company makes
such Underwriter under paragraph (a)(vi) of this Section.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set forth, the
Company and the Selling Stockholder agrees to sell to the Underwriters and each
Underwriter agrees, severally and not jointly, to purchase, at a price of
$______ per Unit, the number of Firm Shares set forth opposite the name of each
Underwriter in Schedule I hereof, subject to adjustments in accordance with
Section 9 hereof.
9
(b) Payment for the Firm Shares to be sold hereunder is to be
made in New York Clearing House funds and, at the option of the Representative,
by certified or bank cashier's checks drawn to the order of the Company or bank
wire to an account specified by the Company against either uncertificated
delivery of Firm Shares or of certificates therefor (which delivery, if
certificated, shall take place in such location in New York, New York as may be
specified by the Representative) to the Representative for the several accounts
of the Underwriters. Such payment is to be made at the offices of the
Representative at the address set forth on the first page of this Agreement, or
at such other place as you and the Company shall designate, at 7:00 a.m.,
Pacific time, on the third business day after the date of this Agreement or at
such other time and date not later than five business days after as you and the
Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and not permitted by law or executive order to be closed.) Except
to the extent uncertificated Firm Shares are delivered at closing, the
certificates for the Firm Shares will be delivered in such denominations and in
such registrations as the Representative requests in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representative at least one business day prior to the
Closing Date.
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Representative to purchase the
Option Shares at the price per Unit as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 45 days after the date of this Agreement, by the
Representative to the Company setting forth the number of Option Shares as to
which the Representative is exercising the option, the names and denominations
in which the Option Shares are to be registered and the time and date at which
certificate representing such Shares are to be delivered. The time and date at
which certificates for Option Shares are to be delivered shall be determined by
the Representative but shall not be earlier than three nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The option with respect to the Option Shares granted hereunder may
be exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters. The Representative may cancel such option at any time prior to its
expiration by giving written notice of such cancellation to the Company. To the
extent, if any, that the option is exercised, payment for the Option Shares
shall be made on the Option Closing Date in New York Clearing House funds and,
at the option of the Representative, by certified or bank cashier's check drawn
to the order of the Company for the Option Shares to be sold by the Company or
bank wire to an account specified by the Company against delivery of
certificates therefor at the offices of Paulson Investment Company, Inc. set
forth on the first page of this Agreement.
(d) In addition to the sums payable to the Representative as
provided elsewhere herein, the Representative shall be entitled to receive at
the Closing, for itself alone
10
and not as Representative of the Underwriters, as additional compensation for
their services, a purchase warrant (the "Representative's Warrant") for the
purchase of up to 132,500 Shares at a price of $_____ per Share, upon the terms
and subject to adjustment and conversion as described in the form of
Representative's Warrant filed as an exhibit to the Registration Statement.
(e) If on the Closing Date the Selling Stockholder fails to
sell the Firm Shares which the Selling Stockholder has agreed to sell on such a
date, the Company agrees that it will sell or arrange for the sale of that
number of shares of Common Stock to the Representative which represents the Firm
Shares which the Selling Stockholder has failed to so sell.
(f) The Selling Stockholder will pay all applicable state
transfer taxes, if any, involved in the transfer to the several Underwriters of
the Firm Shares to be purchased by them from the Selling Stockholder, and the
respective Underwriters will pay any additional stock transfer taxes involved in
further transfers.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a
public offering of the Firm Shares as soon as the Representative deems it
advisable to do so. The Firm Shares are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. The
Representative may from time to time thereafter change the public offering price
and other selling terms. To the extent, if at all, that any Option Shares are
purchased pursuant to Section 2 hereof, the Representative will offer them to
the public on the foregoing terms.
It is further understood that you will act as the
Representative for the Underwriters in the offering and sale of the Shares in
accordance with an Agreement Among Underwriters entered into by you and the
several other Underwriters.
4. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDER.
(a) The Company covenants and agrees with the several
Underwriters that:
(i) The Company will (1) use its best efforts to
cause the Registration Statement to become effective or, if the procedure in
Rule 430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus
in a form approved by the Representative containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A of the Rules and Regulations, and (2) not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representative shall not previously have been advised and furnished with a copy
or to which the Representative shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(ii) The Company will advise the Representative
promptly (1) when the Registration Statement or any post-effective amendment
thereto shall have become effective,
11
(2) of receipt of any comments from the Commission, (3) of any request of the
Commission for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, and (4) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any proceedings
for that purpose. The Company will use its best efforts to prevent the issuance
of any such stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the
Representative in endeavoring to qualify the Shares for sale under the
securities laws of such jurisdictions as the Representative may reasonably have
designated in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company will,
from time to time, prepare and file such statements, reports, and other
documents, as are or may be required to continue such qualifications in effect
for so long a period as the Representative may reasonably request for
distribution of the Shares.
(iv) The Company will deliver to, or upon the order
of, the Representative, from time to time, as many copies of any Preliminary
Prospectus as the Representative may reasonably request. The Company will
deliver to, or upon the order of, the Representative during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representative may reasonably request. The Company will deliver to the
Representative at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representative such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), and of all amendments thereto, as
the Representative may reasonably request.
(v) The Company will comply with the Act and the
Rules and Regulations, and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder, so
as to permit the completion of the distribution of the Shares as contemplated in
this Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
12
(vi) The Company will make generally available to
its security holders, as soon as it is practicable to do so, but in any event
not later than 15 months after the effective date of the Registration Statement,
an earnings statement (which need not be audited) in reasonable detail, covering
a period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so made
available.
(vii) The Company will, for a period of five years
from the Closing Date, deliver to the Representative copies of annual reports
and copies of all other documents, reports and information furnished by the
Company to its stockholders or filed with any securities exchange pursuant to
the requirements of such exchange or with the Commission pursuant to the Act or
the Exchange Act. The Company will deliver to the Representative similar reports
with respect to significant subsidiaries, as that term is defined in the Rules
and Regulations, which are not consolidated in the Company's financial
statements.
(viii) No offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivative of Common Stock (or agreement for such) will be made for a period of
one year after the date of this Agreement, directly or indirectly, by the
Company otherwise than hereunder or with the prior written consent of the
Representative, which consent will not be unreasonably withheld.
(ix) The Company will use its best efforts to list
the Common Stock and the Warrants, subject to notice of their issuance, on The
Nasdaq Stock Market.
(x) The Company has caused each officer and director
and each person who owns, beneficially or of record, 5% or more of the Common
Stock outstanding immediately prior to this offering (the "Insiders") to furnish
to you, on or prior to the date of this Agreement, a letter or letters, in form
and substance satisfactory to the Underwriters, pursuant to which, except as
permitted in the agreement, without prior written consent they will not sell or
otherwise dispose of equity securities of the Company for a period of one year
following the Effective Date and for a period of two years from the Effective
Dates, they will provide us with prior notice of any sales of equity securities
of the Company pursuant to Rule 144 or other similar rule.
(xi) The Company shall apply the net proceeds of its
sale of the Shares as set forth in the Prospectus and shall file such reports
with the Commission with respect to the sale of the Shares and the application
of the proceeds therefrom as may be required in accordance with Rule 463 under
the Act.
(xii) The Company shall not invest, or otherwise use
the proceeds received by the Company from its sale of the Shares in such a
manner as would require the Company or any of the subsidiaries to register as an
investment company under the 1940 Act.
13
(xiii) The Company will maintain a transfer agent
and, if necessary under the jurisdiction of incorporation of the Company, a
registrar for the Common Stock.
(xiv) The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(b) The Selling Stockholder covenants and agrees with the
several Underwriters that:
(i) In order to document the Underwriters'
compliance with the reporting and withholding provisions of the Tax Equity and
Fiscal Responsibility Act of 1983 with respect to the transactions herein
contemplated, the Selling Stockholder agrees to deliver to you prior to or at
the Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(ii) The Selling Stockholder shall not take,
directly or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.
(iii) On the Closing Date, the Selling Stockholder
shall apply the net proceeds of the sale of his shares to satisfy any and all
loans or other indebtedness owed by him to the Company as of the Closing Date,
including any principal and accrued interest.
5. COSTS AND EXPENSES.
(a) The Representative shall be entitled to receive from the
Company, for themselves alone and not as the Representative of the Underwriters,
a nonaccountable expense allowance equal to 3% of the aggregate public offering
price of Shares sold to the Underwriters in connection with the Offering. The
Representative shall be entitled to withhold this allowance on the Closing Date
(less the $35,000 advance against such amount that has been paid by the Company)
with respect to Shares delivered on the Closing Date and to require the Company
to make payment of this allowance on the Option Closing Date with respect to
Shares delivered on the Option Closing Date.
(b) In addition to the payment described in Paragraph (a) of
this Section 5, the Company will pay all costs, expenses and fees incident to
the performance of the obligations of the Company and Selling Stockholder under
this Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements of counsel
for the Company; the cost of printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary Prospectuses, the
Prospectus, this Agreement, the Underwriters' Selling Memorandum, the
Underwriters' Invitation Letter, the Listing Application, the Blue Sky Survey
and any supplements or amendments thereto; the filing fees of the Commission;
the filing fees incident to securing any required review by the NASD of the
terms of the sale of the Shares; the Listing Fee of The
14
Nasdaq Stock Market; reasonable costs of a due diligence investigation of the
principals of the Company by a firm acceptable to the Representative; and the
expenses, including the fees and disbursements of counsel for the Underwriters,
incurred in connection with the qualification of the Shares under state
securities or Blue Sky laws. Any transfer taxes imposed on the sale of the
Shares to the several Underwriters will be paid by the Company, but the Selling
Stockholder shall be responsible for transfer taxes arising from his pro-rata
shares being sold under this Agreement. Additionally, the Selling Stockholder
shall be responsible for the registration fee of the Securities and Exchange
Commission and for the Blue Sky filing fees attributable to the shares being
sold by him as well as for his pro rata share of the underwriting discount and
expense allowance. To the extent, if at all, that the Selling Stockholder
engages special legal counsel to represent him in connection with this offer,
the fees and expenses of such counsel shall be borne by such Selling
Stockholder. If the Offering is not consummated for any reason except knowing,
material misrepresentation by the Company or the Company or Selling Stockholder
or if the Company chooses, for whatever reason, not to proceed with the Offering
within the stated price range, then the Company is obligated to cover the
Representative's additional actual, out of pocket expenses, only up to the
$35,000 previously paid. If the Offering is not consummated due to any knowing,
material misrepresentation by the Company or the Company chooses, for whatever
reason, not to proceed with the Offering within the stated price range, the
Representative will be entitled, upon presentation of a written accounting
therefor in reasonable detail (but without the need to include the underlying
statements or evidence of payment), to prompt reimbursement of up to $75,000
(including the $35,000 previously paid) of actual, out of pocket expenses
related to the Offering, including but not limited to fees and expenses of the
Representative's legal counsel, travel expenses and the fees and expenses of
outside experts, if any, retained to assist the Representative with due
diligence.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the
Firm Shares on the Closing Date and the Option Shares, if any, on the Option
Closing Date are subject to the accuracy, as of the Closing Date or the Option
Closing Date, as the case may be, of the representations and warranties of the
Company and Selling Stockholder contained herein, and to the performance by the
Company and Selling Stockholder of their covenants and obligations hereunder and
to the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representative and complied with to their reasonable satisfaction. No stop order
suspending the effectiveness of the Registration Statement, as amended from time
to time, shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission and no injunction, restraining order, or order of any nature by a
federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance of the Shares.
15
(b) The Representative shall have received on the Closing Date
or the Option Closing Date, as the case may be, the opinion of Morse, Zelnick,
Rose & Lander, LLP, counsel for the Company and Selling Stockholder, dated the
Closing Date or the Option Closing Date, as the case may be, addressed to the
Underwriters (and stating that it may be relied upon by counsel to the
Underwriters) to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the state
of New York, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration Statement; the Company
is duly qualified to transact business in all jurisdictions in which the conduct
of its business requires such qualification, or in which the failure to qualify
would have a materially adverse effect upon the business of the Company.
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization" in the Prospectus;
the authorized shares of the Company's Common Stock have been duly authorized;
the outstanding shares of the Company's Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable; all of the securities
of the Company conform to the description thereof contained in the Prospectus;
the certificates for the Common Stock, assuming they are in the form filed with
the Commission, are in due and proper form; the shares of Common Stock to be
sold by the Company and Selling Stockholder pursuant to this Agreement,
including shares of Common Stock to be sold as a part of the Option Shares have
been duly authorized and, upon issuance and delivery thereof as contemplated in
this Agreement and the Registration Statement, will be validly issued, fully
paid and non-assessable; no preemptive rights of stockholders exist with respect
to any of the Common Stock of the Company or the issuance or sale thereof
pursuant to any applicable statute or the provisions of the Company's articles
of incorporation or bylaws or, pursuant to any contractual obligation. The
Representative's Warrants have been authorized for issuance to the
Representative and will, when issued, possess rights, privileges, and
characteristics as represented in the most recent form of the Representative's
Warrants filed as an exhibit to the Registration Statement; the securities to be
issued upon exercise of the Representative's Warrants, when issued and delivered
against payment therefor in accordance with the terms of the Representative's
Warrants, will be duly and validly issued, fully paid, nonassessable and free of
preemptive rights, and all corporate action required to be taken for the
authorization and issuance of the Representative's Warrants and the securities
to be issued upon their exercise has been validly and sufficiently taken.
(iii) Except as described in or contemplated by the
Prospectus, there are no outstanding securities of the Company convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of capital stock of the Company and there are no outstanding or
authorized options, warrants or rights of any character obligating the Company
to issue any shares of its capital stock or any securities convertible or
exchangeable into or evidencing the right to purchase or subscribe for any
shares of such stock; and except as described in the Prospectus, no holder of
any securities of the Company or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived, to cause the
Company to sell or otherwise issue to them, or to permit them to underwrite the
sale of, any of the Shares or the right to have any Common Stock or other
securities of the Company
16
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) The Registration Statement has become effective
under the Act and no stop order proceedings with respect thereto have been
instituted or are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and
each amendment or supplement thereto comply as to form in all material respects
with the requirements of the Act and the applicable rules and regulations
thereunder (except that such counsel need express no opinion as to the financial
statements and related schedules therein).
(vi) The statements under the captions "Shares
Eligible for Future Sale" and "Description of Capital Stock" in the Prospectus
and in Item ___ of the Registration Statement, insofar as such statements
constitute a summary of documents referred to therein or matters of law, fairly
summarize in all material respects the information called for with respect to
such documents and matters.
(vii) No contracts or documents required to be filed
as exhibits to the Registration Statement or described in the Registration
Statement or the Prospectus which are not so filed or described as required, and
such contracts and documents as are summarized in the Registration Statement or
the Prospectus are fairly summarized in all material respects.
(viii) There are no material legal or governmental
proceedings pending or threatened against the Company.
(ix) The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the articles of incorporation or bylaws of the
Company, or any agreement or instrument known to such counsel to which the
Company is a party or by which the Company may be bound.
(x) This Agreement has been duly authorized,
executed and delivered by the Company and the Selling Stockholder.
(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement by the Company or the Selling Stockholder and the
consummation of the transactions herein contemplated (other than as may be
required by the NASD or as required by state securities and Blue Sky laws as to
which such counsel need express no opinion) except such as have been obtained or
made, specifying the same.
(xii) The Company is not, and will not become, as a
result of the consummation of the transactions contemplated by this Agreement,
and application of the net
17
proceeds therefrom as described in the Prospectus, required to register as an
investment company under the 1940 Act.
(xiii) The Custody Agreement executed and delivered
by the Selling Stockholder is valid and binding and enforceable against such
Stockholder in accordance with its terms.
(xiv) The Underwriters (assuming that they are bona
fide purchasers within the meaning of the Uniform Commercial Code) have acquired
good and marketable title to the Firm Shares being sold by the Selling
Stockholder on the Closing Date free and clear of all liens, encumbrances,
equities and claims.
(xv) On the effective date thereof as described in
the Prospectus, the Exchange (as described in the Prospectus) was consummated in
accordance with the applicable provisions of the New York Business Corporation
Law, and each of the parties thereto had all requisite authority (including all
necessary shareholder and board of director approvals to enter into and
consummate the Exchange.
In rendering such opinion, such counsel may rely as to matters
governed by the laws of states other than New York or federal laws on local
counsel in such jurisdictions, provided that in each case such counsel shall
state that they believe that they and the Underwriters are justified in relying
on such other counsel. In addition to the matters set forth above, the opinion
of Morse, Zelnick, Rose & Lander, LLP, shall also include a statement to the
effect that nothing has come to the attention of such counsel that has caused
them to believe that (i) the Registration Statement, at the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein).
(c) The Representative shall have received from Weiss, Jensen,
Ellis & Howard, counsel for the Underwriters, an opinion dated the Closing Date
or the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (i), (iv) and (v) of Paragraph (b) of this Section 6.
In rendering such opinion Weiss, Jensen, Ellis & Howard may rely as to all
matters governed other than by the laws of the state of Oregon or federal laws
on the opinion of counsel referred to in Paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
that has caused them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) and as of
18
the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Weiss, Jensen,
Ellis & Howard may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(d) The Representative shall have received at or prior to the
Closing Date from Weiss, Jensen, Ellis & Howard a memorandum or summary, in form
and substance satisfactory to the Representative, with respect to the
qualification for offering and sale by the Underwriters of the Shares under the
state securities or Blue Sky laws of such jurisdictions as the Representative
may reasonably have designated to the Company.
(e) The Representative, on behalf of the several Underwriters,
shall have received, on each of the dates hereof, the Closing Date and the
Option Closing Date, as the case may be, a letter dated the date hereof, the
Closing Date or the Option Closing Date, as the case may be, in form and
substance satisfactory to the Representative, of Arthur Andersen LLP confirming
that they are independent public accountants within the meaning of the Act and
the applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material respects
with the applicable accounting requirements of the Act and the related published
Rules and Regulations and containing such other statements and information as
are ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representative shall have received on the Closing Date
or the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that, as of the Closing Date or the Option Closing Date, as the case
may be, each of them severally represents as follows:
(i) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his or her knowledge, contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, as the case may be;
19
(iii) All filings required to have been made
pursuant to Rule 424 or Rule 430A under the Act have been made;
(iv) He or she has carefully examined the
Registration Statement and the Prospectus and, in his or her opinion, as of the
effective date of the Registration Statement, the statements contained in the
Registration Statement were true and correct, and such Registration Statement
and Prospectus did not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and since the
effective date of the Registration Statement, no event has occurred which should
have been set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or otherwise,
of the Company or the earnings, business, management, properties, assets,
rights, operations, condition (financial or otherwise) or prospects of the
Company, whether or not arising in the ordinary course of business.
(g) The Company and the Selling Stockholder shall have
furnished to the Representative such further certificates and documents
confirming the representations and warranties, covenants and conditions
contained herein and related matters as the Representative may reasonably have
requested.
(h) The Common Stock has been approved for designation on The
Nasdaq Stock Market upon notice of issuance.
The opinions and certificates mentioned in this Agreement
shall be deemed to be in compliance with the provisions hereof only if they are
in all material respects satisfactory to the Representative and to Weiss,
Jensen, Ellis & Howard, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this
Section 6 shall not have been fulfilled when and as required by this Agreement
to be fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representative by notifying the Company and the Selling Stockholder of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.
In such event, the Company, the Selling Stockholder and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. CONDITIONS OF OBLIGATIONS OF THE COMPANY.
20
The obligations of the Company to sell and deliver the portion
of the Shares required to be delivered as and when specified in this Agreement
are subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company and the Selling Stockholder jointly and
severally agree to indemnify and hold harmless each Underwriter and each person,
if any, who controls any Underwriter within the meaning of the Act, against any
losses, claims, damages or liabilities to which such Underwriter or any such
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse each Underwriter and each
such controlling person upon demand for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
offering of the Shares, whether or not such Underwriter or controlling person is
a party to any action or proceeding; provided, however, that the Company and the
Selling Stockholder will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representative
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement, the Selling Stockholder and each person,
if any, who controls the Company within the meaning of the Act, against any
losses, claims, damages or liabilities to which the Company, the Selling
Stockholder or any such director, officer or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or (ii) the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
21
circumstances under which they were made; and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, the Selling
Stockholder, officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that each Underwriter will be liable in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission has been made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representative specifically for use
in the preparation thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event:
(i) he indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel;
(ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or;
(iii) the indemnifying party shall have failed to
assume the defense and employ counsel acceptable to the indemnified party within
a reasonable period of time after notice of commencement of the action.
It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties. Such firm shall be
22
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholder on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Stockholder bears to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Selling Stockholder on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
Section 8(d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 8(d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this Section 8(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
23
or claim. Notwithstanding the provisions of this subsection (d), (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter, and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement,
any Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this Section 8
hereby consents to the jurisdiction of any court having jurisdiction over any
other contributing party, agrees that process issuing from such court may be
served upon him or it by any other contributing party and consents to the
service of such process and agrees that any other contributing party may join
him or it as an additional defendant in any such proceeding in which such other
contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of:
(i) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, the Company, the Selling
Stockholder, its directors or officers or any persons controlling the Company;
(ii) acceptance of any Shares and payment therefor
hereunder, and;
(iii) any termination of this Agreement. A successor
to any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or the
Selling Stockholder), you, as Representative of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the Selling
Stockholder such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case
24
may be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 36 hours you, as such Representative, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of Shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of Firm Shares or Option Shares, as the case may be, with
respect to which such default shall occur equals or exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company or you
as the Representative of the Underwriters will have the right, by written notice
given within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the non-defaulting
Underwriters or of the Company or of the Selling Stockholder except to the
extent provided in Section 8 hereof. In the event of a default by any
Underwriter or Underwriters, as set forth in this Section 9, the Closing Date or
Option Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you, as Representative, may determine in order that the
required changes in the Registration Statement or in the Prospectus or in any
other documents or arrangements may be effected. The term "Underwriter" includes
any person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to Paulson
Investment Company, Inc., 811 SW Naito Boulevard, Portland, Oregon 97204,
Attention: Chester L.F. Paulson; with a copy to Weiss, Jensen, Ellis & Howard,
2300 U.S. Bancorp Tower, 111 Fifth Avenue, Portland, Oregon 97204, Attention:
Mark A. von Bergen; if to the Company or the Selling Stockholder, to DAG Media,
Inc., 125-10 Queens Boulevard, Kew Gardens, NY 11415; with a copy to Morse
Zelnick, Rose & Lander, LLP, 450 Park Ave., New York, NY 10022, Attention:
Stephen A. Zelnick, Esq.
11. TERMINATION.
This Agreement may be terminated by you by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the
Shares are released by you for sale by notice to the Underwriters, or (ii) 11:30
a.m. on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the
following has occurred: (i) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company and its
subsidiaries taken as a whole or the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the
25
Company and its subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Shares or to enforce contracts for
the sale of the Shares, (iii) the Dow Jones Industrial Average shall have fallen
by 15 percent or more from its closing price on the day immediately preceding
the date that the Registration Statement is declared effective by the
Commission, (iv) suspension of trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such Exchange, (v) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affect the business or operations of the Company,
(vi) declaration of a banking moratorium by United States or New York State
authorities, (vii) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Exchange Act); (viii) the
suspension of trading of the Common Stock by the Commission on The Nasdaq Stock
Market or (ix) the taking of any action by any governmental body or agency in
respect of its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of
the Underwriters, the Company, the Selling Stockholder and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Stockholder and the Underwriters
acknowledge and agree that the only information furnished or to be furnished by
any Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(d) of Regulation S-B under the Act
and the information under the caption "Underwriting" in the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation
26
made by or on behalf of any Underwriter or controlling person thereof, or by or
on behalf of the Company or its directors or officers and (c) delivery of and
payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in
accordance with, the laws of the state of Oregon. All disputes relating to this
Underwriting Agreement shall be adjudicated before a court located in Multnomah
County, Oregon to the exclusion of all other courts that might have
jurisdiction.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholder and the several Underwriters in accordance with its terms.
Very truly yours,
DAG MEDIA, INC.
By:
--------------------------------
Assaf Ran
Chief Executive Officer
-----------------------------------
Assaf Ran
Selling Stockholder
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written.
PAULSON INVESTMENT COMPANY, INC.
As Representative of the several
Underwriters listed on Schedule I
By:
----------------------------------
Authorized Officer
27
SCHEDULE I
SCHEDULE OF UNDERWRITERS
[Enlarge/Download Table]
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
--------------------------------------------------------------------------- -------------------------
Paulson Investment Company, Inc.
TOTAL: 1,325,0000
-------------------------
-------------------------
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘SB-2’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on: | | 3/10/99 | | | | | | | None on these Dates |
| List all Filings |
3 Subsequent Filings that Reference this Filing
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