<PAGE>
As filed with the Securities and Exchange Commission on March 13, 2000
Registration No. 333-95793
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM SB-2
AMENDMENT NO. 2
to
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MEDIABAY, INC.
(Exact name of registrant as specified in its charter)
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Florida 5961 65-0429858
(State or other jurisdiction of (Primary standard industrial (IRS employer
incorporation or organization) classification number) identification number)
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---------------------
20 Community Place
Morristown, New Jersey 07960
(973) 539-9528
(Address and telephone number of principal executive offices)
---------------------
20 Community Place
Morristown, NJ 07960
(Address of principal place of business)
---------------------
Michael Herrick, Chief Executive Officer
MediaBay, Inc.
20 Community Place
Morristown, New Jersey 07960
(973) 539-9528
(Name, address and telephone number of agent for service)
---------------------
Copies to:
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Robert J. Mittman, Esq. Stephen T. Burdumy, Esq.
Blank Rome Tenzer Greenblatt LLP Klehr, Harrison, Harvey, Branzburg & Ellers LLP
The Chrysler Building 260 S. Broad Street
405 Lexington Avenue Philadelphia, PA 19102-5003
New York, NY 10174 Telephone No. (215) 569-4646
Telephone No. (212) 885-5000 Telecopier No. (215) 568-6603
Telecopier No. (212) 885-5001
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same
offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Florida Business Corporation Act (the "Florida Act") contain
provisions entitling the Registrant's directors and officers to indemnification
from judgments, settlements, penalties, fines, and reasonable expenses
(including attorney's fees) as the result of an action or proceeding in which
they may be involved by reason of having been a director or officer of the
Registrant. In its Articles of Incorporation, the Registrant has included a
provision that limits, to the fullest extent now or hereafter permitted by the
Florida Act, the personal liability of its directors to the Registrant or its
shareholders for monetary damages arising from a breach of their fiduciary
duties as directors. Under the Florida Act as currently in effect, this
provision limits a director's liability except where such director breaches a
duty. The Registrant's Articles of Incorporation and By-Laws provide that the
Registrant shall indemnify, and upon request shall advance expenses to, its
directors and officers to the fullest extent permitted by the Florida Act. The
Florida Act provides that no director or officer of the Registrant shall be
personally liable to the Registrant or its shareholders for damages for breach
of any duty owed to the Registrant or its shareholders, except for liability
for (i) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (ii) any unlawful payment of a
dividend or unlawful stock repurchase or redemption in violation of the Florida
Act, (iii) any transaction from which the director received an improper
personal benefit or (iv) a violation of a criminal law. This provision does not
prevent the Registrant or its shareholders from seeking equitable remedies,
such as injunctive relief or rescission. If equitable remedies are found not to
be available to shareholders in any particular case, shareholders may not have
any effective remedy against actions taken by directors that constitute
negligence or gross negligence.
The Registrant has entered into indemnification agreements with certain
employees, officers and consultants. Pursuant to the terms of the indemnity
agreements, the Registrant has agreed to indemnify, to the fullest extent
permitted under applicable law, against any amounts which the employee, officer
or consultant may become legally obligated to pay in connection with any claim
arising from or out of the actions of the employee, officer or consultant, in
connection with any services performed by or on behalf of our company and
certain expenses related thereto; provided, however, that the employee, officer
or consultant shall reimburse the Registrant for such amounts if the such
individual is found, as finally judicially determined by a court of competent
jurisdiction, not to have been entitled to such indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1993, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to any charter
provision, by-law, contract, arrangement, statute or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
(the "Commission") such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
Reference is made to the Underwriting Agreement, the proposed form of
which is filed as Exhibit 1.1, pursuant to which the underwriter agrees to
indemnify the directors and certain officers of the Registrant and certain
other persons against certain civil liabilities.
II-1
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (other than the underwriting
discounts and commissions and the Underwriter's Non-Accountable Expense
Allowance) expected to be incurred in connection with the issuance and
distribution of the securities being reistered.
SEC Registration ...................... $ 14,573
NASD Filing Fee ....................... $ 6,020
Legal Fees and Expenses* .............. $400,000
Printing and Engraving Costs* ......... $150,000
Accounting Fees* ...................... $100,000
Transfer Agent Fees*................... $ 3,000
Miscellaneous* ........................ $226,407
--------
Total ............................... $900,000
========
- ------------
* Estimated
** To be provided by amendment.
Item 26. Recent Sales of Unregistered Securities.
The Registrant has made the following sales of unregistered securities in
the past three years:
(i) On March 18, 1998, the Registrant sold to Carl Wolf an option to
purchase 50,000 shares of common stock. The Registrant granted to Mr. Wolf the
right to purchase a second option to purchase an additional 25,000 shares. The
price to purchase the second option was $25,000. The Registrant relied on the
exemption offered by Section 4(2) under the Securities Act of 1993 for a
transaction by an issuer not involving a public offering.
(ii) In September 1998, Mr. Wolf exercised his right to purchase the
second option referred to in (i) above. The Registrant relied on the exemption
offered by Section 4(2) under the Securities Act for a transaction by an issuer
not involving a public offering.
(iii) On April 17, 1998, the Registrant issued to 800 Long Distance, Inc.
an option to purchase 21,600 shares of common stock as consideration for costs
incurred in transferring certain toll-free telephone numbers to the Registrant.
The option was valued at $2.50 per share. The Registrant relied on the
exemption from registration offered by Section 4(2) under the Securities Act
for a transaction by an issuer not involving a public offering.
(iv) On May 30, 1998, the Registrant issued to an individual an option to
purchase 20,000 shares of common stock as consideration for the acquisition of
the URLs www.audiobook.com and www.audiobook.net. The option was valued at
$2.50 per share. The Registrant relied on the exemption from registration
offered by Section 4(2) of the Securities Act for a transaction by an issuer
not involving a public offering.
(v) In November 1998, the Registrant issued a warrant to purchase 25,000
shares of common stock pursuant to a consulting agreement under which the
consultant provided services and advice relating to acquisitions proposed at
that time. The Registrant valued the consultant's services at $48,750. The
Registrant relied on the exemption from registration offered by Section 4(2)
under the Securities Act for a transaction by an issuer not involving a public
offering.
(vi) In December 1998, the Registrant issued 425,000 shares of common
stock valued at $12.875 per share and options to purchase an additional 175,000
shares of common stock in connection with its acquisition of Radio Spirits,
Inc. The Registrant granted the holders of these shares the right to require it
to repurchase up to 175,000 of these shares under certain circumstances,
commencing December 2001 at prices ranging from $4.00 to $12.00 per share. The
Registrant relied on the exemption from registration offered by Section 4(2)
under the Securities Act for a transaction by an issuer not involving a public
offering.
II-2
<PAGE>
(vii) In December 1998, the Registrant issued options to purchase 25,000
shares to two individuals as consideration for entering into consulting
agreements. The Registrant relied on the exemption from registration offered by
Section 4(2) under the Securities Act for a transaction by an issuer not
involving a public offering.
(viii) In December 1998, the Registrant issued 50,000 shares of common
stock valued at $12.875 per share and options to purchase an additional 50,000
shares of common stock as partial consideration for its acquisition of the
assets used by Metacom, Inc. in connection with its "Adventures in Cassettes"
business of licensing, producing, marketing and selling old time radio
programs. The Registrant granted the holders of the 50,000 shares the right,
under certain circumstances, to require it to repurchase the 50,000 shares
between the December 2001 and December 2008 at a price of $10.00 per share. The
Registrant relied on the exemption from registration offered by Section 4(2)
under the Securities Act for a transaction by an issuer not involving a public
offering.
(ix) In December 1998, the Registrant issued 125,000 shares of common
stock valued at $12.875 per share as partial consideration for its acquisition
of the assets used by Premier Electronic Laboratories, Inc. in connection with
its business of producing, marketing and selling old time radio and classic
video programs. The Registrant granted the holders of these shares the right,
under certain circumstances, to require it to repurchase the shares between
December 2000 and December 2008 at a price of $15.00 per share. The Registrant
relied on the exemption from registration offered by Section 4(2) of the
Securities Act for a transaction by an issuer not involving a public offering.
(x) In December 1998, the Registrant issued to The Columbia House Company,
Sony Music Entertainment Inc. and WCI Record Club Inc. an aggregate of 325,000
shares of common stock valued at $11.625 per share and warrants to purchase an
additional 100,000 shares of common stock in connection with its acquisition of
Columbia House's Audiobook Club. The Registrant granted the holders of the
325,000 shares the right to require it to repurchase these shares, under
certain circumstances, commencing December 2004 at a price of $15.00 per share.
The Registrant relied on the exemption from registration offered by Section
4(2) of the Securities Act for a transaction by an issuer not involving a
public offering.
(xi) In December 1998, the Registrant issued three-year warrants to
purchase an aggregate of 196,800 shares of common stock per share as partial
consideration to the lenders for providing a credit facility which warrants
have been subsequently adjusted pursuant to their anti-dilution provisions. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
(xii) In December 1998, the Registrant issued to its Chairman a
$15,000,000 principal amount convertible note due December 31, 2004 and
five-year warrants to purchase 500,000 shares of common stock. The Registrant
also agreed that if the note is refinanced, repaid or replaced, it will issue
to its Chairman, warrants to purchase an additional 350,000 shares. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
(xiii) In February 1999, the Registrant granted to an employee five year
options to purchase 158,000 shares of common stock as consideration for
entering into an agreement employment. The Registrant relied on the exemption
from registration offered by Section 4(2) of the Securities Act for a
transaction by an issuer not involving a public offering.
(xiv) In March 1999, the Registrant granted to a law firm five year
warrants to purchase 20,000 shares of common stock as partial payment for legal
services provided in the acquisitions. The warrants were valued at $2.46 using
the Black-Scholes valuation model. The Registrant relied on the exemption from
registration offered by Section 4(2) of the Securities Act for a transaction by
an issuer not involving a public offering.
(xv) In April 1999, the Registrant completed the sale of 750,000 shares of
common stock to a qualified institutional buyer, as that term is defined under
Rule 144A under the Securities Act, for $8,250,000 and issued warrants to
purchase 50,000 shares in connection with a consulting agreement. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
II-3
<PAGE>
(xvi) In June 1999, the Registrant sold 50,000 shares of common stock for
gross proceeds of $550,000 to three qualified institutional buyers. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
(xvii) In June 1999, in connection with an additional bank loan to partly
finance an acquisition, the Registrant granted the lenders three-year warrants
to purchase up to 119,546 shares of common stock which warrants have been
subsequently adjusted pursuant to their anti-dilution provisions. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
(xviii) In June 1999, the Registrant issued a $4,350,000 principal amount
convertible promissory note to its Chairman for $4,350,000. The Registrant also
agreed that if the note is refinanced, repaid or replaced, it will issue to its
Chairman warrants to purchase 125,000 shares of common stock as partial
consideration for the financing. The Registrant relied on the exemption from
registration offered by Section 4(2) under the Securities Act for a transaction
by an issuer not involving a public offering.
(xix) In July 1999, the Registrant sold 540,000 shares of common stock to
three qualified institutional buyers for $7,020,000. The Registrant relied on
the exemption from registration offered by Section 4(2) under the Securities
Act for a transaction by an issuer not involving a public offering.
(xx) In August 1999, the Registrant sold 700,000 shares of common stock to
a qualified institutional buyer for $9,100,000. The Registrant relied on the
exemption from registration offered by Section 4(2) under the Securities Act
for a transaction by an issuer not involving a public offering.
(xxi) In August 1999, the Registrant issued 17,977 shares of common stock
upon conversion of $200,000 principal amount of a convertible note. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
(xxii) In September 1999, the Registrant issued to its Chairman warrants
to purchase 265,000 shares of common stock as described in (xii). The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
(xxiii) In October 1999, the Registrant issued 21,600 shares of common
stock upon exercise of an outstanding option. The Registrant relied on the
exemption from registration offered by Section 4(2) of the Securities Act for a
transaction by an issuer not involving a public offering.
(xxiv) In December 1999 and January 2000, the Registrant issued $2,000,000
principal amount convertible promissory notes to its Chairman's son for
$2,000,000. The Registrant relied on the exemption from registration offered by
Section 4(2) of the Securities Act for a transaction by an issuer not involving
a public offering.
(xxv) In December 1999 and January 2000, the Registrant issued 379,662
shares of common stock upon conversion of convertible notes. The Registrant
relied on the exemption from registration offered by Section 4(2) of the
Securities Act for a transaction by an issuer not involving a public offering.
(xxvi) in January 2000, the Registrant issued warrants to purchase 340,000
shares to an accredited investor. .
(xxvii) From October 1997 through the date of this prospectus, the
Registrant issued options to purchase 3,913,750 shares of common stock under
its 1997 Stock Option Plan and 1999 Stock Incentive Plan. The Registrant relied
on the exemption from registration offered by Section 4(2) of the Securities
Act for a transaction by an issuer not involving a public offering. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
(xxviii) In January 2000, the Registrant issued warrants to purchase
300,000 shares of common stock as consideration for public relations consulting
services. The Registrant relied on the exemption from registration offered by
Section 4(2) of the Securities Act for a transaction by an issuer not involving
a public offering.
(xxix) In February 2000, the Registrant issued 53,932 shares of common
stock upon conversion of $600,000 principal amount of a convertible note. The
Registrant relied on the exemption from registration offered by Section 4(2) of
the Securities Act for a transaction by an issuer not involving a public
offering.
II-4
<PAGE>
Item 27. Exhibits.
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
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1.1 Form of Underwriting Agreement between the Registrant and the Underwriters.
3.1 Restated Articles of Incorporation of the Registrant.+
3.2 Articles of Amendment to Articles of Incorporation.++++++++
3.3 Articles of Amendment to Articles of Incorporation.*
3.4 Amended and Restated By-Laws of the Registrant.*
5.1 Opinion of Blank Rome Tenzer Greenblatt LLP
10.1 Employment Agreement between the Registrant and Norton Herrick.*
10.2 Employment Agreement between the Registrant and Michael Herrick.+
10.3 Employment Agreement between the Registrant and Jesse Faber.*
10.4 Employment Agreement between the Registrant and Stephen McLaughlin.+++++
10.5 Employment Agreement between the Registrant and Howard Herrick.+
10.6 Employment Agreement between the Registrant and John Levy.*
10.7 Employment Agreement between our subsidiary and Carl Amari.+++++
10.8 Supplemental Agreement, dated as of December 11, 1998, by and among the Registrant,
Classic Radio Holding Corp. (now Radio Spirits, Inc.), Radio Spirits, Inc. and Carl
Amari.+++
10.9 Put Agreement, dated as of December 11, 1998, by and between the Registrant and Premier
Electronic Laboratories, Inc.+++++
10.10 Registration and Shareholder Rights Agreement, dated as of December 30, 1998, by and
among the Registrant and The Columbia House Company, WCI Record Club Inc. and Sony
Music Entertainment Inc.+++++
10.11 $2,776,250 Principal Amount 9% Convertible Senior Subordinated Promissory Note of the
Registrant to Norton Herrick due December 31, 2004.*
10.12 $4,800,000 Principal Amount 9% Convertible Senior Subordinated Promissory Note of the
Registrant to ABC Investment, L.L.C. due December 31, 2004.*
10.13 Modification Letter, dated December 31, 1998, among Norton Herrick, the Registrant and
Fleet National Bank+++++
10.14 Security Agreement, dated as of December 31, 1998, by and among the Registrant, Classic
Radio Holding Corp. and Classic Radio Acquisition Corp. and Norton Herrick.+++++
10.15 Credit Agreement, dated as of December 31, 1998, among the Registrant and Fleet National
Bank.+++++
10.16 Amendment and Supplement No. 1 to Credit Agreement dated June 14, 1999 by and among
the Registrant, Fleet National Bank, as administrative agent, and ING (U.S.) Capital
Corporation.+++++++
10.17 Security Agreement, dated as of December 31, 1998, from the Registrant, ABC Internet
Services, Inc., Classic Radio Holding Corp., Classic Radio Acquisition Corp., ABC
Investment Corp., and CH Acquisitions Corp. as grantors to Fleet National Bank as
administrative agent.+++++
10.18 1997 Stock Option Plan+
10.19 1999 Stock Incentive Plan++++++
21.1 Subsidiaries of the Company.*
23.1 Consent of Deloitte & Touche LLP*
23.2 (a) Consent of KPMG LLP*
</TABLE>
II-5
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EXHIBIT NO. DESCRIPTION
- ----------- -----------
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23.2(b) Consent of KPMG LLP*
23.3 Consent of BD&A Certified Public Accountants, Ltd.*
23.4 Consent of PricewaterhouseCoopers LLP.*
23.5 Consent of Blank Rome Tenzer Greenblatt LLP (included in opinion filed as Exhibit 5)
24.1 Power of Attorney (included in the signature page of this Registration Statement).*
27.1 Financial Data Schedule (SEC use only).
</TABLE>
- ------------
* Previously filed
+ Incorporated by reference to the applicable exhibit contained in our
Registration Statement on Form SB-2 (file no. 333-30665) effective
October 22, 1997.
++ Incorporated by reference to the applicable exhibit contained in our
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997.
+++ Incorporated by reference to the applicable exhibit contained in our
Current Report on Form 8-K for reportable event dated December 14,
1998.
++++ Incorporated by reference to the applicable exhibit contained in our
Current Report on Form 8-K dated January 13, 1999.
+++++ Incorporated by reference to the applicable exhibit contained in our
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1998.
++++++ Incorporated by reference to the applicable exhibit contained in our
Proxy Statement dated February 23, 1999.
+++++++ Incorporated by reference to the applicable exhibit contained in our
Current Report on Form 8-K dated June 29, 1999.
++++++++ Incorporated by reference to the applicable exhibit contained in our
Quarterly Report on Form 10-QSB for the quarterly period ended June
30, 1999.
Item 28. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(b) The undersigned Registrant hereby undertakes for the purpose of determining
any liability under the Securities Act, to treat the information omitted
from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by
the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this Registration Statement as of the time the
Securities and Exchange Commission declares it effective; and for the
purpose of determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and treat that offering of the securities at that time as the
initial bonafide offering of those securities.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in the City of
Morristown, State of New Jersey, on March 13, 2000.
MEDIABAY, INC.
By: /s/ Norton Herrick
------------------------------------
Norton Herrick
Chairman and Director
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Signature Title Date
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/s/ Norton Herrick Director and Chairman (Principal Executive March 13, 2000
- ------------------------- Officer)
Norton Herrick
* Director, Chief Executive Officer and March 13, 2000
- ------------------------- President (Principal Executive Officer)
Michael Herrick
* Director and President of Audio Book Club, March 13, 2000
- ------------------------- Inc.
Jesse Faber
* Director and Executive Vice President March 13, 2000
- -------------------------
Howard Herrick
* Executive Vice President and Chief Financial March 13, 2000
- ------------------------- Officer (Principal Financial and Accounting
John F. Levy Officer)
* Director and President of Radio Operations March 13, 2000
- -------------------------
Carl P. Amari
* Director March 13, 2000
- -------------------------
Carl T. Wolf
* Director March 13, 2000
- -------------------------
Roy Abrams
/s/ Norton Herrick
- -------------------------
Norton Herrick
(Attorney-in-fact)
</TABLE>
* By Attorney
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1.1 Form of Underwriting Agreement between the Registrant and the Underwriters.
3.1 Restated Articles of Incorporation of the Registrant.+
3.2 Articles of Amendment to Articles of Incorporation.++++++++
3.3 Articles of Amendment to Articles of Incorporation.*
3.4 Amended and Restated By-Laws of the Registrant.*
5.1 Opinion of Blank Rome Tenzer Greenblatt LLP
10.1 Employment Agreement between the Registrant and Norton Herrick.*
10.2 Employment Agreement between the Registrant and Michael Herrick.+
10.3 Employment Agreement between the Registrant and Jesse Faber.*
10.4 Employment Agreement between the Registrant and Stephen McLaughlin.+++++
10.5 Employment Agreement between the Registrant and Howard Herrick.+
10.6 Employment Agreement between the Registrant and John Levy.*
10.7 Employment Agreement between our subsidiary and Carl Amari.+++++
10.8 Supplemental Agreement, dated as of December 11, 1998, by and among the Registrant,
Classic Radio Holding Corp. (now Radio Spirits, Inc.), Radio Spirits, Inc. and Carl
Amari.+++
10.9 Put Agreement, dated as of December 11, 1998, by and between the Registrant and Premier
Electronic Laboratories, Inc.+++++
10.10 Registration and Shareholder Rights Agreement, dated as of December 30, 1998, by and
among the Registrant and The Columbia House Company, WCI Record Club Inc. and Sony
Music Entertainment Inc.+++++
10.11 $2,776,250 Principal Amount 9% Convertible Senior Subordinated Promissory Note of the
Registrant to Norton Herrick due December 31, 2004.*
10.12 $4,800,000 Principal Amount 9% Convertible Senior Subordinated Promissory Note of the
Registrant to ABC Investment, L.L.C. due December 31, 2004.*
10.13 Modification Letter, dated December 31, 1998, among Norton Herrick, the Registrant and
Fleet National Bank+++++
10.14 Security Agreement, dated as of December 31, 1998, by and among the Registrant, Classic
Radio Holding Corp. and Classic Radio Acquisition Corp. and Norton Herrick.+++++
10.15 Credit Agreement, dated as of December 31, 1998, among the Registrant and Fleet National
Bank.+++++
10.16 Amendment and Supplement No. 1 to Credit Agreement dated June 14, 1999 by and among
the Registrant, Fleet National Bank, as administrative agent, and ING (U.S.) Capital
Corporation.+++++++
10.17 Security Agreement, dated as of December 31, 1998, from the Registrant, ABC Internet
Services, Inc., Classic Radio Holding Corp., Classic Radio Acquisition Corp., ABC
Investment Corp., and CH Acquisitions Corp. as grantors to Fleet National Bank as
administrative agent.+++++
10.18 1997 Stock Option Plan+
10.19 1999 Stock Incentive Plan++++++
21.1 Subsidiaries of the Company.*
23.1 Consent of Deloitte & Touche LLP*
23.2 (a) Consent of KPMG LLP*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
23.2(b) Consent of KPMG LLP*
23.3 Consent of BD&A Certified Public Accountants, Ltd.*
23.4 Consent of PricewaterhouseCoopers LLP.*
23.5 Consent of Blank Rome Tenzer Greenblatt LLP (included in opinion filed as Exhibit 5)
24.1 Power of Attorney (included in the signature page of this Registration Statement).*
27.1 Financial Data Schedule (SEC use only).
</TABLE>
- ------------
* Previously filed
+ Incorporated by reference to the applicable exhibit contained in our
Registration Statement on Form SB-2 (file no. 333-30665) effective
October 22, 1997.
++ Incorporated by reference to the applicable exhibit contained in our
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997.
+++ Incorporated by reference to the applicable exhibit contained in our
Current Report on Form 8-K for reportable event dated December 14,
1998.
++++ Incorporated by reference to the applicable exhibit contained in our
Current Report on Form 8-K dated January 13, 1999.
+++++ Incorporated by reference to the applicable exhibit contained in our
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1998.
++++++ Incorporated by reference to the applicable exhibit contained in our
Proxy Statement dated February 23, 1999.
+++++++ Incorporated by reference to the applicable exhibit contained in our
Current Report on Form 8-K dated June 29, 1999.
++++++++ Incorporated by reference to the applicable exhibit contained in our
Quarterly Report on Form 10-QSB for the quarterly period ended June
30, 1999.
<PAGE>
DRAFT - SUBJECT TO NEGOTIATION
4,000,000 Shares(1)
MEDIABAY, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
March ____, 2000
ROTH CAPITAL PARTNERS, INC.
L.H. FRIEND, WEINRESS, FRANKSON & PRESSON, LLC
PENNSYLVANIA MERCHANT GROUP
As Representatives of the several Underwriters
c/o ROTH CAPITAL PARTNERS, INC.
24 Corporate Plaza
Newport Beach, California 92660
Ladies and Gentlemen:
MediaBay, Inc., a Florida corporation (the "Company"), addresses you as
the Representatives of each of the persons, firms and corporations listed on
Schedule A hereto (herein collectively called the "Underwriters") and hereby
confirms its agreement with the several Underwriters as follows:
1. Description of Shares.
The Company proposes to issue and sell 4,000,000 shares of its
authorized and unissued common stock, no par value (the "Firm Shares"), to the
several Underwriters. The Company also proposes to grant to the Underwriters an
option to purchase up to 600,000 additional shares of the Company's common
stock, no par value (the "Option Shares") solely for the purpose of covering
over-allotments, as provided in Section 7 hereof. As used in this Agreement, the
term "Shares" shall include the Firm Shares and the Option Shares. All shares of
common stock, no par value, of the Company to be outstanding after giving effect
to the sales contemplated hereby, including the Shares, are hereinafter referred
to as "Common Stock."
2. Representations, Warranties and Agreements of the Company.
The Company represents and warrants to and agrees with each
Underwriter that:
- ------------------------
(1) Plus an option to purchase up to 600,000 additional shares to cover
over-allotments.
<PAGE>
(a) A registration statement on Form SB-2 (File No. 333-95793)
with respect to the Shares, including a prospectus, has been prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the applicable rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Act and has been filed with the Commission; such amendments to such
registration statement, such prospectuses and abbreviated registration
statements pursuant to Rule 462(b) of the Rules and Regulations (a "462
Registration Statement") as may have been required prior to the date hereof have
been similarly prepared and filed with the Commission; and the Company will file
such additional amendments to such registration statement, such amended
prospectuses and such abbreviated registration statements as may hereafter be
required. Copies of such registration statement and amendments together with
each exhibit filed therewith, of each related prospectus contained or filed as
part of any pre-effective amendment to such registration statement or filed
pursuant to Rule 424(a) (the "Preliminary Prospectuses") and of any abbreviated
462 Registration Statement have been delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the registration
statement pursuant to Rule 430A(a) or, if the Representatives, on behalf of the
several Underwriters, shall agree to the utilization of Rule 434 of the Rules
and Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations
pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if the
Representatives, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information required
to be included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "Registration Statement" as
used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits (including exhibits incorporated by
reference), in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the registration
statement pursuant to Rule 430A(a) or files a term sheet pursuant to Rule 434 of
the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
or Rule 434(d) of the Rules and Regulations) and, in the event of any amendment
thereto or the filing of any 462 Registration Statement after the effective date
of such registration statement, shall also mean (from and after the
effectiveness of such amendment or the filing of any 462 Registration Statement)
such registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); provided, however, that if in reliance on Rule 434 of the
Rules and Regulations and with the consent of the Representatives, on behalf of
the several Underwriters, the Company shall have provided to the Underwriters a
2
<PAGE>
term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time that
a confirmation is sent or given for purposes of Section 2(10)(a) of the Act, the
term "Prospectus" shall mean the "prospectus subject to completion" (as defined
in Rule 434(g) of the Rules and Regulations) last provided to the Underwriters
by the Company and circulated by the Underwriters to all prospective purchasers
of the Shares (including the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 434(d) of the Rules
and Regulations). Notwithstanding the foregoing, if any revised prospectus shall
be provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such use.
If in reliance on Rule 434 of the Rules and Regulations and with the consent of
the Representatives, on behalf of the several Underwriters, the Company shall
have provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c),
as applicable, prior to the time that a confirmation is sent or given for
purposes of Section 2(10)(a) of the Act, the Prospectus and the term sheet,
together, will not be materially different from the prospectus in the
Registration Statement.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or, to the Company's knowledge,
instituted proceedings for that purpose, and each such Preliminary Prospectus
has conformed in all material respects to the requirements of the Act and the
Rules and Regulations and, as of its date, has not included any untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up to
and on the Closing Date (hereinafter defined) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act and
the Rules and Regulations and will in all material respects conform to the
requirements of the Act and the Rules and Regulations, (ii) the Registration
Statement, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) the Prospectus, and any amendments or supplements thereto,
did not and will not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties contained in this subparagraph
(b) shall apply to information contained in the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof
or information omitted from the Registration Statement or Prospectus or any
amendment or supplement thereto relating to any Underwriter.
(c) If the Company has elected to rely on Rule 462(b) and the
Rule 462 Registration Statement has not been declared effective (i) the Company
has filed a Rule 462 Registration Statement in compliance with, and that is
effective upon filing pursuant to, Rule 462(b) and has received confirmation of
its receipt and (ii) the Company has given irrevocable instructions for
transmission of the applicable filing fee in connection with the filing of the
Rule 462 Registration Statement, in compliance with Rule 111 promulgated under
the Act or the Commission has received payment of such filing fee.
3
<PAGE>
(d) Each of the Company and its direct and indirect
subsidiaries (hereinafter, the "Subsidiaries") is duly incorporated and validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation with full corporate power and authority to own, lease and
operate its properties and conduct its business as described in the Prospectus;
each of the Company and its Subsidiaries is duly qualified to do business as a
foreign corporation and in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its Subsidiaries taken as a whole, (hereinafter, a "Material Adverse
Effect"); no proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification; each of the Company and the Subsidiaries is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities that are material to the conduct of its business, all of
which are valid and in full force and effect. Neither the Company nor any of its
Subsidiaries is in violation of its charter or bylaws and no event has occurred
which, with notice or lapse of time or both, would constitute a breach or
violation of any of the terms and provisions of, or constitute a default under,
any obligation, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness, or in any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which either the Company or any of its Subsidiaries
is a party or by which their properties or assets may be bound. Neither the
Company nor any of its Subsidiaries is in violation of any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, administrative
agency, regulatory body, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or its properties except where
such violation would not have a Material Adverse Effect.
(e) Each of the Company and its Subsidiaries has the corporate power and
authority to enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles and rules of law governing
specific performance, estoppel, waiver, injunctive relief, and other equitable
remedies (regardless of whether enforcement is sought in a proceeding at law or
in equity). The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) any bond, debenture, note or
other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company is a party or by which its properties may be
bound, except where such breach, violation or default would not have a Material
Adverse Effect or prevent the consummation of the transactions contemplated by
this Agreement, (ii) the charter or bylaws of the Company or (iii) any law,
order, rule, regulation, writ, injunction, judgment or decree of any court,
4
<PAGE>
administrative agency, regulatory body, government or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or its
properties, except where such breach, violation or default would not have a
Material Adverse Effect or prevent the consummation of the transactions
contemplated by this Agreement. No further approval or authorization of any
shareholder or the Board of Directors of the Company is required for the
issuance and sale or transfer of the Shares except as may be required under the
Act or under state, or other securities or Blue Sky laws. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or its properties or any other party is required for the execution and
delivery of this Agreement and the consummation by the Company of the
transactions herein contemplated, except such as may be required under the Act
or in connection with listing the Shares on NMS (as hereinafter defined), which
requirements have been satisfied in all material respects, and except such as
may be required by the National Association of Securities Dealers, Inc. (the
"NASD"), or under state, or other securities or Blue Sky laws.
(f) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim or proceeding against either the Company or
any of its Subsidiaries, any of Company's or any of its Subsidiaries' officers,
any of its properties, assets or rights before any court, administrative agency,
regulatory body, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or any of its Subsidiaries, its officers,
its properties, or otherwise which (i) might, individually or in the aggregate,
result in any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company or its
Subsidiaries, taken as a whole (a "Material Adverse Change"), or, (ii) might
prevent consummation of the transactions contemplated hereby or (iii) is
required to be disclosed in the Registration Statement or Prospectus and is not
so disclosed. There are no agreements, contracts, leases or documents of the
Company of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement by the Act or the Rules and Regulations which have not
been accurately described in all material respects in the Registration Statement
or Prospectus or filed as exhibits to the Registration Statement. Neither the
Company nor its Subsidiaries is a party or subject to the provisions of any
injunction, judgment, decree or order of any court, administrative agency,
regulatory body, government or governmental agency or body domestic or foreign,
that could be expected to result in a Material Adverse Change. Each of the
Company and its Subsidiaries has conducted and is conducting its business in
compliance with all applicable federal, state, local and foreign statutes, laws,
rules, regulations, ordinances, codes, decisions, decrees, directives and
orders, except where the failure to do so would not, singly or in the aggregate,
have a Material Adverse Effect on the Company.
(g) All outstanding shares of capital stock of each of the
Company and its Subsidiaries have been duly authorized and validly issued and
are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities.
The Company has an authorized, issued and outstanding capitalization as set
forth in the Prospectus. The capital stock of the Company conforms to the
description thereof contained in the Registration Statement and the Prospectus
(and such statements correctly state the substance of the instruments defining
the capitalization of the Company). The Shares to be issued and sold by the
Company hereunder have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement, and, when issued and delivered by the
5
<PAGE>
Company against payment therefor in accordance with the terms of this Agreement,
will be duly and validly issued and fully paid and nonassessable, and will be
sold to the Underwriters free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest. Except as set forth in the Prospectus,
no preemptive right, co-sale right, registration right, right of first refusal
or other similar right of shareholders exists with respect to any of the Shares
or the issuance and sale thereof, other than those that have been satisfied or
expressly waived prior to the date hereof and those that will automatically
expire upon and will not apply to the consummation of the transactions
contemplated on or before the Closing Date. Except as disclosed in the
Registration Statement, Prospectus and the financial statements of the Company,
and the related notes thereto included in the Prospectus, the Company has no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options (the "Plan Options"), or other rights granted and
exercised thereunder, set forth in the Prospectus fairly and accurately
presents, in all material respects, the information required to be shown with
respect to such plans, arrangements, options and rights. All outstanding Plan
Options have been duly authorized and issued in compliance with the option plan
pursuant to which such option was granted and with all federal and state
securities laws and the Florida Business Corporation Act.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, except as set forth in
the Registration Statement and Prospectus, there has not been (i) any Material
Adverse Change, (ii) any transaction that is material to either the Company or
any of its Subsidiaries, (iii) any material obligation, direct or contingent,
incurred by either the Company or any of its Subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any material change in the
capital stock or outstanding indebtedness for borrowed money of either the
Company or any of its Subsidiaries, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of either the Company or any of its
Subsidiaries, (vi) any default in the payment of principal of or interest on any
outstanding debt obligation which is not being repaid from the net proceeds of
the offering, or (vii) any loss or damage (whether or not insured) to the
property of either the Company or any of its Subsidiaries which has been
sustained or will have been sustained which has a Material Adverse Effect.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its Subsidiaries has good and marketable
title to all properties and assets described in the Registration Statement and
Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a Material Adverse Effect and liens for taxes not yet due and payable, (ii)
the agreements to which either the Company or any of its Subsidiaries is a party
described in, or filed as exhibits to, the Registration Statement and Prospectus
are valid agreements, enforceable by the Company or its Subsidiaries, as the
case may be, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles and rules of law governing specific performance,
estoppel, waiver, injunctive relief and other equitable remedies (regardless of
whether enforcement is sought in a proceeding at law or in equity) and, to the
Company's knowledge, the other contracting party or parties thereto are not in
breach or default under any of such agreements, and (iii) either the Company or
6
<PAGE>
its Subsidiaries has valid and enforceable leases for all properties described
in the Registration Statement and Prospectus, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles and rules of law governing
specific performance, estoppel, waiver, injunctive relief and other equitable
remedies (regardless of whether enforcement is sought in a proceeding at law or
in equity). Except as set forth in the Registration Statement and Prospectus,
the Company and its Subsidiaries own or lease all such properties as are
necessary to its operations as now conducted or as proposed to be conducted.
(j) Deloitte & Touche, LLP, KPMG LLP, PriceWaterhouseCoopers
LLP and BD&A Certified Public Accountants, Ltd., who have delivered their
reports with respect to the audited financial statements of the Company, Audio
Books Direct and Radio Spirits, Inc. and the audited carve-out financial
statements of the Columbia House Audiobook Club, together with the related
schedules and notes, filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent accountants
within the meaning of the Act and the Rules and Regulations. The audited
financial statements of the Company, Audio Books Direct and Radio Spirits, Inc.
and the audited carve-out financial statements of the Columbia House Audiobook
Club, together with the related schedules and notes, and any unaudited financial
information, forming part of the Registration Statement and Prospectus, fairly
present, in all material respects, the financial position and the results of
operations of the Company, Audio Books Direct, Radio Spirits and The Columbia
House Audiobook Club at the respective dates and for the respective periods to
which they apply; and all audited financial statements of the Company, Audio
Books Direct and Radio Spirits, Inc. and the audited carve-out financial
statements of the Columbia House Audiobook Club, together with the related
schedules and notes, and any unaudited financial information, filed with the
Commission as part of the Registration Statement, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as may be otherwise stated therein. The
selected and summary financial data included in the Registration Statement
fairly present, in all material respects, the information shown therein at the
respective dates and for the respective periods for which they apply, and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included in the Registration Statement.
(k) Each of the Company and its Subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(l) Each of the Company and its Subsidiaries has timely filed
all necessary federal, state, local and foreign income and franchise tax returns
and have paid all taxes shown thereon as due, and there is no tax deficiency
that has been or, might be asserted against the Company or any of its
Subsidiaries that might have a Material Adverse Effect. All tax liabilities are
adequately provided for on the books of each of the Company and its
Subsidiaries.
7
<PAGE>
(m) Each of the Company and its Subsidiaries maintains
insurance with insurers of recognized financial responsibility of the types and
in the amounts which are adequate or which are otherwise required by any
agreement to which either the Company or a Subsidiary is a party, including, but
not limited to, insurance covering real and personal property owned or leased by
the Company or its Subsidiaries against theft, damage, destruction, acts of
vandalism, products liability, errors and omissions, and all other risks
customarily insured against, all of which insurance is in full force and effect.
The Company does not have any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
(n) No labor disturbance by the employees of the Company or
any of its Subsidiaries exists or, to the Company's knowledge, is imminent. The
Company is not aware of any existing or imminent work stoppage or labor strike
by the employees of any of the Companies' or any of its Subsidiaries' principal
suppliers, subcontractors, distributors (domestic or foreign) that might be
expected to result in a Material Adverse Change. No collective bargaining
agreement exists with any of the Company's employees and, to the Company's
knowledge, no such agreement is imminent.
(o) If any full-time employee identified in the Prospectus has
entered into any non-competition, non-disclosure, confidentiality or other
similar agreement with any party other than the Company or its Subsidiaries,
such employee is neither in violation thereof nor is expected to be in violation
thereof solely as a result of the business conducted or expected to be conducted
by the Company as described in the Prospectus or such person's performance of
his or her obligations to the Company. [Substantially all] employees engaged by
or on behalf of the Company or any of its Subsidiaries to render services for
the Company or any of its Subsidiaries have entered into an agreement with the
Company or such Subsidiary, as the case may be, providing for terms and
conditions of non-disclosure and confidentiality in connection with such
services ("Confidentiality Agreements"). To the Company's knowledge, the
Confidentiality Agreements are the legal, valid, binding and enforceable
instruments of the employees, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting rights generally or by
general equitable principles and rules of law governing specific performance,
estoppel, waiver, injunctive relief, and other equitable remedies (regardless of
whether enforcement is sought in a proceeding at law or in equity). To the
Company's knowledge, no employee of the Company is in violation of any
Confidentiality Agreement. [Each Officer] of the Company or any of its
Subsidiaries has entered into an agreement with the Company or such Subsidiary,
as the case may be, providing for terms and conditions of non-disclosure,
non-competition and confidentiality ("Officer Confidentiality Agreements"). To
the Company's knowledge, the Officer Confidentiality Agreements are the legal,
valid, binding and enforceable instruments of the Officers, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws relating
to or affecting rights generally or by general equitable principles and rules of
law governing specific performance, estoppel, waiver, injunctive relief, and
other equitable remedies (regardless of whether enforcement is sought in a
proceeding at law or in equity). To the Company's knowledge, no Officer of the
Company is in violation of any Officer Confidentiality Agreement.
8
<PAGE>
(p) The Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is
approved for listing on the Nasdaq National Market System ("NMS"). The Company
has taken no action designed to, or likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act or delisting the
Common Stock from NMS, nor has the Company received any notification that the
Commission or NMS is contemplating terminating such registration or quotation.
(q) Each of the Company and its Subsidiaries owns or possesses
rights to use all patents, patent rights, patent licenses, inventions, trade
secrets, trademarks, service marks, trade names, copyrights, service names, mask
works, technology, know-how and other proprietary intellectual rights which are
necessary to conduct its business as now conducted and as described in the
Registration Statement and Prospectus, except where the failure to do so would
not have a Material Adverse Effect. Except as set forth in the Registration
Statement and the Prospectus, the expiration of any patents, patent rights,
trade secrets, trademarks, service marks, trade names or copyrights would not
have a Material Adverse Effect. The Company or its assignor has duly and
properly filed with the U.S. Patent and Trademark Office all pending trademark
and service mark applications (the "Trademark Applications") referred to in the
Registration Statement and Prospectus. The information contained in the
Registration Statement and Prospectus concerning the Trademark Applications and
patents owned by or licensed to the Company or its Subsidiaries is accurate in
all material respects. Neither the Company nor any of its Subsidiaries has
received any notice of, nor has it any knowledge of, any infringement of or
conflict with asserted rights of either the Company or any of its Subsidiaries
by others with respect to any patents, patent rights, inventions, trade secrets,
trademarks, service marks, trade names, copyrights, mask works, technology or
know-how. Neither the Company nor any of it Subsidiaries has received any notice
of, nor has it any knowledge of, any infringement of or conflict with asserted
rights of others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a Material Adverse Effect.
(r) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to conduct,
its affairs in such a manner as to ensure that it is not and will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act and such rules and regulations.
(s) Each of the Company and such Subsidiaries has submitted
all reports and other documentation necessary to be submitted in accordance with
all foreign regulatory orders, laws and regulations in jurisdictions in which
the Company or such Subsidiary is conducting business except where such failure
would not have a Material Adverse Effect. Neither the Company nor any such
Subsidiaries has received notification of violation of any applicable statute,
rule, regulation or order administered or issued by any foreign administrative
agency, regulatory body, government or governmental agency in foreign
jurisdictions in which it is conducting business.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its Subsidiaries is in compliance with
all laws, orders, rules and regulations relating to the use, treatment, storage
and disposal of toxic substances and protection of health or the environment
9
<PAGE>
("Environmental Laws") which are applicable to its business except where failure
to do so would not have a Material Adverse Effect, (ii) neither the Company nor
any of its Subsidiaries has received notice from any administrative agency,
regulatory body, government, governmental authority or third party of an
asserted claim under Environmental Laws, (iii) neither the Company nor any of
its Subsidiaries will be required to make material capital expenditures to
comply or cause its Subsidiaries to comply with Environmental Laws in the
foreseeable future and (iv) no property which is, or has been, owned, leased or
occupied by the Company or an of its Subsidiaries has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended, or otherwise designated as a contaminated
site under applicable state or local law.
(u) The Company has not distributed, and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option Shares
are to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale of
the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(v) Neither the Company nor any of its Subsidiaries has at any
time during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign or domestic office or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any foreign or
domestic governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by
applicable law.
(w) The Company has not taken and will not take, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(x) Except as otherwise set forth in the Registration
Statement and the Prospectus, each officer and director of the Company, and each
person listed on Schedule B attached hereto has agreed in writing (each such
writing, a "Lock-Up Agreement") that such person will not, except as set forth
in such Lock-Up Agreements, for the applicable period set forth in such Lock-Up
Agreements, offer or sell any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock (collectively,
"Securities"), now owned or hereafter acquired by such person. The Company has
provided to counsel for the Underwriters true, accurate and complete copies of
all of the Lock-up Agreements presently in effect or effected hereby. The
Lock-Up Agreements are the legal, valid, binding and enforceable instruments of
the parties thereto, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws relating to or affecting rights generally or by general
equitable principles and rules of law governing specific performance, estoppel,
waiver, injunctive relief, and other equitable remedies (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(y) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any shareholder who owns beneficially more than five
percent (5%) of the Common Stock of the Company or any of the members of the
families of any of them, except as disclosed in the Registration Statement and
the Prospectus.
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(z) Except as disclosed in the Registration Statement and the
Prospectus, neither the Company nor any of its officers or directors is a party
to any arrangements or understandings, whether oral or written, nor has the
Company or any such person made any payments for commissions or similar payment
in connection with the transactions contemplated by this Agreement.
(aa) There are no persons with registration or other similar
rights to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Act, other than those who have
entered into Lock-up Agreements and waived any applicable registration rights
with respect to the Registration Statement.
(bb) No relationship, direct or indirect, exists between or
among the Company on the one hand and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, that is required by the
Act or the Rules and Regulations to be described in the Registration Statement
and the Prospectus that is not described as so required.
(cc) The Preliminary Prospectuses and Prospectus delivered to
the Underwriters for use in connection with this offering were identical to the
versions of the Preliminary Prospectuses and Prospectuses created to be
transmitted to the Commission for filing via Electronic Data Gathering Analysis
and Retrieval System ("EDGAR"), except to the extent permitted by Regulation
S-T.
(dd) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government of Cuba
or with any person or affiliate located in Cuba.
3. Purchase, Sale and Delivery of Shares.
On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriters, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
$_____ per share, the respective number of Firm Shares which is set forth
opposite the name of such Underwriter in Schedule A hereto (subject to
adjustment as provided in Section 10).
Arrangement for electronic transfer of, or delivery of
definitive certificates for the Firm Shares to be purchased by the Underwriters
pursuant to this Section 3 shall be made against payment of the purchase price
therefor by the several Underwriters by wire transfer in same day funds, at the
offices of Klehr, Harrison, Harvey, Branzburg & Ellers, LLP, Philadelphia,
Pennsylvania (or at such other place as may be agreed upon between the
Representatives and the Company), at 10:00 A.M. Eastern Standard Time, on
______________, 2000 or such other date as the Representatives and the Company
may determine (or at such time and date to which payment and delivery shall have
been postponed pursuant to Section 11 hereof), such time and date of payment and
delivery being herein called the "Closing Date;" provided, however, that if the
Company has not made available to the Representatives copies of the Prospectus
within the time provided in Section 4(4) hereof, the Representatives may, in
their sole discretion, postpone the Closing Date until no later than two (2)
full business days following delivery of copies of the Prospectus to the
Representatives. The certificates for the Firm Shares to be so delivered will be
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made available to you at such office or such other location including, as you
may reasonably request at least two (2) full business days prior to the Closing
Date and will be in such names and denominations as you may request. If the
Representatives so elect, delivery of the Firm Shares may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the
several Underwriters intend to make a public offering (as such term is described
in Section 11 hereof) of the Firm Shares at a public offering price of $______
per share.
4. Further Agreements of the Company.
The Company covenants and agrees with each of the Underwriters that:
(1) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible. The Company will use its best efforts
to cause any 462 Registration Statement as may be required subsequent to the
date the Registration Statement is declared effective to become effective as
promptly as possible. The Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any 462 Registration
Statement has become effective or any supplement to the Prospectus has been
filed. If the Company omitted information from the Registration Statement at the
time it was originally declared effective in reliance upon Rule 430A(a) of the
Rules and Regulations, the Company will provide evidence reasonably satisfactory
to you that the Prospectus contains such information and has been filed, within
the time period prescribed, with the Commission pursuant to subparagraph (1) or
(4) of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective which
is declared effective by the Commission. If the Company files a term sheet
pursuant to Rule 434 of the Rules and Regulations, the Company will provide
evidence reasonably satisfactory to you that the Prospectus and term sheet
meeting the requirements of Rule 434(b) or (c), as applicable, of the Rules and
Regulations have been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (7) of Rule 424(b) of the Rules and
Regulations. If for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence reasonably satisfactory to you that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed. The Company will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information. Promptly upon your request, the
Company will prepare and file with the Commission any amendments or supplements
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to the Registration Statement or Prospectus which, in the opinion of counsel for
the several Underwriters ("Underwriters' Counsel"), may be necessary or
advisable in connection with the distribution of the Shares by the Underwriters.
The Company will promptly prepare and file with the Commission, and promptly
notify you of the filing of, any amendments or supplements to the Registration
Statement or Prospectus which may be necessary to correct any statements or
omissions, if, at any time when a prospectus relating to the Shares is required
to be delivered under the Act, any event shall have occurred as a result of
which the Prospectus or any other prospectus relating to the Shares as then in
effect would include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company will file
no amendment or supplement to the Registration Statement or Prospectus which
shall not previously have been submitted to you a reasonable time prior to the
proposed filing thereof or to which you object, subject, however, to compliance
with the Act and the Rules and Regulations and the provisions of this Agreement.
(2) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
prompt withdrawal if such stop order should be issued.
(3) The Company will arrange for qualification (including by
providing full cooperation with Underwriter's Counsel, whose services in this
matter are required and which you and the Company will seek to expedite) of the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, provided,
however, that the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Shares shall have been qualified as
above provided, the Company will make and file such statements and reports in
each year as are or may be required by the laws of such jurisdiction for such
purpose.
(4) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, copies of each Registration Statement (which will include all
exhibits), each Preliminary Prospectus, the Prospectus and any amendments or
supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you may
from time to time reasonably request. Notwithstanding the foregoing, if the
Representatives, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall provide
to you copies of a Preliminary Prospectus updated in all respects through the
date specified by you in such quantities as you may from time to time reasonably
request.
(5) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement, complying with the provisions of Section 11(a) of the Act
and covering a twelve (12) month period beginning after the effective date of
the Registration Statement.
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(6) During a period of three (3) years after the date hereof,
the Company will furnish to its shareholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and will furnish to you and
the other several Underwriters hereunder, upon request (i) concurrently with
furnishing such reports to its shareholders, statements of operations of the
Company for each of the first three (3) quarters in the form furnished to the
Company's shareholders, (ii) concurrently with furnishing to its shareholders, a
balance sheet of the Company as of the end of such fiscal year, together with
statements of operations, of shareholders' equity, and of cash flows of the
Company for such fiscal year, accompanied by a copy of the certificate or report
thereon of independent certified public accountants, and (iii) as soon as they
are available, copies of all reports (financial or other) mailed to all of the
Company's shareholders. During such three (3) year period, if the Company shall
have active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and such
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary which is not so consolidated.
(7) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(8) The Company will maintain a 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.
(9) If at any time during the earlier of the forty-five (45)
day period after the Registration Statement becomes effective or the date on
which all of the Option Shares are purchased, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith consult with you concerning the substance of and whether to
disseminate a press release or other public statement, commenting on such rumor,
publication or event.
(10) The Company will cause the Securities to be included for
quotation on NMS following the Firm Closing Date.
(11) For the period from the date hereof until 120 days after
the date hereof, the Company will not, in connection with a Financing
Transaction, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) of any shares of Common Stock
or any securities convertible into, or exchangeable or exercisable for, shares
of Common Stock, except for issuances pursuant to the exercise or conversion of
securities of the Company outstanding on the date hereof pursuant to the terms
of such securities as of the date hereof and to the extent not prohibited by
applicable contractual obligations of such security holders. For purposes of
this Agreement, the term "Financing Transaction" shall mean any transaction or
series or combination of transactions engaged in, directly or indirectly, by the
Company for the primary
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<PAGE>
purpose of raising capital. The term Financing Transaction shall not include a
transaction engaged in by the Company for a bona fide strategic business purpose
approved by the Company's board of directors and not for the primary purpose of
raising capital. Notwithstanding the foregoing, the Company may, with the
consent of Roth Capital Partners, Inc., which consent shall not be unreasonably
withheld, issue options or warrants to purchase Common Stock in connection with
obtaining a line of credit.
5. Expenses.
(a) The Company agrees with each Underwriter that:
(1) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
printing of this Agreement, the Agreement Among Underwriters, the Selected
Dealer Agreement, any Blue Sky filing fees and related expenses, the
Underwriters' Questionnaire and Power of Attorney, and any instruments related
to any of the foregoing; the issuance and delivery of the Shares hereunder to
the several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars' fees;
the fees and disbursements of counsel for the Company; all fees and other
charges of the Company's independent certified public accountants; the cost of
furnishing to the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus, and
any amendments or supplements to any of the foregoing; NASD filing fees and the
cost of qualifying the Shares under the laws of such jurisdictions as you may
designate (including filing fees and fees and disbursements of Underwriters'
Counsel in connection with such NASD filings any Blue Sky qualifications); all
other expenses directly incurred by the Company in connection with the
performance of its obligations hereunder; [and accountable expenses of the
Underwriter (including legal fees and expenses of Underwriter's counsel) up to a
maximum of $ .] The provisions of this Section 5(a)(1) are intended to relieve
the Underwriters from the payment of the expenses and costs which the Company
hereby agrees to pay.
(2) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company. Any such interim
reimbursement payments which are not made to the Underwriters, or any such
return of reimbursement payments which are not made to the Company within thirty
(30) days of a request for reimbursement or determination that any interim
reimbursement payment is improper, as the case may be, shall bear interest,
compounded daily, determined on the basis of the prior rate (or other commercial
lending rate for borrowers of the highest credit standing) listed in The Wall
Street Journal on and from the date of such request or the date of such
determination, as the case may be.
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(b) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Section 5(a)(2)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. Any such arbitration will be limited to the operation of the interim
reimbursement provisions contained in Section 5(a)(2) hereof and will not
resolve the ultimate propriety or enforceability of the obligation to indemnify
for expenses which is created by the provisions of Sections 8(a) and 8(b) hereof
or the obligation to contribute to expenses which is created by the provisions
of Section 8(d) hereof.
6. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters to purchase and pay for
the Shares as provided herein shall be subject to the accuracy, as of the date
hereof and the Closing Date and any later date on which Option Shares are to be
purchased, as the case may be, of the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder
and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 4:30 P.M., Eastern Standard Time, on the date following the date of
this Agreement, or such later date and time as shall be consented to in writing
by you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise in accordance with Section
4(1) of this Agreement) shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares, shall have been reasonably satisfactory to Underwriters' Counsel, and
such counsel shall have been furnished with such papers and information as they
may have reasonably requested to enable them to pass upon the matters referred
to in this Section.
(c) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, or any later date on which Option Shares are to
be purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus.
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(d) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, the
opinion of Blank Rome Tenzer Greenblatt LLP, counsel for the Company, dated as
of the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, addressed to the Underwriters and with reproduced
copies or signed counterparts thereof for each of the Underwriters,
substantially to the effect that:
(1) Each of the Company and its Subsidiaries has been
duly incorporated and are validly existing as corporations in good standing
under the laws of the jurisdiction of their incorporation;
(2) Each of the Company and its Subsidiaries has the
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus;
(3) Each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which its ownership or leasing of property or the conduct
of its business requires, except where the failure to so qualify would not have
a Material Adverse Effect;
(4) To such counsel's knowledge, the authorized, capital
stock of the Company is as set forth in the Prospectus as of the dates stated
therein. The issued and outstanding shares of capital stock of the Company have
been duly authorized, validly issued and are fully paid and nonassessable, and
have not been issued in violation of the Company's Articles of Incorporation or
bylaws or in violation of or subject to any preemptive right, co-sale right,
registration right, or right of first refusal or other similar right, whether
statutory, contained in the Company's Articles of Incorporation or bylaws or in
any other agreement or contract known to such counsel to which the Company is a
party.
(5) The Firm Shares or the Option Shares, as the case
may be, to be issued by the Company pursuant to the terms of this Agreement have
been duly authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be validly issued and fully paid and
nonassessable and will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or,
to the best of such counsel's knowledge, other similar right, whether statutory,
contained in the Company's Articles of Incorporation or bylaws or in any other
agreement or contract known to such counsel to which the Company is a party; and
the forms of certificates evidencing the Shares comply with Florida law;
(6) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(7) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly executed
and delivered by the Company and, is a valid and binding agreement of the
Company, enforceable in accordance with its terms, and except as enforceability
may be limited by (a) applicable bankruptcy, insolvency, reorganization,
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fraudulent conveyance, moratorium or similar laws and court decisions relating
to or affecting creditors' rights generally, (b) general principles of equity,
regardless of whether applied in a proceeding at law or in equity, (c) judicial
imposition of an implied covenant of good faith and fair dealing, and (d)
federal or state laws or public policy relating to the enforceability of the
indemnification and contribution provisions set forth in this Agreement;
(8) Based solely on telephone calls made to the
Commission on the Effective Date, the Closing Date and on such later date on
which Option Shares are purchased, 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 that purpose have
been instituted or are pending or, to such counsel's knowledge, threatened under
the Act;
(9) The Registration Statement and the Prospectus, and
each amendment or supplement thereto (other than the financial statements
(including supporting schedules), financial data derived therefrom (including
Exhibit 27.1 to the Registration Statement) and other financial and statistical
data and information contained therein or excluded therefrom as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, complied as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations;
[(10) The information in the Prospectus under the
caption "Description of Capital Stock," the information in the Prospectus
concerning the number of shares of common stock which are restricted shares
under the Securities Act of 1933, the number of restricted shares eligible for
sale in the public market and the date when all restricted shares will be
available for sale in the public market described in the Prospectus and the
information in the Prospectus under the caption "Business--Legal Proceedings,"
has been reviewed by such counsel and is a fair summary of such matters;]
[(11) The statements in the Prospectus summarizing the
Business Corporation Act of the State of Florida, (b) the description in the
Prospectus of the Articles of Incorporation and bylaws of the Company, and (c)
the statements, contained in the Prospectus under the caption "Shares Eligible
for Future Sale," regarding Rule 144 promulgated under the Act, are accurate in
all material respects.]
[(12) The description in the Registration Statement and
the Prospectus of the charter and bylaws of the Company and of statutes fairly
present in all material respects the information required to be presented by the
Act and the applicable Rules and Regulations;]
(13) The performance of the Company's obligations
pursuant to this Agreement will not (a) result in any violation of the Articles
of Incorporation or bylaws of the Company or any of its Subsidiaries or (b)
conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument known to
such counsel and to which the Company or any of its Subsidiaries is a party or
by which its properties are bound, or any applicable statute, rule or regulation
generally applicable to transactions of the type contemplated hereunder or any
order, writ or decree of any court, government or governmental agency or body
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that could reasonably be expected to have jurisdiction over the Company or any
of its properties or operations which such breach, conflict, violation or
default could reasonably be expected to have a Material Adverse Effect;
(14) [To such counsel's knowledge,] no consent,
approval, authorization or order of or qualification with any court, government
or governmental agency or body having jurisdiction over the Company or any of
its Subsidiaries or any of the Company's or its Subsidiaries' properties or
operations is necessary in connection with the consummation by the Company of
the transactions herein contemplated, except (i) such as have been obtained
under the Act or in connection with listing the Shares on NMS or (ii) such as
may be required by the NASD or under state or other securities or Blue Sky laws
in connection with the purchase and the distribution of the Shares by the
Underwriters;
(15) To such counsel's knowledge, each of Company and
its Subsidiaries is not in violation of its respective charter or bylaws.
(16) Except as set forth in the Registration Statement
and Prospectus, no holders of Common Stock or other securities of the Company
have registration rights with respect to securities of the Company and, except
as set forth in the Registration Statement and Prospectus, all holders of
securities of the Company having rights to registration of such shares of Common
Stock or other securities, because of the filing of the Registration Statement
by the Company, have, with respect to the offering contemplated hereby and
thereby, waived such rights and entered into the Lock-up Agreements; and
(17) Except as set forth in the Registration Statement
and the Prospectus, there is no actual or, to the knowledge of such counsel
after due inquiry, threatened action, suit, claim or proceeding relating to
patents, patent rights or licenses, trademarks or trademark rights, copyrights,
collaborative research, licenses or royalty arrangements or agreements or trade
secrets, know-how or proprietary techniques or technology, including, processes
and substances, owned by or affecting the business operations of the Company or
any of its Subsidiaries which are pending or threatened against the Company or
any of its Subsidiaries and which action, suit, claim or proceeding could
reasonably be expected to have a Material Adverse Effect.
In addition, such counsel shall state that although they are
not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, and, except as set forth in the opinion, have not
undertaken any independent investigation to determine the existence or absence
of such factual conditions and circumstances, based upon such counsel's
participation in discussions with representatives of the Company,
representatives of the Representatives and counsel to the Representatives in
connection with the preparation of the Registration Statement and Prospectus
contained therein or excluded therefrom, nothing has come to the attention of
such counsel which leads such counsel to believe that the Registration Statement
(other than the financial statements (including supporting schedules)), other
financial information derived therefrom (including Exhibit 27.1 to the
Registration Statement) and other financial, numeric and statistical data and
information contained therein or excluded therefrom, as to which such counsel
need express no opinion), on the Effective Date, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (ii) the
Prospectus, as of the Closing Date, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
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Counsel rendering the foregoing opinion may rely, as to
matters of fact, to the extent such counsel deems proper, upon appropriate
certificates of executive officers of the Company, of the Company's transfer
agent and of government officials. Such counsel may rely as to matters involving
the application of laws of any jurisdiction other than the State of New York,
the State of Florida, or the federal laws of the United States, to the extent
satisfactory in form and scope to counsel for the Underwriters, upon the opinion
of counsel qualified to pass on the laws of such jurisdiction; provided,
however, that the foregoing opinion shall also state that the Underwriters are
justified in relying upon such counsel and copies of such opinion shall be
delivered to you and Underwriter's counsel. References to the Registration
Statement and the Prospectus in this subsection (d) shall include any amendment
or supplement thereto at the date of such opinion. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of Klehr, Harrison, Harvey, Branzburg & Ellers, LLP, in form and
substance reasonably satisfactory to you, with respect to the sufficiency of all
such corporate proceedings and other legal matters relating to this Agreement
and the transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter, or letters from Deloitte & Touche, LLP, addressed to the Underwriters,
dated the Closing Date or such later date on which Option shares are to be
purchased, as the case may be (in each case, the "Bring Down Letter"),
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations and based upon the procedures described in the letter delivered
to you concurrently with the execution of this Agreement (herein called the
"Original Letter"), dated the date hereof, or such later date on which Option
Shares are to be purchased, as the case may be, (i) confirming, to the extent
true, that the statements and conclusions set forth in the Original Letter are
accurate as of the Closing Date or such later date on which Option Shares are to
be purchased, as the case may be, and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the Original Letter
that are necessary to reflect any changes in the facts described in the Original
Letter since its date, or to reflect the availability of more recent financial
statements, data or information. The Bring Down Letter shall not disclose any
change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in your sole judgement, is material and adverse
and that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus. The Original Letter shall be addressed to or for the use of the
Underwriters and the Company's Board of Directors in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are
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independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations, (ii) set
forth their opinion with respect to their examination of the balance sheets of
the Company as of December 31, 1999 and December 31, 1998, respectively, and
related statements of operations, changes in shareholders' equity (deficit) and
cash flows for the twelve months ended December 31, 1999 and December 31, 1998,
respectively, (iii) state that nothing came to their attention that caused them
to believe that the financial statements included in the Registration Statement
and Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations and
that any adjustments thereto have not been properly applied to the historical
amounts in the compilation of such statements, and (iv) address other matters
agreed upon by Deloitte & Touche LLP and you.
References to the Registration Statement and the Prospectus in
the preceding subparagraph (f) with respect to either letter referred to above
shall include any amendment or supplement thereto at the date of such letter.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, signed by the Chief
Executive Officer and Chief Financial Officer of the Company (in their
respective capacities), to the effect that, and you shall be satisfied that:
(1) The representations and warranties of the Company in
this Agreement are true and correct in all material respects, as if made on and
as of the Closing Date and such later date on which Option Shares are to be
purchased, as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions (unless waived) on its part to be
performed or satisfied at or prior to the Closing Date or any later date on
which Option Shares are to be purchased, as the case may be;
(2) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(3) When the Registration Statement became effective and
at all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, conformed in all material respects to the requirements of the Act and
the Rules and Regulations and, as of its date, did not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became
effective and at all times subsequent thereto up to and on the Closing Date and
on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
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amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing shall not apply to
information contained in the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof or information
omitted from the Registration Statement or Prospectus or any amendment or
supplement thereto relating to any Underwriter; and, since the effective date of
the Registration Statement, there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been so set forth; and
(4) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been (a) any Material Adverse Change, (b) any transaction that is material to
the Company and its Subsidiaries taken as a whole, except transactions entered
into in the ordinary course of business, (c) any obligation, direct or
contingent, that is material to the Company and its Subsidiaries taken as a
whole, incurred by the Company or any of its Subsidiaries, except obligations
incurred in the ordinary course of business, (d) any change in the capital stock
(other than exercises of options and warrants outstanding on the Effective Date
or conversions of convertible notes outstanding on the Effective Date) or
outstanding indebtedness of the Company or any of its Subsidiaries that is
material to the Company and its Subsidiaries taken as a whole or is out of the
ordinary course of business of the Company or such Subsidiary , (e) any dividend
or distribution of any kind declared, paid or made on the capital stock of the
Company, or (f) any loss or damage (whether or not covered by insurance) to the
property of the Company which has been sustained or will have been sustained
which has a Material Adverse Effect.
(h) The Company shall have obtained and delivered to you the
Lock-up Agreements complying with the provisions of this Agreement and Schedule
B hereof.
(i) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company) as to the accuracy of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
[(j) The Company shall have obtained an insurance policy, in
form and substance and with an insurer satisfactory to Roth Capital Partners,
Inc. in their sole discretion, providing for coverage substantially similar to
the Company's present officers' and directors' liability insurance coverage and
which is in a face amount of no less than double the amount of the Company's
current insurance coverage and which such insurance policy shall name as an
insured party Roth Capital Partners, Inc. and each person, if any, who controls
Roth Capital Partners, Inc. within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and shall cover all losses, claims, damages, or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are caused by, related to or based upon or in connection with the matters set
forth in subparagraphs (i) through (iv) of paragraph (a) of Section 8 hereof
accruing or asserted from the date hereof through no less than three years from
the Closing Date.]
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All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with such
number of conformed copies of such opinions, certificates, letters and documents
as you shall reasonably request.
7. Option Shares.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, solely for the
purpose of covering over-allotments in connection with the distribution and sale
of the Firm Shares only, a nontransferable option to purchase the Option Shares
at the purchase price per share for the Firm Shares set forth in Section 3
hereof (the "Option"). The Option may be exercised by the Representatives on
behalf of the several Underwriters on one or more occasions in whole or in part
during the period of forty-five (45) days after the date on which the Firm
Shares are initially offered to the public by giving written notice (the "Option
Notice") to the Company. The number of Option Shares to be purchased by each
Underwriter upon the exercise of the Option shall be the same proportion of the
total number of Option Shares to be purchased by the several Underwriters
pursuant to the exercise of the Option as the number of Firm Shares purchased by
such Underwriter (set forth in Schedule A hereto) bears to the total number of
Firm Shares purchased by the several Underwriters (set forth in Schedule A
hereto), adjusted by the Representatives in such manner as to avoid fractional
shares, or as otherwise agreed among the several Underwriters.
Arrangement for electronic transfer of or delivery of
definitive certificates for the Option Shares to be purchased by the several
Underwriters pursuant to the exercise of the Option granted by this Section 7
shall be made against payment of the purchase price therefor by the several
Underwriters by wire transfer in same day funds. In the event of any breach of
the foregoing, the Company shall reimburse the Underwriters for the interest
lost and any other expenses borne by them by reason of such breach. Such
delivery and payment shall take place at the offices of Klehr, Harrison, Harvey,
Branzburg & Ellers LLP, 260 South Broad Street, Philadelphia, Pennsylvania, or
at such other place as may be agreed upon between the Representatives and the
Company (i) on the Closing Date, if written notice of the exercise of such
option is received by the Company at least two (2) full business days prior to
the Closing Date, or (ii) on a date which shall not be earlier than the second
(2nd) full business day following the date the Company receives written Notice
of the Option and shall not be later than the third (3rd) full business day
following the date the Company receives written Notice of the Option, if such
notice is received by the Company after the date two (2) full business days
prior to the Closing Date.
The certificates for the Option Shares to be so delivered will
be made available to you at such office or such other location, as you may
reasonably request at least two (2) full business day prior to the date of
payment and delivery and will be in such names and denominations as you may
request, such request to be made at least two (2) full business days prior to
such date of payment and delivery. If the Representatives so elect, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
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<PAGE>
It is understood that each of you, individually, and not as
the Representatives of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior to
the date of payment and delivery for the Option Shares to be purchased by such
Underwriter or Underwriters. Any such payment by you shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, to the conditions set forth in Section 7 hereof, and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be reasonably
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may reasonably request in order to evidence the accuracy and completeness of
any of the representations, warranties or statements, the performance of any of
the covenants or agreements of the Company or the satisfaction of any of the
conditions herein contained.
2. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of the Act or the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such controlling
person may become subject (including, without limitation, in its capacity as an
Underwriter), under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of any
representation, warranty, agreement or covenant of the Company herein contained,
(ii) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
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 (iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in connection with
the marketing of the Shares furnished by the Company, including without
limitation, slides, videos, films and tape recordings,] and agrees to reimburse
each Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or
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<PAGE>
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary Prospectus
or the Prospectus, or any such amendment or supplement thereto, in reliance
upon, and in conformity with, written information relating to any Underwriter
furnished (or not furnished in the case of an omission or alleged omission of
information relating to any Underwriter) to the Company by such Underwriter,
directly or through the Representatives, specifically for use in the preparation
thereof. This indemnity agreement shall be in addition to any liabilities which
the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Act or otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or based
upon (i) any breach of any representation, warranty, agreement or covenant of
such Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8(b) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished (or not furnished in
the case of an omission or alleged omission of information relating to any
Underwriter) to the Company by such Underwriter, directly or through the
Representatives, specifically for use in the preparation thereof, and agrees to
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such loss, claim,
damage, liability or action.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each director
of the Company, and each person, if any, who controls the Company within the
meaning of the Act or the Exchange Act. This indemnity agreement shall be in
addition to any liabilities which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8 except to the extent that it has been
prejudiced by such omission. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it shall 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; provided, however, that if the defendants in any such action
include both the
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indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it which
are different from or additional to those available to the indemnifying party,
and that it is a conflict for the indemnified party or parties to be represented
by such counsel, the indemnified party or parties shall have the right to select
separate counsel to assume such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of the
indemnifying party's election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed separate
counsel in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with appropriate local
counsel) approved by the indemnifying party representing all the indemnified
parties under Section 8(a), 8(b), or 8(c) hereof who are parties to such
action), (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. In no event shall any
indemnifying party be liable in respect of any amounts paid in settlement of any
action unless the indemnifying party shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably withheld or
delayed. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnification could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on all claims that are the subject matter of such
proceeding.
(d) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this Section
8 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 this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the public offering
price (less the underwriting discount), and the Company and Norton Herrick are
responsible for the remaining portion, provided, however, that (i) no
Underwriter shall be required to contribute any amount in excess of the amount
by which the underwriting discount applicable to the Shares purchased by such
Underwriter exceeds the amount of damages which such Underwriter has otherwise
been required to pay and (ii) no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The contribution agreement in this Section 8(d) shall extend
upon the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter or the Company within the meaning
of the Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
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(e) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery.
All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter within the meaning of the Act or the Exchange Act, or by or on
behalf of the Company, or any of its officers, directors or controlling persons
within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Shares to the several Underwriters hereunder or termination of
this Agreement.
10. Substitution of Underwriters.
If any Underwriter or Underwriters shall fail to take up and pay
for the number of Firm Shares agreed by such Underwriter or Underwriters to be
purchased hereunder upon tender of such Firm Shares in accordance with the terms
hereof, and if the aggregate number of Firm Shares which such defaulting
Underwriter or Underwriters so agreed but failed to purchase does not exceed 10%
of the Firm Shares, the remaining Underwriters shall be obligated, severally in
proportion to their respective commitments hereunder, to take up and pay for the
Firm Shares of such defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or underwriters
shall have been substituted as aforesaid by such postponed Closing Date, the
Closing Date may, at the option of the Company, be postponed for a further
twenty-four (24) hours, if necessary, to allow the Company the privilege of
finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Shares which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
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Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement, supplements to the Prospectus
or other such documents which may thereby be made necessary, and (ii) the
respective number of Firm Shares to be purchased by the remaining Underwriters
and substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and pay
for all such Firm Shares so agreed to be purchased by the defaulting Underwriter
or Underwriters or substitute another underwriter or underwriters as aforesaid
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, then the Company shall not be liable to
any Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of
(i) 9:30 A.M., Eastern Standard Time, on the first full business day following
the effective date of the Registration Statement, or (ii) the time of the public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the public offering shall mean the time
of the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the time at which the Shares are first generally
offered by the Underwriters to the public by letter, telephone, telegram or
telecopy, whichever shall first occur. By giving notice as set forth in this
Section 11 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided herein.
(b) You, as Representatives of the several Underwriters, shall
have the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be, (i)
if the Company shall have failed, refused or been unable to perform any
agreement hereunder on its part to be performed, or because any other condition
of the Underwriters' obligations hereunder required to be fulfilled is not
fulfilled in all material respects, including, without limitation, any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and adverse,
or (ii) if additional governmental restrictions, not in force and effect on the
date hereof, shall have been
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imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the NMS or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your sole
judgment makes it inadvisable or impracticable to proceed with the offering,
sale and delivery of the Shares, or (v) if there shall have been an outbreak or
escalation of hostilities or of any other insurrection or armed conflict or the
declaration by the United States of a national emergency which, in the opinion
of the Representatives, makes it impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus. In the
event of termination pursuant to subparagraph (i) above, the Company shall
remain obligated to pay costs and expenses pursuant to Sections [5(a)(1) and
(2), 5(b) and 8] hereof. Any termination pursuant to any of subparagraphs (ii)
through (v) above shall be without liability of any party to any other party
except as provided in Sections [5(a)(1) and (2), 5(b) and 8].
If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Section 11, you shall
promptly notify the Company by telephone, telecopy or telegram, in each case
confirmed by letter. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone, telecopy
or telegram, in each case, confirmed by letter.
12. Notices.
All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, or telecopied (and confirmed by letter), and deemed given
when received, to the addresses set forth below:
If to the Underwriters:
c/o Roth Capital Partners, Inc.
18301 Von Karman, Suite 100
Irvine, California 92715
Facsimile Number: (714) 852-9603
Attention: General Counsel
With a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
260 South Broad Street
Philadelphia, PA, 19102
Facsimile Number: (215) 568-6603
Attention: Stephen T. Burdumy, Esq.
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If to the Company:
MediaBay, Inc.
2295 Corporate Blvd., N.W.
Suite 222
Boca Raton, Florida 33421
Facsimile Number: (___)___________
Attention: Chief Executive Officer
With a copy to:
Blank Rome Tenzer Greenblatt LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
Facsimile Number: (212) 885-5001
Attention: Robert J. Mittman, Esq.
13. Parties.
This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or entity, other
than the parties hereto and their respective executors, administrators,
successors and assigns, and the controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in Section 8 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or entity. No purchaser of any
of the Shares from any Underwriter shall be construed a successor or assign by
reason merely of such purchase.
In all dealings with the Company under this Agreement, you
shall act on behalf of each of the several Underwriters, and the Company shall
be entitled to act and rely upon any statement, request, notice or agreement
made or given by you jointly or by Roth Capital Partners, Inc. on behalf of you.
14. Applicable Law.
The validity and interpretation of this Agreement, and the
terms and conditions set forth herein, shall be governed by, and construed in
accordance with, the laws of the State of California.
15. Consent to Jurisdiction and Service of Process.
All judicial proceedings arising out of or relating to this
Agreement shall be initiated and tried exclusively in the State and Federal
courts located in the state of California. The aforementioned choice of venue is
intended by the
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parties to be mandatory and not permissive in nature, thereby precluding the
possibility of litigation between the parties with respect to or arising out of
this Agreement in any jurisdiction other than that specified in this Section 14.
The parties accept for themselves and in connection with their respective
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waive any defense of forum non conveniens and irrevocably
agree to be bound by any judgment rendered thereby in connection with this
Agreement. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated by
this Section 14 by registered or certified mail, return receipt requested,
postage prepaid, to its address for the giving of notices as set forth in this
Agreement.
16. Counterparts.
This Agreement may be executed by facsimile and in one or more
counterparts, each of which will constitute an original and all of which taken
together shall constitute one and the same agreement.
17. Information Supplied by Underwriters.
The statements set forth in the last paragraph on the front cover
page and under the heading "Underwriting" in the Prospectus constitute the only
information furnished by any Underwriter to the Company for use in the
Registration Statement or Prospectus for the purposes of Section 8 hereof.
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If the foregoing correctly sets forth the understanding among the Company and
the several Underwriters, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
the Company and the several Underwriters.
Very truly yours,
MEDIABAY, INC.
By: ________________________________________
Michael Herrick, Chief Executive Officer
Accepted as of the date first above written:
ROTH CAPITAL PARTNERS, INC.
L.H. FRIEND, WEINRESS, FRANKSON, &
PRESSON, LLC
PENNSYLVANIA MERCHANT GROUP
On their behalf and on behalf of each of the
several Underwriters named in Schedule A
hereto.
By: ROTH CAPITAL PARTNERS, INC.
By: ___________________________________
Name:
Title:
For and on behalf of the Representatives
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SCHEDULE A
Number of Firm Shares
Underwriters To Be Purchased
- ----------------------------------------------- -------------------------------
Roth Capital Partners, Inc.
L.H. Friend, Weinress, Frankson & Presson, LLC
Pennsylvania Merchant Group
TOTAL
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SCHEDULE B
<PAGE>
EXHIBIT 5
BLANK ROME TENZER GREENBLATT LLP
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
March 13, 2000
MediaBay, Inc.
20 Community Place
Morristown, New Jersey 07960
Gentlemen:
You have requested our opinion with respect to the sale by MediaBay,
Inc., a Florida corporation (the "Company") pursuant to a Registration Statement
(the "Registration Statement") on Form SB-2 under the Securities Act of 1933, as
amended (the "Act"), of : (i) up to 4,600,000 shares (the "Shares") of common
stock, no par value of the Company ("the "Shares").
We have examined originals, or copies certified or otherwise identified
to our satisfaction of such documents and corporate and public records as we
deem necessary as a basis for the opinion hereinafter expressed. With respect to
such examination, we have assumed the genuiness of all signatures appearing on
all documents presented to us as conformed or reproduced copies. Where factual
matters relevant to such opinion were not independently established, we have
relied upon certificates of appropriate state and local officials, and upon
certificates of executive officers and responsible employees and agents of the
Company. Based upon the foregoing, it is our opinion that the Shares when sold,
paid for and issued as contemplated by the Registration Statement, will be
validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion in the Registration
Statement, and to the use of our name as counsel in connection with the
Registration Statement and in the Prospectus forming a part thereof. In giving
this consent, we do not thereby concede that we come within the categories of
persons whose consent is required by the Act or the General Rules and
Regulations promulgated thereunder.
Very truly yours,
/s/ Blank Rome Tenzer Greenblatt LLP
BLANK ROME TENZER GREENBLATT LLP
