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Exhibit 1.1
FORM OF UNDERWRITING AGREEMENT
________________ Shares of Common Stock
of
VICTORY ENTERTAINMENT CORP.
UNDERWRITING AGREEMENT
New York, New York
, 2000
Weatherly Securities Corp.
Two World Trade Center, Suite 2946
New York, New York 10048
Ladies and Gentlemen:
Victory Entertainment Corp., a Florida corporation (the "Company"),
confirms its agreement with Weatherly Securities Corp. ("Weatherly" or the
"Representative," collectively with M.R. Beal & Company and the other
Underwriters set forth on Schedule 1 hereto, the "Underwriters"), with respect
to the sale by the Company and the purchase by the Underwriters of __________
shares (the "Firm Securities") of the Company's common stock, par value $.001
per share ("Common Stock"), in an initial public offering (the "IPO") and the
grant by the Company to the Underwriters of the option described in Section 2(b)
hereof to purchase up to an additional ______ shares [fifteen percent (15%) of
the Firm Securities] for the purpose of covering over-allotments, if any (the
"Overallotment Securities"). The Firm Securities together with the Overallotment
Securities are hereinafter collectively referred to as the "Securities." The
Company also proposes to issue to the Underwriters warrants to purchase up to
_________ shares of Common Stock [ten percent (10%) of the Securities sold in
the IPO less eighty thousand (80,000) shares] at an exercise price per share
equal to one hundred sixty-five percent (165%) of the price at which the
Securities are offered to the public (the "Underwriters' Warrants").
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1.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Underwriters as follows:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-38794) including
any related preliminary prospectus (each a "Preliminary Prospectus"),
for the registration of the Securities under the Securities Act of
1933, as amended (the "Act"), which registration statement and any
amendment or amendments have been prepared by the Company in conformity
with the requirements of the Act and the Rules and Regulations (as
hereinafter defined). Following execution of this Underwriting
Agreement (the "Agreement"), the Company will promptly file (i) if the
registration statement has been declared effective by the Commission, a
prospectus under Rules 430A and/or 424(b) under the Act, in form
satisfactory to the Underwriters, or (ii) in the event the registration
statement has not been declared effective, a further amendment to said
registration statement in the form heretofore delivered to the
Underwriters and will not, before the registration statement becomes
effective, file any other amendment thereto unless the Underwriters
shall have consented thereto after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed
as a part thereof and all information deemed to be a part thereof as of
such time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations), is hereinafter called the "Registration Statement," and
the form of prospectus in the form first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations is hereinafter
called the "Prospectus." For purposes hereof, "Rules and Regulations"
means the rules and regulations adopted by the Commission under either
the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of the Registration
Statement or Prospectus or any part thereof and no proceedings for a
stop order have been instituted or are pending or, to the knowledge of
the Company, threatened. Each of the Preliminary Prospectus, the
Registration Statement and the Prospectus at the time of filing thereof
conformed in all material respects with the requirements of the Act and
the Rules and Regulations, and neither the Preliminary Prospectus, the
Registration Statement nor the Prospectus at the time of filing thereof
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were
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made, not misleading, except that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and
in conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters
expressly for use in such Preliminary Prospectus, Registration
Statement or Prospectus.
(c) When the Registration Statement becomes effective (the
"Effective Date") and at all times subsequent thereto up to the Closing
Date and the Overallotment Closing Date (as hereinafter defined), and
during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and Prospectus will in all material respects
comply with the requirements of the Act and the Rules and Regulations;
neither the Registration Statement, nor any amendment thereto, at the
time the Registration Statement or such amendment is declared effective
under the Act, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus, as of its date, at the Closing Date and at the
Overallotment Closing Date, will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information
supplied to the Company in writing by or on behalf of the Underwriters
expressly for use in the Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Florida.
Each of the Company's subsidiaries has been duly incorporated or
organized and is validly existing as a corporation in good standing
under the laws of its state of incorporation or organization. Each of
the Company and its subsidiaries is duly qualified to do business and
in good standing as a foreign corporation in each jurisdiction in which
its ownership or leasing of its properties or the character of its
operations requires such qualification to do business, except where the
failure to so qualify would not have a material adverse effect on the
financial condition, prospects, properties, business or results of
operations of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect"). Each of the Company and its subsidiaries
has all requisite power and authority (corporate and other), and has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus, except where the failure to comply
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would not have a Material Adverse Effect; each of the Company and its
subsidiaries is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises
and permits and all federal, state, local and foreign laws, rules and
regulations, except where the failure to comply would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, certificate, franchise or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect. The disclosures, if any,
in the Registration Statement concerning the effects of federal, state,
local and foreign laws, rules and regulations on the Company's business
as currently conducted and as contemplated are correct in all material
respects.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under the caption
"Capitalization" and will have the pro forma as adjusted capitalization
set forth therein on the Closing Date, based upon the assumptions set
forth therein, subject in each case to any shares of Common Stock which
may have been issued subsequent to June 30, 2000 upon exercise of
outstanding warrants or stock options, and the Company is not a party
to or bound by any instrument, agreement or other arrangement providing
for the Company to issue any capital stock, rights, warrants, options
or other securities, except for this Agreement and as otherwise
described in the Prospectus. The Securities, the Underwriters' Warrants
and all other securities issued or issuable by the Company conform or,
when issued and paid for, will conform in all respects to all
statements with respect thereto contained in the Registration Statement
and the Prospectus. All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued
in violation of the preemptive rights of any holders of any security of
the Company, or similar contractual rights granted by the Company to
subscribe for or purchase securities. The Securities and the
Underwriters' Warrants to be issued and sold by the Company hereunder,
and upon payment therefor, are not and will not be subject to any
preemptive or other similar rights of any shareholder to subscribe for
or purchase securities, have been duly authorized and, when issued,
paid for and delivered in accordance with the terms hereof and thereof,
will be validly issued, fully paid and non-assessable and will conform
to the descriptions thereof contained in the Prospectus; the holders
thereof will not be subject to any liability solely as such holders;
all corporate action required to be taken for the authorization,
issuance and sale of the Securities and the Underwriters' Warrants has
been duly and validly taken; and the certificates, if any, representing
the Securities and the Underwriters' Warrants will be in due and proper
form. Authorized shares of
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Common Stock have been reserved for issuance by the Company upon
exercise by the Underwriters of the Underwriters' Warrants and when
certificates evidencing the shares of Common Stock issuable upon the
exercise of the Underwriters' Warrants have been duly executed,
countersigned, registered, issued and delivered upon exercise of the
Underwriters' Warrants in accordance with the terms thereof, such
shares will be validly issued, fully paid and non-assessable.
(f) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration
Statement and the Prospectus fairly present the financial position and
the results of operations of the Company and its predecessor at the
respective dates and for the respective periods to which they apply;
and such financial statements have been prepared in conformity with
generally accepted accounting principles and the Rules and Regulations,
consistently applied throughout the periods involved. There has been no
material adverse change or development involving a change in the
financial condition, prospects, properties, business or results of
operation of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Change"), whether or not arising in the ordinary
course of business, since the dates of the financial statements
included in the Registration Statement and the Prospectus and the
outstanding debt, the property, both tangible and intangible, and the
business of the Company conform in all material respects to the
descriptions thereof contained in the Registration Statement and in the
Prospectus.
(g) To the Company's knowledge, BDO Seidman, LLP, whose report is
filed with the Commission as a part of the Registration Statement, is
an independent certified public accountant as required by the Act and
the Rules and Regulations.
(h) Each of the Company and its subsidiaries (i) has paid all
federal, state, local and foreign taxes for which it is liable,
including, but not limited to, withholding taxes and taxes payable
under Chapters 21 through 24 of the Internal Revenue Code of 1986 (the
"Code"), (ii) has furnished all tax and information returns it is
required to furnish pursuant to the Code, and has established adequate
reserves for such taxes which are not due and payable, and (iii) does
not have knowledge of any tax deficiency or claims outstanding,
proposed or assessed against it.
(i) The Company maintains insurance, which is in full force and
effect, of the types and in the amounts which it reasonably believes to
be adequate for its business, including, but not limited to, personal
injury and product liability insurance covering all material personal
and real property owned or leased by the Company or any of its
subsidiaries against fire, theft, damage and all risks customarily
insured against.
(j) Except as disclosed in the Prospectus, there is no action,
suit, proceeding, inquiry, investigation, litigation or governmental
proceeding (including,
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without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or, to the knowledge of
the Company, threatened against, or involving the properties or
business of the Company which: (i) questions the validity of the
capital stock of the Company or this Agreement or of any action taken
or to be taken by the Company pursuant to or in connection with this
Agreement; (ii) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in
all respects); or (iii) would reasonably be expected to have a Material
Adverse Effect.
(k) The Company has full legal right, power and authority to enter
into this Agreement and the Underwriters' Warrants and to consummate
the transactions provided for in this Agreement; and each of this
Agreement and the Underwriters' Warrants has been duly authorized,
executed and delivered by the Company. Each of this Agreement and the
Underwriters' Warrants constitutes a legally valid and binding
agreement of the Company, subject to due authorization, execution and
delivery by the Underwriters, enforceable against the Company in
accordance with its terms (except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement
of creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law). Neither the Company's
execution or delivery of this Agreement or the Underwriters' Warrants,
its performance hereunder or thereunder, its consummation of the
transactions contemplated herein and therein, nor the conduct of its
business as described in the Registration Statement, the Prospectus and
any amendments or supplements thereto, conflicts with or will conflict
with or results or will result in any breach or violation of any of the
terms or provisions of, or constitutes or will constitute a default
under, or results or will result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon any property or
assets (tangible or intangible) of the Company or any of its
subsidiaries pursuant to the terms of: (i) its respective articles or
certificate of organization or incorporation or by-laws; (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, shareholders' agreement, note, loan or credit agreement or
any other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of its properties or assets
(tangible or intangible) is or may be subject; or (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company
or any of its subsidiaries of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or body (including,
without limitation, those having jurisdiction over environmental or
similar
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matters), domestic or foreign, having jurisdiction over the Company or
any of its subsidiaries or any of their respective activities or
properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the performance by the Company or
any of its subsidiaries of this Agreement and the transactions
contemplated hereby, except such as have been or may be obtained under
the Act or may be required under state securities or Blue Sky laws in
connection with (i) the Underwriters' purchase and distribution of the
Firm Securities and Overallotment Securities to be sold by the Company
hereunder or (ii) the issuance and delivery of the Underwriters'
Warrants.
(m) All executed agreements or copies of executed agreements
(whether electronically scanned or otherwise) filed as exhibits to the
Registration Statement (the "Material Agreements") to which the Company
or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries may be bound or to which any of its assets, properties
or businesses may be subject have been duly and validly authorized,
executed and delivered by the Company or any of its subsidiaries, and
constitute legally valid and binding agreements of the Company or any
of its subsidiaries party thereto, enforceable against it in accordance
with their respective terms, except to the extent there is no Material
Adverse Effect. The descriptions contained in the Registration
Statement of contracts and other documents are accurate in all material
respects and fairly present the information required to be shown with
respect thereto by the Rules and Regulations and there are no material
contracts or other documents which are required by the Act or the Rules
and Regulations to be described in the Registration Statement or filed
as exhibits to the Registration Statement which are not described or
filed as required, and the exhibits which have been filed are complete
and correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as
may otherwise be indicated or contemplated herein or therein, neither
the Company nor any of its subsidiaries has: (i) issued any securities
or incurred any liability or obligation, direct or contingent, for
borrowed money in any amount; (ii) entered into any transaction other
than in the ordinary course of business; (iii) declared or paid any
dividend or made any other distribution on or in respect of its capital
stock; or (iv) made any changes in capital stock or changes in debt
(long or short term) or liabilities other than in the ordinary course
of business; or (v) suffered a Material Adverse Change.
(o) Except as disclosed in the Prospectus, no default exists in the
due performance and observance of any term, covenant or condition of
any license, contract, indenture, mortgage, installment sales
agreement, lease, deed of trust, voting trust
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agreement, shareholders' agreement, note, loan or credit agreement, or
any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries may be bound or to or by which any of its property or
assets (tangible or intangible) is subject or affected except where
such default does not, and would not reasonably be expected to, have a
Material Adverse Effect.
(p) Each of the Company and its subsidiaries has generally enjoyed
a satisfactory employer-employee relationship with its employees and is
in compliance in all material respects with all federal, state, local
and foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours.
(q) Since its inception, neither the Company nor any of its
subsidiaries has incurred any liability arising under or as a result of
the application of the provisions of the Act and has not incurred any
liability as a result of any of the issuances set forth in Item 15 of
the Registration Statement.
(r) Except as would not have a material adverse effect upon the
Company, the Company has maintained its "employee benefit plans," as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Except as disclosed in the Prospectus,
the Company does not maintain or contribute to a defined benefit plan,
as defined in Section 3(35) of ERISA, or a multiemployer plan, as
defined in Section 3(37) of ERISA.
(s) Neither the Company nor any of its subsidiaries is in violation
in any material respect of any domestic or foreign laws, ordinances or
governmental rules or regulations to which it is subject.
(t) Except as described in the Prospectus or except as have been
waived prior to the date hereof, no holders of any securities of the
Company or of any options, warrants or other convertible or
exchangeable securities of the Company exercisable for or convertible
or exchangeable for securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or
to require the Company to file a registration statement under the Act
in connection with the offering of the Securities.
(u) Neither the Company nor, to the Company's knowledge, any of its
employees, directors, shareholders or affiliates (within the meaning of
the Rules and Regulations) has taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result in, under the Ex-
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change Act or otherwise, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the
Securities or otherwise.
(v) Except as described in the Prospectus, none of the patents,
patent applications, trademarks, service marks, trade names and
copyrights, or licenses and rights to the foregoing presently owned or
held by the Company or any of its subsidiaries is in dispute or is in
any conflict with the right of any other person or entity within the
Company's or any of its subsidiaries' current area of operations nor
has the Company received notice of any of the foregoing. To the
Company's knowledge, each of the Company and its subsidiaries: (i) owns
or has the right to use, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever, all patents,
trademarks, service marks, trade names and copyrights, technology and
licenses and rights with respect to the foregoing used in the conduct
of its business as now conducted or proposed to be conducted without
infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect
to any of the foregoing; and (ii) except as set forth in the
Prospectus, is not obligated or under any liability whatsoever to make
any payments by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service mark
trade name, copyright, know-how, technology or other intangible asset,
with respect to the use thereof or in connection with the conduct of
its business or otherwise.
(w) Except as disclosed in the Prospectus, the Company, directly or
through its subsidiaries, has unrestricted rights and/or licenses to
market and distribute the programming and related merchandise of The
Dooley and Pals Show, Vamps, Sk8ratz, ExtremeTeam and Nextbigstar.com,
free and clear of and without violating any right, lien or claim of
others.
(x) The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of all the material trade
secrets, trademarks, know-how (including unpatented and/or unpatentable
proprietary and confidential information), technical data and
information ("Intellectual Property") material to the business or
operations of the Company and its subsidiaries, taken as a whole.
(y) On or before the Effective Date of the Registration Statement,
the Company shall cause to be duly executed legally binding and
enforceable agreements (the "Lock-Up Agreements") pursuant to which (i)
each of the Company's officers and directors, and each person who
received options to purchase shares of Common Stock under the Company's
2000 Long Term Incentive and Share Award Plan (the "Plan"), executed a
Lock-Up Agreement substantially in the form of EXHIBIT 1, and (ii)
except as set forth in the Prospectus, all other persons who own Common
Stock or other se-
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curities exercisable for Common Stock have executed a Lock-Up Agreement
substantially in the form of EXHIBIT 2.
(z) Except as previously disclosed to the Underwriters in writing,
the Company has not incurred any liability and there are no
arrangements or understandings for services in the nature of a finder's
or origination fee with respect to the sale of the Securities or any
other arrangements, agreements, understandings, payments or issuances
with respect to the Company or any of its officers, directors or
affiliates that may adversely affect the Underwriters' compensation,
as determined by the National Association of Securities Dealers,
Inc. ("NASD").
(aa) The Firm Securities have been approved for quotation on the
Nasdaq National Market System of the Nasdaq Stock Market, Inc.
("Nasdaq") subject to official notice of issuance.
(bb) Neither the Company nor, to the knowledge of the Company, any
of its officers, employees, agents or any other person acting on behalf
of the Company has, directly or indirectly, given or agreed to give any
money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or
employee of any governmental agency (domestic or foreign) or
instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who was, is or may be in a position to help or hinder the
business of the Company (or assist the Company in connection with any
actual or proposed transaction) which: (a) might subject the Company or
any other such person to any damage or penalty in any civil, criminal
or governmental litigation or proceeding (domestic or foreign) which
would have a Material Adverse Effect; (b) if not given in the past,
would have had a Material Adverse Effect; and (c) if not continued in
the future, would reasonably be expected to have a Material Adverse
Effect. The Company's internal accounting controls are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of
1977, as amended.
(cc) The Company has entered into employment agreements with
Michael Gerber, Art David and Jacob (Kobi) Jaeger as described in the
Prospectus.
(dd) No securities of the Company have been sold by the Company
since its inception, except as disclosed in Part II of the Registration
Statement and except for the issuance of shares of common stock upon
the exercise of outstanding warrants and stock options. All sales of
securities set forth in Part II of the Registration Statement were made
pursuant to a valid exemption from registration under the Act and in
compliance with any applicable state or federal law.
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(ee) The minute books of the Company have been made available to
Ruskin, Moscou, Evans & Faltischek, P.C. ("Underwriters' Counsel") and
contain a complete summary of all meetings and actions of the Board of
Directors and Shareholders of the Company since May 1999.
(ff) Except as previously disclosed to Weatherly, no officer,
director or, to the Company's knowledge, shareholder of the Company has
any affiliation or association with any member of the NASD.
(gg) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property owned or leased by it and except for a general security
interest held by Wardley Investments Limited which will terminate upon
repayment of certain promissory notes upon consummation of the IPO,
free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects, or other restrictions or equities of any
kind whatsoever, other than liens for taxes or assessments not yet due
and payable except where the failure to comply would not have a
Material Adverse Effect.
(hh) Three (3) members of the Company's audit committee, as
described in the Prospectus, qualify as "independent directors" under
the Rules and Regulations of Nasdaq. All transactions between the
Company and its officers and directors required to be disclosed under
the Rules and Regulations as "related party transactions" have been
disclosed in the Prospectus under "Related Party Transactions" in
accordance with the Rules and Regulations.
1.2 REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. Each
Underwriter represents and warrants to, and agrees with, the Company as follows:
(a) Such Underwriter is a "qualified institutional buyer" as
defined in Rule 144A of the Act.
(b) Such Underwriter is acquiring the Underwriters' Warrants for
its own account for investment and not with a view to distribution, and
with no present intention of distributing the Underwriters' Warrants or
the shares of Common Stock issuable upon the exercise thereof or
selling the Underwriters' Warrants or the shares of Common Stock
issuable upon the exercise thereof for distribution. Such Underwriter
understands that the Underwriters' Warrants are being issued to such
Underwriter in a transaction which is exempt from the registration
requirements of the Act. Such Underwriter's acceptance of the
Underwriters' Warrants shall constitute a confirmation of the foregoing
representation and warranty and understanding thereof.
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(c) Such Underwriter has such knowledge and experience in financial
and business matters as is required for evaluating the merits and risks
of making this investment, and such Underwriter has received such
information requested by the Underwriters concerning the business,
management and financial affairs of the Company in order to evaluate
the merits and risks of making this investment. Further, such
Underwriter acknowledges that such Underwriter has had the opportunity
to ask questions of, and receive answers from, the officers of the
Company concerning the terms and conditions of this investment and to
obtain information relating to the organization, operation and business
of the Company and of the Company's contracts, agreements and
obligations.
(d) Such Underwriter is making the foregoing representations and
warranties with the intent that they may be relied upon by the Company
in determining the suitability of the issuance of the Underwriters'
Warrants to such Underwriter for purposes of federal and state
securities laws.
(e) Such Underwriter further acknowledges that such Underwriter has
been advised that such Underwriters' Warrants and the shares of Common
Stock issuable upon exercise thereof have not been registered under the
provisions of the Act.
(f) Such Underwriter has carefully evaluated the risks of this
investment, and understands and has relied only on the information
provided to it in writing by the Company relating to this investment.
(g) Such Underwriter has taken all actions reasonably necessary to
ensure that the Underwriter's participation in the IPO complies with
the Conduct Rules of the NASD.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND
AGREEMENT TO ISSUE UNDERWRITERS' WARRANTS.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Company agrees to sell to each Underwriter, and
each Underwriter, severally and not jointly, agrees to purchase from
the Company, the number of Firm Securities set forth opposite its name
on Schedule 1 hereto at a purchase price of _________[ninety-two
percent (92%) of the public offering price] per security.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters to purchase all or any portion of the Overallotment
Securities. The option granted hereby will expire forty-
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five (45) days after the date of this Agreement, and may be exercised
in whole or in part from at any time (but not more than once) only for
the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Firm Securities upon notice
by the Underwriters to the Company setting forth the number of
Overallotment Securities as to which the Underwriters are then
exercising the option and the time and date of payment and delivery for
such Overallotment Securities. Any such time and date of delivery shall
be determined by the Underwriters, but shall not be later than seven
full business days after the exercise of said option, nor in any event
prior to the Closing Date, unless otherwise agreed to in writing
between the Underwriters and the Company. Nothing herein contained
shall obligate the Underwriters to make any over-allotments. No
Overallotment Securities shall be delivered unless the Firm Securities
shall be simultaneously delivered or shall theretofore have been
delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of Weatherly at
Two World Trade Center, Suite 2946, New York, New York 10048 or at such
other place as shall be designated by Weatherly. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on ________
__, 2000 or at such other time and date as shall be agreed to in
writing between the Company and the Underwriters but not more than five
(5) business days after the Effective Date of the Registration
Statement (such time and date of payment and delivery being hereafter
called "Closing Date"). In addition, in the event that any or all of
the Overallotment Securities are purchased by the Underwriters, payment
of the purchase price for, and delivery of certificates for such
Overallotment Securities shall be made at the above-mentioned office or
at such other place and at such time (such time and date of payment and
delivery being hereinafter called "Overallotment Closing Date") as
shall be agreed upon by the Underwriters and the Company on the
Overallotment Closing Date as specified in the notice from the
Underwriters to the Company as contemplated in paragraph (b) above.
Delivery of the certificates for the Firm Securities and the
Overallotment Securities, if any, shall be made to the Underwriters
against payment by the Underwriters of the purchase price for the Firm
Securities and the Overallotment Securities, if any, to the order of
the Company by wire transfer of immediately available funds, and
certificates for the Firm Securities and the Overallotment Securities,
if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered
in such names as the Underwriters may request in writing at least two
(2) business days prior to Closing Date or the Overallotment Closing
Date, as the case may be. The certificates for the Firm Securities and
the Overallotment Securities, if any, shall be made available to
Weatherly at the above-mentioned office or such other place as the
Underwriters may designate for inspection, checking and packaging no
<PAGE>
-14-
later than 9:30 a.m. on the last business day prior to the Closing Date
or the Overallotment Closing Date, as the case may be.
The Company shall not be obligated to sell any Securities hereunder
unless all Firm Securities to be sold by the Company are purchased hereunder.
The Company agrees to issue and sell the Securities to the Underwriters in
accordance herewith.
(d) On the Closing Date, the Company shall issue the Underwriters'
Warrants, which shall entitle the holders thereof to purchase up to
________ shares of Common Stock [an amount equal to ten (10%) percent
of the Securities sold in the IPO less eighty thousand (80,000) shares]
in amounts as the Representative shall instruct the Company. The
Underwriters' Warrants shall be exercisable for a period of five (5)
years at an initial exercise price equal to one hundred sixty-five
percent (165%) of the initial public offering price of the Firm
Securities. The Underwriters' Warrants shall provide that the holder
thereof shall not, directly or indirectly, offer to sell, sell, grant
any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise encumber the Underwriters' Warrants or the shares of Common
Stock issuable upon the exercise of or dispose of any beneficial
interest therein for a period of not less than twelve (12) months. The
Underwriters' Warrants shall be substantially in the form filed as
Exhibit 10.30 to the Registration Statement. The Company has reserved
and shall continue to reserve a sufficient number of shares of Common
Stock for issuance upon exercise of the Underwriters' Warrants.
3. PUBLIC OFFERING OF THE SECURITIES. As soon after the Registration
Statement becomes effective and as the Underwriters deems advisable, but in no
event more than five (5) business days after such Effective Date, the
Underwriters shall make a public offering of the Securities at the price and
upon the other terms set forth in the Prospectus and otherwise in compliance
with the Rules and Regulations. The Underwriters may allow such concessions and
discounts upon sales to other dealers as set forth in the Prospectus. The
Underwriters may from time to time increase or decrease the public offering
price after distribution of the Securities has been completed and after the
Underwriters have exercised any option to purchase Overallotment Securities to
such extent as the Underwriters, in their sole discretion, deem advisable and
otherwise in compliance with the Rules and Regulations.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement (if it has not already become effective) and any
amendments thereto to become effective as promptly as practicable and
will not at any time, whether before or after the Effective Date of the
Registration Statement, file any amendment to the Registration
Statement or supplement to the Prospectus or file any document under
the Ex-
<PAGE>
-15-
change Act within twenty-five (25) days after the date of the
Prospectus except for Form 8-A to which the Underwriters shall have
objected; provided such filing is not required by the Rules and
Regulations; or (iii) .which is not in compliance with the Act, the
Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriters and, if requested by the
Underwriters, confirm by notice in writing: (i) when the Registration
Statement, as amended, becomes effective (if it has not already become
effective), if the provisions of Rule 430A promulgated under the Act
will be relied upon, when the Prospectus has been filed in accordance
with said Rule 430A and when any post-effective amendment to the
Registration Statement becomes effective; (ii) of the issuance by the
Commission of any stop order or of the initiation or the threatening of
any proceeding suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the
Prospectus, or any amendment or supplement thereto, or the institution
of proceedings for that purpose; (iii) of the issuance by any state
securities commission of any proceedings for the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose; (iv) of the receipt of any comments from
the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information. If the Commission or
any state securities commission or regulatory authority shall enter a
stop order or suspend such qualification at any time, the Company will
make every reasonable effort to obtain promptly the lifting of such
order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Underwriters) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant
to Rule 424(b) within the time periods specified therein.
(d) The Company will give the Underwriters notice of its intention
to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement
to the Prospectus (including any revised prospectus which the Company
proposes for use by the Underwriters in connection with the offering of
the Securities which differs from the corresponding prospectus on file
at the Commission at the time the Registration Statement becomes
effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the Rules and Regulations), will
furnish the Underwriters with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file any such prospectus to which
the Underwriters or Underwriters' Counsel shall reasonably object.
<PAGE>
-16-
(e) The Company shall cooperate in good faith with the
Underwriters, and Underwriters' Counsel, at or prior to the time the
Registration Statement becomes effective, in endeavoring to qualify the
Securities for offering and sale under the securities laws of such
jurisdictions as the Underwriters may reasonably designate, and shall
cooperate with the Underwriters and Underwriters' Counsel in the making
of such applications, and filing such documents and shall furnish such
information as may be required for such purpose; provided, however, the
Company shall not be required to qualify as a foreign corporation or
file a general consent to service of process in any such jurisdiction.
In each jurisdiction where such qualification shall be effected, the
Company will, unless the Underwriters agree that such action is not at
the time necessary or advisable, use all reasonable efforts to file and
make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction to continue such
qualification.
(f) During the time when the Prospectus is required to be delivered
under the Act, the Company shall use all reasonable efforts to comply
with all requirements imposed upon it by the Act and the Exchange Act,
as now and hereafter amended, and by the Rules and Regulations, as from
time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the
provisions hereof and the Prospectus, or any amendments or supplements
thereto. If at any time when the Prospectus relating to the Securities
is required to be delivered under the Act any event shall have occurred
as a result of which the Prospectus, as then amended or supplemented,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary at any time to amend
the Prospectus to comply with the Act, the Company will notify the
Underwriters promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of
the Act, each such amendment or supplement to be reasonably
satisfactory to Underwriters' Counsel, and the Company will furnish to
the Underwriters a reasonable number of copies of such amendment or
supplement.
(g) As soon as practicable, but in any event not later than
forty-five (45) days after the end of the twelve-month period
commencing on the day after the end of the fiscal quarter of the
Company during which the Effective Date of the Registration Statement
occurs (90 days in the event that the end of such fiscal quarter is the
end of the Company's fiscal year), the Company shall make generally
available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters, an
earnings statement which will be in such form and detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the
Act and Rule 158(a) of the Rules and Regulations, which statement need
not be audited
<PAGE>
-17-
unless required by the Act, covering a period of at least twelve (12)
consecutive months after the Effective Date of the Registration
Statement.
(h) During a period of three (3) years after the date hereof and
provided that the Company is required to file reports with the
Commission under Section 12 of the Exchange Act, the Company will
furnish to its shareholders, as soon as practicable, annual reports
(including financial statements audited by independent public
accountants), and will deliver to the Underwriters:
(i) as soon as they are available, copies of all reports
(financial or other) mailed to shareholders;
(ii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the
NASD or any securities exchange;
(iii) a copy of any Schedule 13D, 13G, 14D-l, 13E-3 or 13E-4
received or filed by the Company from time to time;
(iv) every press release and every material news item or
article of interest to the financial community in respect of the
Company and any future subsidiaries or their affairs which was
released or prepared by the Company which are reasonably available;
and
(v) any additional information of a public nature concerning
the Company and any future subsidiaries or their respective
businesses which the Underwriters may reasonably request which is
reasonably available.
During such three-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the Company and
its subsidiaries are consolidated and, if available, will be
accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) The Company will furnish to the Underwriters or pursuant to the
Underwriters' direction, without charge, at such place as the
Underwriters may designate, copies of each Preliminary Prospectus, the
Registration Statement and any pre-effective or post-effective
amendments thereto (two copies of which will be signed and will include
all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared
after the Effective Date of the Registration Statement, in each case as
soon as available and in such quantities as the Underwriters may
reasonably request.
<PAGE>
-18-
(j) The Company will not take, and the Company shall take
reasonable steps to prevent its officers, directors and affiliates from
taking, directly or indirectly, any action designed to, or which might
in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the
Company except as may be permitted under the Act or the Exchange Act.
(k) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the provisions, set forth
under the caption "Use of Proceeds" in the Prospectus.
(l) The Company shall take such steps as shall be necessary to
ensure that neither the Company nor any subsidiary shall become an
"investment company" within the meaning of such term under the
Investment Company Act of 1940 and the rules and regulations of the
Commission thereunder.
(m) The Company shall timely file all such reports, forms or other
documents as may be required from time to time under the Act, the
Exchange Act and the Rules and Regulations, and all such reports, forms
and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act and the Rules
and Regulations.
(n) For a period of one (1) year from the Effective Date of the
Registration Statement, the Company shall furnish to the Underwriters
at the Company's sole expense upon the Underwriters' request following
reasonable notice, but no more than four (4) times in the aggregate,
daily consolidated transfer sheets relating to the Securities.
(o) The Company will not take any action to facilitate the sale of
any shares of Common Stock pursuant to Rule 144 under the Act or
otherwise if any such sale would violate the terms of the Lock-up
Agreements. The Lock-up Agreements shall be substantially in the form
attached hereto as EXHIBIT 1, in the case of the parties referred to in
Section 1.1(y)(i) above, and as EXHIBIT 2, in the case of the parties
referred to in Section 1.1(y)(ii) above.
(p) Prior to the 120th day after the Overallotment Closing Date,
the Company will provide the Underwriters and their respective
designees with ten (10) bound volumes of the transaction documents
relating to the Registration Statement and the closings thereunder.
(q) Until a date which is three (3) years from the Closing Date,
the Company shall use commercially reasonable efforts to cause one (1)
individual selected by the Representative to be nominated for election
to the Board of Directors of the Com-
<PAGE>
-19-
pany (the "Board"), if requested by the Representative and provided
such individual is reasonably acceptable to and approved by the
Company. The Underwriters' nominee, if elected, shall receive the same
compensation as the other non-employee members of the Board.
[Alternatively, the Representative shall be entitled to appoint an
individual who shall be permitted to attend all meetings of the Board
and to receive all notices and other correspondence and communications
sent by the Company to members of the Board, and copies of all minutes
thereof.] The Company shall reimburse the Representative designee for
his or her out-of-pocket expenses reasonably incurred and authorized in
advance by the Company in connection with his or her attendance at
Board meetings. To the extent permitted by law, the Company agrees to
indemnify the Representative's designee to the same extent it
indemnifies the other non-employee members of the Board. The
Representative's nominee shall, if a member of the Board and if so
requested by the Chairman of the Board, be a member of the Audit
Committee of the Board. The Representative's nominee or designee, as
the case may be, shall agree not to disclose any non-public information
and shall, if requested by the Company, execute and deliver a
non-disclosure agreement upon terms reasonably acceptable to the
Company. The Company reserves the right not to provide information and
to exclude such Representative's attendee from any meeting or portion
thereof if attendance at such meeting by such attendee would compromise
or adversely affect the attorney-client privilege between the Company
and its counsel, or would, in the good faith judgment of the Board,
result in a conflict of interest situation. The Company shall use its
reasonable efforts to promptly bring to the attention of such attendee
any agenda item that, in the good faith judgment of the Board, would
result in any trade secret, privileged matter or a conflict of interest
arising during such meeting and the Board may exclude such attendee (or
alternatively, the attendee shall be entitled to exclude himself or
herself) from any deliberation or discussion of the Board concerning
such trade secret (if the observer has not executed a confidentiality
agreement), privileged matter or dissemination of such information. If
such observer in his or her good faith judgment believes that an item
to be discussed shall result in a conflict, then such observer shall
promptly bring such conflict to the attention of the Chairman of the
Board. In no event shall any provision of this paragraph waive any
obligation of confidentiality to the Company owed by any such attendee
or the Representative.
(r) The Company will use commercially reasonable efforts to engage
BDO Seidman, LLP (or a substitute independent certified public
accounting firm having a national reputation reasonably acceptable to
the Representative) on or before the Closing Date, and continuously
engage such firm for three (3) years following the Closing Date.
<PAGE>
-20-
(s) On or prior to the Closing Date, the Company will give written
instructions to the Transfer Agent directing the placement of
stop-order restrictions against all certificates representing all
securities of the Company owned by the persons who have entered into
Lock-Up Agreements.
(t) The Underwriters acknowledge that the Company will use its best
efforts to obtain key-man life insurance policy with respect to Mr.
Gerber in the amount of $3,000,000 and to keep such insurance in effect
until the third anniversary of the Effective Date, assuming such
insurance is available on commercially reasonable terms.
(u) As soon as practicable, but in no event more than five (5)
business days after the Effective Date of the Registration Statement,
the Company shall file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities.
(v) During the period commencing on the date hereof and ending on
the first anniversary of the Effective Date (the "Lock-up Period"),
except with the written consent of the Underwriters, the Company will
not issue or sell, directly or indirectly, any shares of its capital
stock, or sell or grant options, or warrants or rights to purchase any
shares of its capital stock, except pursuant to (i) this Agreement,
(ii) the Underwriters' Warrants, (iii) the exercise of warrants and
options of the Company heretofore issued and described in the
Prospectus, (iv) the grant of options and the issuance of shares issued
upon exercise of options issued or to be issued under the Plan and (v)
the issuance of shares of Common Stock in connection with the
settlement of the litigation CMI INTERNATIONAL HOLDING LTD. v.
LIGHTPOINT ENTERTAINMENT, INC., ET AL. (the "CMI Litigation").
Notwithstanding the foregoing, the Company may issue shares of its
Common Stock during the Lock-up Period in connection with (i)
acquisitions, strategic alliances or joint ventures or (ii)
compensation for directors or consultants (not in excess of 100,000
shares during the Lock-Up Period for purposes of this clause (ii))
("Excepted Transactions"); provided, however, that: (i) the Company
shall give Weatherly five (5) days prior written notice of any such
issuance describing the Excepted Transaction in reasonable detail and
stating the number of shares of Common Stock proposed to be issued in
the Excepted Transaction, (ii) all Common Stock issued in connection
with the Excepted Transaction shall remain subject to the lock-up
restrictions of this Section 4(v) for the remainder of the Lock-up
Period, (iii) prior to any such issuance of Common Stock, each person
that is to acquire any such Common Stock shall sign a lock-up agreement
in form and substance reasonably acceptable to Weatherly covering all
such shares of Common Stock for the remainder of the Lock-up Period and
(iv) no such issuance shall be made unless and until the re-
<PAGE>
-21-
quirements and conditions in the foregoing clauses (i), (ii) and (iii)
have been complied with and satisfied.
(w) Subsequent to the dates as of which information is given in the
Registration Statement and Prospectus and prior to the Closing Date or
the Overallotment Closing Date, except as disclosed in or contemplated
by the Registration Statement and Prospectus, (i) neither the Company
nor its subsidiaries will have incurred any liabilities or obligations,
direct or contingent, or entered into any material transactions other
than in the ordinary course of business; (ii) there shall not have been
any change in the capital stock, funded debt (other than regular
repayments of principal and interest on existing indebtedness) or other
securities of the Company or any Material Adverse Change, including any
material loss or damage to the properties of the Company (whether or
not such loss is insured against), which would reasonably be expected
to have a Material Adverse Effect; and (iii) the Company shall not pay
or declare any dividend or other distribution on its Common Stock or
its other securities or redeem or repurchase any of its Common Stock or
other securities.
(x) The Company maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as
necessary in order to permit preparation of financial statements in
accordance 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.
(y) For a period equal to the lesser of (i) three (3) years from
the date hereof, or (ii) the sale to the public of the shares
underlying the Underwriters' Warrants, the Company will not take any
action or actions that may prevent or disqualify the Company's use of
Form S-1 or Form S-3 for the registration under the Act of the shares
underlying the Underwriters' Warrants.
(z) For a period of three (3) years from the date hereof, use its
best efforts at its cost and expense to maintain the listing of the
Securities on the Nasdaq National Market System.
(aa) Until the later of (i) the date of which the Prospectus is no
longer required to be delivered in connection with sales by the
Underwriters or a dealer or (ii) twenty-five (25) days after the date
of the Prospectus, the Company shall not without the prior written
consent of the Underwriters, which consent shall not be unreasonably
withheld, issue, directly or indirectly, any press release or other
communication or
<PAGE>
-22-
hold any press conference with respect to the Company or its activities
or the offering contemplated hereby, other than trade releases issued
in the ordinary course of the Company's business consistent with past
practices with respect to the Company's operations.
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing Date
and the Overallotment Closing Date (to the extent not paid at the
Closing Date) all of its and Weatherly's expenses and fees incident to
the performance of the obligations of the Company and Weatherly under
this Agreement and in connection with the IPO, including, without
limitation: (i) the fees and expenses of accountants and counsel for
the Company; (ii) all costs and expenses incurred in connection with
the preparation, duplication, mailing, printing and filing of the
Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing and delivery of the
Preliminary Prospectuses and any amendments thereof or supplements
thereto supplied to the Underwriters in quantities as hereinabove
stated; (iii) the printing, engraving, issuance and delivery of the
Securities including any transfer or other taxes payable in connection
with the issuance of the Securities to the Underwriters; (iv)
disbursements and fees of Underwriters' Counsel in connection with the
qualification of the Securities under state or foreign securities or
"Blue Sky" laws, including the costs of printing and mailing the
"Preliminary Blue Sky Memorandum" and the "Supplemental Blue Sky
Memorandum," if any, which Underwriters' Counsel fees (exclusive of
filing fees and disbursements) shall not exceed $10,000; (v)
advertising costs and expenses, including but not limited to costs and
expenses in connection [with one information meeting held in New York,
New York,] one tombstone advertisement, at least ten (10) sets of bound
volumes of the offering documents for the Underwriters and their
counsel; (vi) fees and expenses of the transfer agent; (vii) the fees
payable to the NASD; and (viii) the fees and expenses incurred in
connection with the listing of the Securities on the Nasdaq National
Market; provided, the Company shall not be responsible for counsel fees
and expenses of the Underwriters or expenses incurred by the
Underwriters in connection with any "road show" conducted in connection
with the IPO. All fees and expenses payable to the Underwriters
hereunder shall be payable at the Closing Date or Overallotment Closing
Date, as applicable.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, the Company shall
reimburse and indemnify the Underwriters in accordance with Section
11(c).
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to
the Underwriters a non-
<PAGE>
-23-
accountable expense allowance equal to three percent (3%) of the gross
proceeds received by the Company from the sale of the Firm Securities,
$25,000 of which has been paid to date to the Underwriters. The Company
will pay the non-accountable expense allowance on the Closing Date by
wire transfer of immediately available funds or, at the election of the
Underwriters, by deduction from the payment from the Underwriters to
the Company as contemplated under Section 2(c). In the event the
Underwriters elect to exercise the over-allotment option described in
Section 2(b) hereof, the Company further agrees to pay to the
Underwriters on the Overallotment Closing Date (by wire transfer of
immediately available funds or, at the Underwriters' election, by
deduction from the proceeds of the offering) a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds received by
the Company from the sale of the Overallotment Securities.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein in all material respects as
of the Closing Date and the Overallotment Closing Date, if any, as if they had
been made on and as of the Closing Date or the Overallotment Closing Date, as
the case may be; the accuracy on and as of the Closing Date or Overallotment
Closing Date, if any, of the statements of officers of the Company made pursuant
to the provisions hereof; and the performance by the Company on and as of the
Closing Date and the Overallotment Closing Date, if any, of each of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., New York time, on the date of this Agreement or
such later date and time as shall be consented to in writing by the
Underwriters, and, at Closing Date and the Overallotment Closing Date,
if any, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending or contemplated to the
knowledge of the Company by the Commission and any request on the part
of the Commission for additional information shall have been complied
with to the reasonable satisfaction of Underwriters' Counsel. If the
Company has elected to rely upon Rule 430A of the Rules and
Regulations, the price of the Securities and any price-related
information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and
Regulations within the prescribed time period, and prior to Closing
Date the Company shall have provided evidence satisfactory to the
Underwriters of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A of the Rules
and Regulations.
<PAGE>
-24-
(b) The Company shall not have advised the Underwriters that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Underwriters' reasonable opinion and
the reasonable opinion of Underwriters' Counsel as defined below, is
material or omits to state a fact which, in the Underwriters'
reasonable opinion and the reasonable opinion of Underwriters' Counsel,
is material and is required to be stated therein or is necessary to
make the statements therein not misleading, or that the Prospectus, or
any supplement thereto, contains an untrue statement of fact which, in
the Underwriters' reasonable opinion and the reasonable opinion of its
counsel is material, or omits to state a fact which, in the
Underwriters' reasonable opinion and the reasonable opinion of
Underwriters' Counsel, is material and is required to be stated therein
or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Securities,
the Underwriters' Warrants, the Registration Statement and the
Prospectus, and all other legal matters relating to this Agreement and
the transactions contemplated hereby, shall be reasonably satisfactory
in all material respects to counsel for the Underwriters, and the
Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass
upon such matters.
(d) At the Closing Date and the Overallotment Closing Date, the
Underwriters shall have received the opinion of Lowndes, Drosdick,
Doster, Kantor & Reed, P.A., Florida counsel to the Company, dated the
Closing Date, or Overallotment Closing Date, as the case may be,
addressed to the Underwriters and in form and substance reasonably
satisfactory to Underwriters' Counsel, to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Florida with full corporate power and authority to own or lease its
properties and to carry on its business as set forth in the
Registration Statement and Prospectus. We confirm that the Company
is qualified to do business in the following States:
_______________;
(ii) Each of Victory Distribution Inc., Victory Television,
Inc., Victory Animation Studios Inc., Lightpoint Entertainment,
Inc. and Vamps Productions, Inc. (the "Florida Subsidiaries") has
been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Florida with full
corporate power and authority to own or lease its properties and to
carry on its business as set forth in the Registration Statement
and Prospectus. Based solely on certificates from public officials,
we confirm that the Florida
<PAGE>
-25-
Subsidiaries are qualified to do business in the following
States: Victory Distribution Inc.: ______________________, Victory
Television, Inc.: __________________, Victory Animation Studios
Inc.: _________________, Lightpoint Entertainment, Inc.:
______________________ and Vamps Productions, Inc.:
______________________;
(iii) All issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable; the holders thereof are not, except by
reason of their own conduct or acts, subject to personal liability
by reason of being such holders, and to the counsel's knowledge
none of such securities were issued in violation of the preemptive
rights of any holder of any security of the Company. The Securities
to be sold by the Company hereunder have been duly authorized and,
when issued, paid for and delivered in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and
conform or upon issuance will conform to the description thereof
contained in the Prospectus; to such counsel's knowledge, the
Securities are not subject to any preemptive or other similar
rights of any shareholder of the Company; to such counsel's
knowledge, the holders of the Securities shall not be personally
liable for the payment of the Company's debts solely by reason of
being such holders except as they may be liable by reason of their
own conduct or acts; and the certificates representing the
Securities are in due and proper form under applicable Florida law.
The shares of Common Stock issuable upon exercise of the
Underwriters' Warrants have been reserved for issuance. When
certificates evidencing the shares of Common Stock issuable upon
the exercise of the Underwriters' Warrants have been duly executed,
countersigned, registered, issued and delivered upon exercise of
the Underwriters' Warrants in accordance with the terms thereof,
the shares of Common Stock issuable upon the exercise of the
Underwriters' Warrants will be duly and validly issued, fully paid
and non-assessable; to such counsel's knowledge, the Underwriters'
Warrants and the shares of Common Stock issuable upon the exercise
thereof are not subject to any preemptive or other similar rights
of any shareholder of the Company;
(iv) To such counsel's knowledge, the authorized and
outstanding capital stock of the Company conforms in all material
respects to the description therein contained in the Prospectus
under the captions "Capitalization" and "Description of Capital
Stock;
(v) Each of this Agreement and the Underwriters' Warrants has
been duly and validly authorized, executed and delivered by the
Company;
<PAGE>
-26-
(vi) Neither the execution and performance of this Agreement or
the Underwriters' Warrants nor the consummation of the transactions
herein or therein contemplated will violate any of the provisions
of the articles of incorporation or bylaws, or other organizational
documents, of the Company or any of its Florida Subsidiaries or, to
such counsel's knowledge, violate any statute, judgment, decree,
order, rule or regulation (assuming compliance with all applicable
state securities and "Blue Sky" laws) of any court or governmental
body of the State of Florida, the violation of which would have a
Material Adverse Effect; and
(vii) To such counsel's knowledge, no consent, approval,
authorization or order of, and no filing with, any court,
regulatory body, government agency or other body of the State of
Florida (other than such as may be required under state securities
or "Blue Sky" laws, as to which no opinion need be rendered) is
required in connection with the issuance by the Company of the
Securities pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement and the taking of any
action by the Company contemplated hereby or thereby, which has not
been obtained, except for any such consent, approval,
authorization, order or filing, the failure of which to obtain
would not have a Material Adverse Effect.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the State of
Florida, to the extent such counsel deems proper and to the extent
specified in such opinion, if at all, upon an opinion or opinions (in
form and substance reasonably satisfactory to Underwriters' Counsel) of
other counsel reasonably acceptable to Underwriters' Counsel, familiar
with the applicable laws of such other jurisdictions, including, but
not limited to, the opinion of Cahill Gordon & Reindel referred to in
subsection (e) below, and (B) as to matters of fact, to the extent they
deem proper, on certificates and written statements of responsible
officers of the Company and its subsidiaries and certificates or other
written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good
standing of the Company and its subsidiaries; PROVIDED that copies of
any such statements or certificates shall be delivered to Underwriters'
Counsel.
(e) At the Closing Date and the Overallotment Closing Date, the
Underwriters shall have received the opinion of Cahill Gordon &
Reindel, counsel to the Company, dated the Closing Date, or
Overallotment Closing Date, as the case may be, addressed to the
Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
<PAGE>
-27-
(i) Victory Internet Productions, Inc. (the "Delaware
Subsidiary") has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of
Delaware with full corporate power and authority to own or lease
its properties and to carry on its business as set forth in the
Registration Statement and Prospectus. Based solely on certificates
from public officials, we confirm that the Delaware Subsidiary is
qualified to do business in the following
States:______________________;
(ii) The Registration Statement and any post-effective
amendments or supplements thereto (other than the financial
statements, schedules and other financial and statistical data
included therein, as to which no opinion need be rendered) comply
as to form in all material respects with the requirements of the
Act and the Rules and Regulations;
(iii) The Registration Statement has been declared effective
under the Act, and, if applicable, filing of all pricing
information has been timely made in the appropriate form under Rule
430A, and, to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and
to such counsel's knowledge, no proceedings for that purpose have
been instituted or are pending or threatened or contemplated under
the Act;
(iv) To such counsel's knowledge, there are no material
contracts or other documents required to be described in the
Registration Statement and the Prospectus and filed as exhibits to
the Registration Statement other than those described in the
Registration Statement and the Prospectus and filed as exhibits
thereto;
(v) Each of this Agreement and the Underwriters' Warrants has
been duly and validly authorized, executed and delivered by the
Company. Each of this Agreement and the Underwriters' Warrants
constitutes a legally valid and binding agreement of the Company,
enforceable as against the Company in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in
any action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law or pursuant to
public policy);
(vi) Neither the execution and performance of this Agreement or
the Underwriters' Warrants nor the consummation of the transactions
herein or therein contemplated will conflict with, result in the
material breach of, or constitute, either by itself or upon notice
or the passage of time or both, a material
<PAGE>
-28-
default under, any Material Agreement, or violate any of the
provisions of the certificate of incorporation or bylaws, or other
organizational documents, of the Delaware Subsidiary or, so far as
is known to such counsel, violate any statute, judgment, decree,
order, rule or regulation (assuming compliance with all applicable
state securities and "Blue Sky" laws and assuming compliance with
the rules and regulations of the NASD) of any court or governmental
body of the United States of America, the State of New York or in
respect of the General Corporation Law of the State of Delaware,
the violation of which would have a Material Adverse Effect on the
Company and its subsidiaries;
(vii) No consent, approval, authorization or order of, and no
filing with, any court, regulatory body, government agency or other
body of the United States of America, the State of New York or in
respect of the General Corporation Law of the State of Delaware
(other than such as may be required under state securities or "Blue
Sky" laws or by the NASD, as to which no opinion need be rendered)
is required in connection with the issuance by the Company of the
Securities pursuant to the Prospectus and the Registration
Statement, the performance of this Agreement and the taking of any
action by the Company contemplated hereby or thereby, which has not
been obtained, except for any such consent, approval,
authorization, order or filing which would not reasonably be
expected to have a Material Adverse Effect; and
(viii) To such counsel's knowledge, except as described in the
Prospectus or as have been waived, no person, corporation, trust,
partnership, association or other entity holding securities of the
Company has the contractual right to include and/or register any
securities of the Company in the Registration Statement.
In addition, such counsel shall also include a statement to the
effect that they have participated in conferences with officers and
other representatives of the Company, representatives of the
Underwriters, counsel for the Underwriters and representatives of the
independent accountants for the Company at which the contents of the
Registration Statement, the Prospectus and related matters were
discussed, and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and Prospectus
(except to the extent specified elsewhere in such letter), on the basis
of the foregoing (relying as to materiality to a large extent upon the
opinions of officers and other representatives of the Company), no
facts have come to the attention of such counsel that causes such
counsel to believe that the Registration Statement at the time it
became effective contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the
<PAGE>
-29-
statements therein not misleading or that the Prospectus as of its date
or as of the Closing Date or the Overallotment Closing Date contained
or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading (it being understood that such counsel has not been
requested to and does not express any comment with respect to the
financial statements and schedules and other financial and statistical
data included in the Registration Statement and the Prospectus).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United
States, the laws of the State of New York and the General Corporation
Law of the State of Delaware, to the extent such counsel deems proper
and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to
Underwriters' Counsel, familiar with the applicable laws of such other
jurisdictions, including, but not limited to, the opinion of Lowndes,
Drosdick, Doster, Kantor & Reed, P.A. referred to in subsection (d)
above, and (B) as to matters of fact, to the extent they deem proper,
on certificates and written statements of responsible officers of the
Company and its subsidiaries and certificates or other written
statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good
standing of the Company; PROVIDED that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel.
(f) At the Closing date and the Overallotment Closing Date, the
Underwriters shall have received an opinion of ____________________,
intellectual property counsel to the Company, dated the Closing Date or
the Overallotment Closing Date, as the case may be, addressed to the
Underwriters and in form and substance reasonably acceptable to
Underwriters' Counsel, to the effect that, except as set forth in the
Prospectus, the Company and its subsidiaries own the right, title and
interest in and to any Intellectual Property used in the Company's
business or licensed by the Company or its subsidiaries for use by
others; and to the knowledge of such counsel, there are no pending or
threatened proceedings or litigation challenging the validity of such
Intellectual Property or any license for use of such item.
(g) On or prior to each of the Closing Date and the Overallotment
Closing Date, Underwriters' Counsel shall have been furnished such
documents and certificates as they may reasonably require and request
for the purpose of enabling them to review or pass upon the matters
referred to in subsection (c) of this Section 6, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
<PAGE>
-30-
(h) Prior to the Closing Date and the Overallotment Closing Date,
if any: (i) there shall have been no Material Adverse Change or
development involving a prospective Material Adverse Change, whether or
not in the ordinary course of business, from the latest dates as of
which the financial condition of the Company is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by
the Company or any of its subsidiaries, from the latest date as of
which the financial condition of the Company is set forth in the
Registration Statement and Prospectus which is materially adverse to
the Company and its subsidiaries, taken as a whole; (iii) neither the
Company nor any of its subsidiaries shall be in default under any
provision of any instrument relating to any outstanding indebtedness
for money borrowed, except as described in the Prospectus, which would
have a Material Adverse Effect; (iv) no material assets of the Company
or its subsidiaries shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (v) no action, suit
or proceeding, at law or in equity, shall have been pending or to its
knowledge threatened against the Company or its subsidiaries, or
affecting any of their respective properties or businesses before or by
any court or federal, state or foreign commission, board or other
administrative agency wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect, except as set forth in
the Registration Statement and Prospectus; and (vi) no stop order shall
have been issued under the Act and no proceedings thereof or shall have
been initiated, threatened or contemplated by the Commission.
(i) At the Closing Date and the Overallotment Closing Date, if any,
the Underwriters shall have received a certificate of the Company
signed by the principal executive officer and by the chief financial or
chief accounting officer of the Company, dated the Closing Date or
Overallotment Closing Date, as the case may be, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are, in all material respects, true and correct, as if
made on and as of the Closing Date or the Overallotment Closing
Date, as the case may be, and the Company has complied in all
material respects with all agreements and covenants and satisfied
in all material respects all conditions contained in this Agreement
on its part to be performed or satisfied at or prior to such
Closing Date or Overallotment Closing Date, as the case may be; and
(ii) 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 person's
knowledge, are contemplated or threatened under the Act.
<PAGE>
-31-
References to the Registration Statement and the Prospectus in this
subsection (i) are to such documents as amended and supplemented at the
date of such certificate.
(j) (A) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest financial statements included in
the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus, or (B) since such date there shall not have been any
Material Adverse Change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any Material Adverse Change, or
any development involving a prospective Material Adverse Change,
otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is,
in the judgment of the Underwriters, so material and adverse as to make
it impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities being delivered on such Closing Date and
the Overallotment Closing Date on the terms and in the manner
contemplated in the Prospectus.
(k) At the time this Agreement is executed, the Underwriters shall
have received a letter, dated such date, addressed to the Underwriters
in form and substance satisfactory in all respects (including the
non-material nature of the changes or decreases, if any, referred to in
clause (iii) below) to the Underwriters, from BDO Seidman, LLP:
(i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating it is their opinion that the consolidated
financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of
the Act and the Rules and Regulations thereunder;
(iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
consolidated financial statements of the Company (with an
indication of the date of the latest available unaudited interim
consolidated financial statements), a reading of the latest
available minutes of the shareholders and board of directors and
the various committees of the board of directors of the Company,
consultations with officers and other employees of the Company
responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their
attention that would lead them to believe that (A) at a specified
date not more than
<PAGE>
-32-
five (5) days prior to the Effective Date of the Registration
Statement, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the shareholders'
equity or net current assets of the Company as compared with
amounts shown in the financial statements included in the
Registration Statement, other than as set forth in or contemplated
by the Registration Statement, or, if there was any change or
decrease, setting forth the amount of such change or decrease, and
(B) during the period from July 1, 2000 to a specified date not
more than five (5) days prior to the Effective Date of the
Registration Statement, there was any decrease in net revenues, net
earnings or increase in net earnings per common share of the
Company, in each case as compared with the corresponding period
beginning July 1, 1999, other than as set forth in or contemplated
by the Registration Statement, or, if there was any such decrease
or increase, setting forth the amount of such decrease;
(iv) stating that they have compared specific dollar amounts,
numbers of securities, percentages of revenues and earnings,
statements and other financial information pertaining to the
Company set forth in the Prospectus in each case to the extent that
such amounts, numbers, percentages, statements and information may
be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in
the letter and found them to be in agreement;
(v) stating that they have not during the immediately preceding
five (5) year period brought to the attention of the Company's
management any "material weakness," as defined in Statement of
Auditing Standard No. 60 "Communication of Internal Control
Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(vi) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may reasonably
request.
(l) At the Closing Date and the Overallotment Closing Date, the
Underwriters shall have received from BDO Seidman, LLP, a letter, dated
as of the Closing Date, or Overallotment Closing Date, as the case may
be, to the effect that they reaffirm that statements made in the letter
furnished pursuant to subsection (k) of this Section 6, except that the
specified date referred to shall be a date not more than five days
prior to the Closing Date and, if the Company has elected to rely on
Rule 430A of the Rules and Regulations, to the further effect that they
have carried out procedures as specified in clause (v) of subsection
(k) of this Section with respect to certain
<PAGE>
-33-
amounts, percentages and financial information as specified by the
Underwriters and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in
such clause (v).
(m) On each of the Closing Date and Overallotment Closing Date, if
any, there shall have been duly tendered to the Underwriters for their
accounts the appropriate number of Securities against payment therefor.
(n) No order suspending the sale of the Securities in any
jurisdiction designated by the Underwriters pursuant to subsection (e)
of Section 4 hereof shall have been issued on either the Closing Date
or the Overallotment Closing Date, if any, and no proceedings for that
purpose shall have been instituted or to its knowledge or that of the
Company shall be contemplated.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the Overallotment Closing Date, as
the case may be, is not so fulfilled, the Underwriters may terminate this
Agreement or, if the Underwriters so elects, they may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, each of their respective directors, officers, employees,
agents and each person, if any, who controls any of the Underwriters
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (the "Underwriter Indemnified Parties" or, individually,
"Underwriter Indemnified Party"), against any losses, claims, damages,
or liabilities, joint or several, to which such Underwriters
Indemnified Parties 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 based upon:
(i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto; or
(ii) the omission or alleged omission to state, in such
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement
thereto.
<PAGE>
-34-
The Company will reimburse, as incurred, the Underwriter Indemnified
Parties for any amounts reasonably incurred by the Underwriter Indemnified
Parties in connection with investigating, defending against, or appearing as a
third-party witness in connection with any loss, claim, damage, liability,
action, investigation, litigation or proceeding, including legal fees,
accounting, investigative or other expenses; PROVIDED, HOWEVER, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement or any amendment thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by the Underwriters
specifically for use therein. Solely with respect to any Preliminary Prospectus,
the foregoing indemnity agreement shall not inure to the benefit of any
Underwriter from whom the person asserting any loss, claim, damage, or liability
purchased Securities, or any person controlling such Underwriter, if copies of
the Prospectus were timely delivered by the Company to the Underwriters pursuant
to this Agreement and a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of such Underwriter to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. This indemnity agreement
will be in addition to any liability which the Company may otherwise have to
each of the Underwriter Indemnified Parties.
The Company will not, without the prior written consent of the
Underwriters, settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which any
liability could be asserted against any Underwriter Indemnified Party or
indemnification could be sought hereunder (whether or not the Underwriter
Indemnified Party is a party to such claim, action, suit, or proceeding), unless
such settlement, compromise or consent includes an unconditional general release
of the Underwriter Indemnified Party from all liability arising out of such
claim, action, suit or proceeding.
(b) Each of the Underwriters, severally and not jointly, will
indemnify and hold harmless the Company, its directors, officers,
employees, agents and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (the "Company Indemnified Parties") against, any losses,
claims, damages or liabilities to which the Company Indemnified Parties
may become subject under the Act or otherwise, but only insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or (ii) the omission
or the al-
<PAGE>
-35-
leged omission to state therein a material fact required to be stated
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
necessary to make the statements therein not misleading, in each case
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 to the Company by the
Underwriters specifically for use therein. Subject to the limitation
set forth immediately preceding this clause, the Underwriters will
reimburse, as incurred, any amounts reasonably incurred by the Company
Indemnified Parties in connection with investigating or defending any
such loss, claim, damage or liability, or any action in respect
thereof, including legal fees, accounting, investigative or other
expenses. This indemnity agreement will be in addition to any liability
which the Underwriters may otherwise have to each of the Company
Indemnified Parties.
(c) Promptly after receipt by an indemnified party under subsection
7(a) or 7(b) hereof of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under subsection 7(a) or 7(b), notify
the indemnifying party 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 such
subsection, unless and to the extent that such indemnifying party did
not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights or defenses.
In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the
defendants in any such action include both the indemnified party and
the indemnifying party, and the indemnified party shall have
reasonably concluded that there may be one or more legal
defenses available to it which are different from, additional to or
inconsistent with those available to the indemnifying party, such
indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or
parties, and the indemnifying party shall bear the cost of any legal
fees or other expenses subsequently incurred by the indemnified party
in connection with its defense. It is understood that no indemnifying
party shall, in connection with any proceeding or related proceeding in
the same jurisdiction, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all
indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred.
<PAGE>
-36-
If the indemnified party may not reasonably conclude that there may be
one or more legal defenses available to it which are different from, additional
to or inconsistent with those available to the indemnifying party, after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not be liable to
such indemnified party under this Section 7 for any legal fees or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel and (ii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying party
to such indemnified party has been given, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party.
(d) In circumstances in which the indemnification provided for in
subsection 7(a) or 7(b) is unavailable or insufficient to hold harmless
an indemnified party in respect of the losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party,
in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Securities. If,
however, the allocation provided for in the foregoing sentence is not
permitted by applicable law, then each party shall contribute to such
amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits, but also the
relative fault of the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof). The relative benefits
received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total
proceeds from the IPO (net of underwriting discounts and commissions
but before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the
Underwriters. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or
the Underwriters, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission, and other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would not
be equitable if the amount of such contribution were determined by pro
rata or per capita allocation or by any other method of allocation that
does not take into account
<PAGE>
-37-
the equitable considerations referred to in the first sentence of this
paragraph. Notwithstanding any other provision of this paragraph, the
Underwriters shall not be obligated to make contributions hereunder
that in the aggregate exceed the total compensation actually received
by the Representative or Underwriters, as applicable, less the
aggregate amount of any damages that the Underwriters had otherwise
been required to pay in respect of the same or any substantially
similar claim. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
8. SUBSTITUTION OF UNDERWRITERS. If any Underwriter shall for any
reason not permitted hereunder cancel its obligations to purchase the Firm
Securities hereunder, or shall fail to take up and pay for the Firm Securities
set forth opposite its name on Schedule 1 hereto upon tender of such Firm
Securities in accordance with the terms hereof, then the remaining Underwriters
shall have the right to take up and pay for the Firm Securities which the
defaulting Underwriter agreed but failed to purchase. If such remaining
Underwriters do not, at the Firm Closing Date, take up and pay for the Firm
Securities which the defaulting Underwriter agreed but failed to purchase, the
time for delivery of the Firm Securities shall be extended to the next business
day to allow the remaining Underwriters the privilege of substituting within
twenty-four (24) hours another Underwriter or Underwriters satisfactory to the
Company. If no such Underwriter or Underwriters shall have been substituted as
aforesaid, within such twenty-four (24) hour period, the time of delivery of the
Firm Securities may, at the option of the Company, be again extended to the next
following business day, if necessary, to allow the Company the privilege of
finding within twenty-four (24) hours another Underwriter or Underwriters to
purchase the Firm Securities which the defaulting Underwriter agreed but failed
to purchase. If it shall be arranged for the remaining Underwriters or
substituted Underwriters to take up the Firm Securities of the defaulting
Underwriter, (i) the Company or the Underwriters shall have the right to
postpone the time of delivery for a period of not more than 7 business days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or Prospectus, or in any other document or arrangements,
and the Company agrees promptly to file any amendments to the Registration
Statement or supplements to the Prospectus which may thereby be made necessary,
and (ii) respective numbers of Firm Securities to be purchased by the remaining
Underwriters or substituted Underwriters shall be taken as the basis of the
underwriting obligation for all purposes of this Agreement.
If there is an event of default by any Underwriter and (i) the
remaining Underwriters fails to take up and pay for all the Firm Securities
agreed to be purchased by the defaulting Underwriter or substitute another
Underwriter, and (ii) the Company does not find or elects not to find another
Underwriter for such Firm Securities, then this Agreement shall terminate.
<PAGE>
-38-
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Overallotment Closing Date, as the case may be, and such
representations, warranties and agreements of the Company and of the
Underwriters and the indemnity agreements contained in Section 7 hereof shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Underwriters, the Company or any controlling person,
and shall survive termination of this Agreement or the issuance and delivery of
the Securities to the Underwriters.
10. EFFECTIVE DATE. This Agreement shall become effective at 9:30 a.m.,
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Underwriters, in their discretion, shall release the Securities for the sale to
the public; provided, however, that the provisions of Sections 5, 7 and 11 of
this Agreement shall at all times be effective. For purposes of this Section 10,
the Securities to be purchased hereunder shall be deemed to have been so
released upon the earlier of dispatch by the Underwriters of telegrams to
securities dealers releasing such Securities for offering or the release by the
Underwriters for publication of the first newspaper advertisement which is
subsequently published relating to the Securities.
11. TERMINATION.
(a) The Underwriters shall have the right to terminate this
Agreement: (i) if any calamitous domestic or international event or act
or occurrence has materially disrupted, general securities markets in
the United States; or (ii) if trading on the New York Stock Exchange,
the Nasdaq National Market, or in the over-the-counter market shall
have been suspended or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or
(iii) if the United States shall have become involved in a war or major
hostilities; or (iv) if a banking moratorium has been declared by a New
York or federal authority; or (v) if any other substantial national or
international calamity or emergency shall have occurred that in the
Underwriters' reasonable judgment would make it inadvisable or
impracticable to proceed with the offering covered in Section 6 (i),
sale or delivery of the Securities.
(b) Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 8 and 11(a)
hereof), and whether or not this Agreement is otherwise carried out,
the provisions of Section 5(a) and Section 7 shall not be in any
<PAGE>
-39-
way affected by such election or termination or failure to carry out
the terms of this Agreement or any part hereof.
(c) In addition to any agreement to indemnify the Underwriters for
any other amounts due the Underwriters pursuant to this Agreement or
any other agreement, if the Company or the Underwriters decides not to
proceed with the IPO for any reason other than for termination of this
Agreement pursuant to Section 8, the Company will be obligated to
reimburse the Underwriters for its out-of-pocket expenses including
reasonable accounting and legal fees, exclusive of amounts previously
paid or to be paid in accordance with Section 5(a).
12. VENUE; SUBMISSION TO JURISDICTION. The Company (a) agrees that any
legal suit, action or proceeding arising out of or relating to this Agreement
shall be instituted exclusively in New York State Supreme Court, County of New
York, or in the United States District Court for the Southern District of New
York, (b) waives any objection which the Company may have now or hereafter to
the venue of any such suit, action or proceeding, and (c) irrevocably consents
to the jurisdiction of the New York State Supreme Court, County of New York and
the United States District Court for the Southern District of New York in any
such suit, action or procedure. Each of the Company and the Underwriters further
agrees to accept and acknowledge service of any and all process which may be
served in any suit, action or proceeding in the New York State Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York, and agrees that service of process upon the Company mailed
by certified mail to the Company's address shall be deemed in every respect
effective service of process upon the Company in any such suit, action or
proceeding. In the event of litigation between the parties arising hereunder,
the prevailing party shall be entitled to costs and reasonable attorney's fees.
13. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to Weatherly
Securities Corp., Two World Trade Center, Suite 2946, New York, New York 10048,
Attention: Jack Najarian, with a copy to Ruskin, Moscou, Evans & Faltischek,
P.C., 170 Old Country Road, Mineola, New York 11501-4366, Attention: Michael L.
Faltischek, Esq. Notices to the Company shall be directed to the Company at 1000
Universal Studios Plaza, Building 22A, Orlando, Florida 32819, with a copy to
Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention:
Gerald S. Tanenbaum, Esq. Parties may change address for giving notices by
written notice in accordance with this Section.
14. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof, and their
respec-
<PAGE>
-40-
tive successors and assigns, and their respective heirs and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from the Underwriters shall be deemed to
be a successor by reason merely of such purchase.
15. APPLICABLE LAW/CONSTRUCTION. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New York
without giving effect to any choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. WAIVER. The waiver by either party of the breach of any provision
of this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach.
18. ASSIGNMENT. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party.
19. TITLES AND CAPTIONS. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
20. PRONOUNS AND PLURALS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the Person or Persons may require.
21. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between and among the parties and supersedes all prior and contemporaneous
understandings and agreements among them respecting the subject matter of this
Agreement.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
VICTORY ENTERTAINMENT CORP.
By:
-----------------------------------
Name: Michael Gerber
Title: President and
Chief Executive Officer
<PAGE>
-41-
Confirmed and accepted as of the date first above written.
WEATHERLY SECURITIES CORP.
M.R. BEAL & COMPANY, as Representatives
of the Several Underwriters Named in
Schedule 1 Hereto
By: WEATHERLY SECURITIES CORP.
By:
------------------------------------
Name: John S. Matthews
Title: Chief Executive Officer
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SECURITIES
<S> <C>
Weatherly Securities Corp.
M.R. Beal & Company
</TABLE>
<PAGE>
EXHIBIT 1
LOCK-UP AGREEMENT
May 17, 2000
VICTORY ENTERTAINMENT CORP.
1000 Universal Studios Plaza
Building 22A
Orlando, Florida 32819
RE: VICTORY ENTERTAINMENT CORP. - INITIAL PUBLIC OFFERING
Ladies and Gentlemen:
The undersigned understands that Victory Entertainment Corp., a
Florida corporation (the "COMPANY"), proposes to enter into an Underwriting
Agreement (the "UNDERWRITING AGREEMENT") with the several Underwriters (the
"UNDERWRITERS") to be named therein, providing for the initial public offering
(the "PUBLIC OFFERING") by the several Underwriters of common stock of the
Company (the "COMMON STOCK").
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Common Stock, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of the Company, which will not be
granted without the written consent of the Underwriters, the undersigned will
not, during the period commencing on the date of the final prospectus relating
to the Public Offering (the "PROSPECTUS") and ending 365 days thereafter, (1)
offer, pledge, announce the intention to sell, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock, or any securities of the
Company which are substantially similar to the Common Stock, including, but not
limited to, (x) any securities convertible into or exercisable or exchangeable
for Common Stock or (y) any shares of Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission, or (2) enter into any
swap, option, future, forward or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the Common Stock or any
securities of the Company which are substantially similar to the Common Stock,
including, but not limited to, any securities convertible into or exercisable or
exchangeable for Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. In addition, the undersigned agrees that,
without the prior written consent of Company, which will not be granted without
the written consent of the Underwriters, it will not, during the aforementioned
365-day period, make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities of the Company
which
<PAGE>
-2-
are substantially similar to the Common Stock, including, but not limited
to, any securities convertible into or exercisable or exchangeable for Common
Stock.
Notwithstanding the foregoing, this Lock-Up Agreement shall not
apply to shares of Common Stock purchased by the undersigned in the Public
Offering or in the open market following the consummation of the Public
Offering. In addition, if the undersigned is an individual, he or she may
transfer any Common Stock either during his or her lifetime or on death by will
or by intestacy (1) to his or her immediate family, (2) to a trust or other
entity the beneficiaries or equity holders of which are exclusively the
undersigned and/or a member or of his or her immediate family or (3) as a
charitable contribution; PROVIDED, HOWEVER, that in any such case it shall be a
condition to such transfer that the transferee execute an agreement stating that
the transferee is receiving and holding the Common Stock transferred subject to
the provisions of this Lock-Up Agreement, and there shall be no further transfer
of such Common Stock except in accordance with this Lock-Up Agreement. For
purposes of this Lock-Up Agreement, "IMMEDIATE FAMILY" shall mean spouse, lineal
descendant, father, mother, brother or sister of the transferor.
In furtherance of the foregoing, the Company and any duly appointed
transfer agent for the registration or transfer of the securities described
herein are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Lock-Up Agreement.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Lock-Up Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned hereunder shall be binding upon the successors, assigns, heirs or
personal representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement is
not executed on or before March 31, 2001, or if the Underwriting Agreement
(other than the provisions thereof which survive termination) shall terminate or
be terminated prior to payment for and delivery of the Common Stock to be sold
thereunder, the undersigned shall be released from all obligations under this
Lock-Up Agreement.
The undersigned agrees to comply with any additional restriction or
condition on the disposition of the securities described herein which may be
required to qualify the offering of the shares in any jurisdiction in accordance
with the blue sky or securities laws of such jurisdiction.
To enable the Company and the Underwriters to enforce the foregoing,
the undersigned hereby consents to the placing of restrictive legends consistent
with this Lock-Up Agreement upon the certificates evidencing the securities
described herein and to the entry of stop-transfer orders consistent with this
Lock-Up Agreement on the books and records of the
<PAGE>
-3-
transfer agent of such securities with respect to any such securities registered
in the name of the undersigned or beneficially owned by the undersigned. The
Company agrees to instruct the transfer agent to place such legends and enter
such stop-transfer orders and not to transfer any such securities without the
consent of the Company and the Underwriters as set forth herein.
The undersigned understands that the Underwriters will be entering
into the Underwriting Agreement and proceeding with the Public Offering in
reliance upon this Lock-Up Agreement.
<PAGE>
-4-
THIS LOCK-UP AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
Very truly yours,
--------------------------------
Fill in Name
(a)By:
--------------------------
Name:
Title:
Accepted as of the date
first set forth above:
VICTORY ENTERTAINMENT CORP.
By:
--------------------------
Name:
Title:
----------
(a) To be filled in if this Lock-Up Agreement is being signed on behalf of
a corporation, partnership, trust or other entity.
<PAGE>
EXHIBIT 2
LOCK-UP AGREEMENT
May 10, 2000
VICTORY ENTERTAINMENT CORP.
1000 Universal Studios Plaza
Building 22A
Orlando, Florida 32819
RE: VICTORY ENTERTAINMENT CORP. - INITIAL PUBLIC OFFERING
Ladies and Gentlemen:
The undersigned understands that Victory Entertainment Corp., a
Florida corporation (the "COMPANY"), proposes to enter into an Underwriting
Agreement (the "UNDERWRITING AGREEMENT") with the several Underwriters (the
"UNDERWRITERS") to be named therein, providing for the initial public offering
(the "PUBLIC OFFERING") by the several Underwriters of common stock of the
Company (the "COMMON STOCK").
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Common Stock, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of the Company, which will not be
granted without the written consent of the Underwriters, the undersigned will
not, during the period commencing on the date of the final prospectus relating
to the Public Offering (the "PROSPECTUS") and ending 365 days thereafter, (1)
offer, pledge, announce the intention to sell, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock, or any securities of the
Company which are substantially similar to the Common Stock, including, but not
limited to, (x) any securities convertible into or exercisable or exchangeable
for Common Stock or (y) any shares of Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission, or (2) enter into any
swap, option, future, forward or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the Common Stock or any
securities of the Company which are substantially similar to the Common Stock,
including, but not limited to, any securities convertible into or exercisable or
exchangeable for Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. In addition, the undersigned agrees that,
without the prior written consent of Company, which will not be granted without
the written consent of the Underwriters, it will not, during the aforementioned
365-day period, make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities of the Company
which
<PAGE>
-2-
are substantially similar to the Common Stock, including, but not limited
to, any securities convertible into or exercisable or exchangeable for Common
Stock.
Notwithstanding the foregoing, if the average closing price for the
Common Stock on the Nasdaq National Market during any calendar month ending 180
days or more after the date of the Prospectus exceeds the IPO price by at least
50%, and the average daily trading volume of the Common Stock on the Nasdaq
National Market for that month exceeds 20% of the number of shares of Common
Stock issued in the Public Offering, then this Lock-Up Agreement shall be
released for (and the undersigned will thereafter be allowed to sell) up to 5%
of the number of shares of outstanding Common Stock which the undersigned held
immediately prior to date of the Prospectus. During the one-year period
following the Public Offering in which this Lock-Up Agreement will be in effect,
this test will run with respect to each calendar month ending 180 days or more
after the date of the Prospectus.
In addition, this Lock-Up Agreement shall not apply to shares of
Common Stock purchased by the undersigned in the Public Offering or in the open
market following the consummation of the Public Offering. In addition, if the
undersigned is an individual, he or she may transfer any Common Stock either
during his or her lifetime or on death by will or by intestacy (1) to his or her
immediate family, (2) to a trust or other entity the beneficiaries or equity
holders of which are exclusively the undersigned and/or a member or of his or
her immediate family or (3) as a charitable contribution; PROVIDED, HOWEVER,
that in any such case it shall be a condition to such transfer that the
transferee execute an agreement stating that the transferee is receiving and
holding the Common Stock transferred subject to the provisions of this Lock-Up
Agreement, and there shall be no further transfer of such Common Stock except in
accordance with this Lock-Up Agreement. For purposes of this Lock-Up Agreement,
"IMMEDIATE FAMILY" shall mean spouse, lineal descendant, father, mother, brother
or sister of the transferor.
In furtherance of the foregoing, the Company and any duly appointed
transfer agent for the registration or transfer of the securities described
herein are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Lock-Up Agreement.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Lock-Up Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned hereunder shall be binding upon the successors, assigns, heirs or
personal representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement is
not executed on or before March 31, 2001, or if the Underwriting Agreement
(other than the provisions thereof which survive termination) shall terminate or
be terminated prior to payment for
<PAGE>
-3-
and delivery of the Common Stock to be sold thereunder, the undersigned shall be
released from all obligations under this Lock-Up Agreement.
The undersigned agrees to comply with any additional restriction or
condition on the disposition of the securities described herein which may be
required to qualify the offering of the shares in any jurisdiction in accordance
with the blue sky or securities laws of such jurisdiction.
To enable the Company and the Underwriters to enforce the foregoing,
the undersigned hereby consents to the placing of restrictive legends consistent
with this Lock-Up Agreement upon the certificates evidencing the securities
described herein and to the entry of stop-transfer orders consistent with this
Lock-Up Agreement on the books and records of the transfer agent of such
securities with respect to any such securities registered in the name of the
undersigned or beneficially owned by the undersigned. The Company agrees to
instruct the transfer agent to place such legends and enter such stop-transfer
orders and not to transfer any such securities without the consent of the
Company and the Underwriters as set forth herein.
The undersigned understands that the Underwriters will be entering
into the Underwriting Agreement and proceeding with the Public Offering in
reliance upon this Lock-Up Agreement.
<PAGE>
-4-
THIS LOCK-UP AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
Very truly yours,
--------------------------------
Fill in Name
(a)By:
--------------------------
Name:
Title:
Accepted as of the date
first set forth above:
VICTORY ENTERTAINMENT CORP.
By:
--------------------------
Name:
Title:
----------
(a) To be filled in if this Lock-Up Agreement is being signed on behalf of
a corporation, partnership, trust or other entity.
