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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported)
April 19, 2000
NTN COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 001-11460 31-1103425
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification No.)
5966 LA PLACE COURT
CARLSBAD, CALIFORNIA 92008
(Address of Principal Executive Offices) (Zip Code)
(760) 438-7400
(Registrant's telephone number, including Area Code)
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ITEM 5. OTHER EVENTS.
On April 19, 2000, NTN Communications, Inc. (the "Company") completed an
underwritten public offering of 2,000,000 shares of its Common Stock, $.005 par
value. The Company intends to use the net proceeds received from the offering
(estimated to be approximately $5,185,000) to market its new game portal called
BUZZTIME.com(TM), to convert its existing customer base to the DITV Network, and
for working capital and general corporate purposes.
The Company believes that its current financial resources and projected cash
flows, together with the net proceeds received from the offering, will be
sufficient to fund continuing operations through December 31, 2000. Depending on
market conditions, the Company may attempt to raise capital or attract strategic
investors during the second half of this year for, among other uses, further
development and marketing of BUZZTIME.com and further expansion and improvement
of its DITV Network.
On April 20, 2000, the Company announced its strategic plan for its BUZZTIME.com
interactive game web site, which the Company expects to launch in the next
several weeks. The plan is as follows:
o Launch BUZZTIME.com as a uniquely compelling game site providing a
strong combination of quiz show programming, player community and a
robust player rewards program. BUZZTIME.com's National Operations
Center will link players from various interactive platforms and
networks into a single powerful database. The player rewards program
will enable all BUZZTIME.com players to earn BuzzPoints and prizes
regardless of which platform they choose to access the programming.
o Broadly Distribute Content -- The popularity of the Company's
programming has generated recent agreements with America Online, AT&T
Interactive Offerings Group, FOXSports.com, Midway Games and others.
BUZZTIME.com continues to develop a broad network of partnerships with
other Internet and interactive TV distribution partners for the
delivery and promotion of its branded interactive games.
o Promote BUZZTIME.com on the NTN Hospitality Network -- The Company will
use its "out-of-home" network to promote BUZZTIME.com on over 10,000
television screens in thousands of restaurants, sports bars and hotels
in the U.S. The NTN Network hosts over 17 million games played each
month, and through on-site polling, the Company estimates that 80% of
its network viewers use the Internet.
o Leverage the BUZZTIME.com Interactive Studio -- BUZZTIME.com's advanced
technology can make any live or taped television broadcast interactive.
The Company's unique television studio is comprised of 16 broadcast
bays, multiple satellite feeds, server farms and a vast 24/7 broadcast
schedule. In addition to its own game broadcasts, the studio will host
third party game play in return for player registrations, promotion
and/or a share of advertising revenues. BUZZTIME.com's recent agreement
to host thousands of live Internet players for
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Fox Family Channel's new live game show, Paranoia, demonstrates this
technological capability.
o Forge relationships between loyal players and advertising and marketing
partners to capitalize on the Company's proven programming and expanded
player reach. This will be accomplished through the Company's unique
technology, powerful database, stratified programming, customized
marketing programs and dedicated sales staff. The Company believes that
this will bring strong revenue growth over the next 12 months from a
number of avenues including advertising and sponsorships; direct
marketing partnerships geared toward BUZZTIME.com's unique membership
rewards program; pay-to-play subscriptions; and consumer research
services for advertisers.
Certain statements contained in this report that are not historical information
contain forward-looking statements. These forward-looking statements, including
those relating to the growth and success of the Company and its BUZZTIME.com web
site, are subject to risks and uncertainties, including product demand and
market acceptance risks, the growth of the Internet and interactive television,
the impact of competitive products and technology, and the availability of
capital on acceptable terms, as well as other factors discussed in the Company's
other reports filed with the Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
1.1 Underwriting Agreement, dated April 14, 2000 among Starr Securities,
Inc., GunnAllen Financial, Inc. and the Company regarding the sale of
2,000,000 shares of the Registrant's common stock (the "Shares").
4.1 Warrant Agreement, dated April 19, 2000, among Starr Securities, Inc.,
GunnAllen Financial, Inc. and the Company.
4.2 Warrant Certificate, dated April 19, 2000, between GunnAllen Financial,
Inc. and the Company.
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
NTN COMMUNICATIONS, INC.
By: /s/ Kendra Berger
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Kendra Berger
Chief Financial Officer
Date: April 21, 2000
S-1
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
1.1 Underwriting Agreement, dated April 14, 2000 among Starr Securities,
Inc., GunnAllen Financial, Inc. and the Company regarding the sale of
2,000,000 shares of the Registrant's common stock (the "Shares").
4.1 Warrant Agreement, dated April 19, 2000, among Starr Securities, Inc.,
GunnAllen Financial, Inc. and the Company.
4.2 Warrant Certificate, dated April 19, 2000, between GunnAllen Financial,
Inc. and the Company.
</TABLE>
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EXHIBIT 1.1
NTN COMMUNICATIONS, INC.
UNDERWRITING AGREEMENT
2,000,000 Shares of Common Stock
(Par Value $.005 Per Share)
New York, New York
April 14, 2000
Starr Securities, Inc.
60 Broad Street
New York, New York 10004
GunnAllen Financial, Inc.
1715 Westshore Blvd - Suite 775
Tampa, Florida 33607
Dear Sirs:
NTN Communications, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Starr Securities, Inc. ("Starr
Securities") and GunnAllen Financial, Inc. ("GunnAllen" and collectively with
Starr, the "Underwriters", unless the context is otherwise) pursuant to this
Underwriting Agreement (the "Agreement") an aggregate of 2,000,000 shares (the
"Shares") of Common Stock of the Company, par value .005 per share (the "Common
Stock"). It is understood that the Underwriters propose to offer the Shares to
be purchased hereunder to the public upon the terms and conditions set forth
herein and as described in the Registration Statement and the Prospectus (as
such terms are hereinafter defined). The Company will also issue and sell to
GunnAllen, for its own account and the accounts of its designees for an
aggregate price of $48.00, warrants (the "Underwriters' Warrants") to purchase
up to an aggregate of 48,000 shares of Common Stock (the "Warrant Shares") at an
exercise price of $3.75 per share, which sale will be consummated in accordance
with the terms and conditions of the form of Underwriters' Warrant substantially
in the form of Exhibit A to this Agreement.
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, the Underwriters:
(a) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission")
in conformity in all material respects with the
provisions of the Securities Act of 1933, as amended,
and the rules and regulations (the "Rules and
Regulations") of the Commission thereunder
(collectively, the "Act"), a registration statement
on Form S-3 (Registration No. 333-33078) under the
Act (the "Registration Statement"), including a
prospectus relating to the Shares; and an amendment
thereto has been filed
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with the Commission, and such amendment has been
similarly prepared. Such registration statement and
such amendment have become effective under the Act.
The Company also has filed, or proposes to file, with
the Commission pursuant to Rule 424(b) under the Act,
a prospectus supplement relating to the offering of
the Shares pursuant to Rule 415 of the Act.
The term "Registration Statement" as used in this Agreement
means the Registration Statement (including all financial schedules and
exhibits), as amended at the time it became effective, as supplemented or
amended prior to the execution of this Agreement. The term "Prospectus" as used
in this Agreement means the prospectus in the form first used to confirm sales
of Shares (the "Base Prospectus") together with the prospectus supplement
relating to the offering of the Shares under Rule 415 of the Act dated the date
hereof in the form first filed with the Commission on or after the date hereof
(the "Prospectus Supplement"). The term "Prepricing Prospectus Supplement" as
used in this Agreement means the Base Prospectus together with any prospectus
supplement subject to completion included in the Registration Statement as filed
with the Commission pursuant to Rule 424(b) under the Act; and as such
prospectus shall have been amended from time to time prior to the date of the
Prospectus. Any reference in this Agreement to the Registration Statement, the
Base Prospectus, any Prepricing Prospectus Supplement or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of the
Registration Statement, such Prepricing Prospectus Supplement or the Prospectus,
as the case may be, and any reference to any amendment or supplement to the
Registration Statement, any Prepricing Prospectus Supplement or the Prospectus
shall be deemed to refer to and include any documents filed after such date
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which, upon filing, are incorporated by reference therein, as required by
paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated
Documents" means the documents which at the time are incorporated by reference
in the Registration Statement, any Prepricing Prospectus Supplement, the
Prospectus, or any amendment or supplement thereto.
(b) Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority
has issued an order preventing or suspending the use
of any Prospectus, nor has the Commission or any such
authority instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings
with respect to such an order.
(c) The Company and the transactions contemplated by this
Agreement meet the requirements for using Form S-3
under the Act, and the standards for such form prior
to October 21, 1992. The Registration Statement in
the form in which it became effective and also in
such form as it may be when any post-effective
amendment thereto shall become effective, and the
Prospectus and any supplement or amendment thereto
when filed with the Commission under Rule 424(b)
under the Act, complied or will comply in all
material respects with the provisions of the Act and
will not at any such times contain an untrue
statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, except that this representation and
warranty does not apply to statements in or
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omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity
with information relating to the Underwriters
furnished to the Company in writing by or on behalf
of the Underwriters expressly for use therein.
(d) The Incorporated Documents heretofore filed, when
they were filed (or, if any amendment with respect to
any such document was filed, when such amendment was
filed), conformed in all material respects with the
requirements of the Exchange Act and the Rules and
Regulations thereunder, any further Incorporated
Documents so filed will, when they are filed, conform
in all material respects with the requirements of the
Exchange Act and the Rules and Regulations
thereunder; no such document when it was filed (or,
if an amendment with respect to any such document was
filed, when such amendment was filed), contained an
untrue statement of a material fact or omitted to
state a material fact required to be stated therein
or necessary in order to make the statements therein,
in light of the circumstances under which they were
made, not misleading; and no such further document,
when it is filed, will contain an untrue statement of
a material fact or will omit to state a material fact
required to be stated therein or necessary in order
to make the statements therein, in light of the
circumstances under which they are made, not
misleading.
(e) The Company has been duly incorporated and is now,
and at the Closing Date will be, validly existing and
in good standing as a corporation under the laws of
the State of Delaware, and has (i) an authorized and
outstanding capitalization and indebtedness as set
forth in the Registration Statement and the
Prospectus at the respective dates referred to
therein, and (ii) full corporate power and authority
to own or lease, as the case may be, its properties,
whether tangible or intangible, and conduct its
business as presently conducted and as described in,
or contemplated by, the Registration Statement and
the Prospectus, and to execute, deliver and perform
this Agreement and the Underwriters' Warrant
Agreement and to consummate the transactions
contemplated hereby and thereby. The Company is duly
qualified to do business and is in good standing as a
foreign corporation in all jurisdictions in which the
nature of the business transacted by it or the
character or location of its properties, in each case
taken as a whole, makes such qualification necessary,
except where the failure to so qualify would not have
a material adverse effect upon the financial
condition, results of operations, business or
properties of the Company and its Subsidiaries (as
defined below), taken as a whole.
(f) All of the Company's subsidiaries (collectively, the
"Subsidiaries") are listed on Schedule I attached
hereto. Except for its interests in the Subsidiaries,
the Company does not own, directly or indirectly, any
capital stock of or other equity interest in any
corporation, partnership or other legal entity
whatsoever. Each Subsidiary is a corporation, general
partnership, limited partnership, or limited
liability company, as the case may be, duly
organized, validly existing
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and in good standing in the jurisdiction of its
incorporation or organization, with full corporate,
partnership or limited liability company power and
authority to own or lease, as the case may be, its
properties, whether tangible or intangible, and
conduct its business as presently conducted and as
described in, or contemplated by, the Registration
Statement and the Prospectus. Each of the
Subsidiaries is duly qualified to do business and is
in good standing as a foreign corporation,
partnership or limited liability company, as the case
may be, in all jurisdictions in which the nature of
the business transacted by it or the character or
location of its properties, in each case taken as a
whole, makes such qualification necessary, except
where the failure to so qualify would not have a
material adverse effect upon the financial condition,
results of operations, business or properties of the
Company and the Subsidiaries taken as a whole. All of
the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable. All
of the interests owned or held by the Company,
directly or indirectly, in each of the Subsidiaries
are free and clear of any lien, adverse claim,
security interest, equity or other encumbrance,
except for such as would not have a material adverse
effect upon the financial condition, results of
operations, business or properties of the Company and
the Subsidiaries taken as a whole.
(g) Each of the Company and the Subsidiaries holds, or
will hold by the Closing Date, all licenses,
certificates and permits from state, federal or other
regulatory authorities which are material for the
conduct of its business as presently conducted and as
described in the Registration Statement and the
Prospectus, and is in material compliance with all
laws and regulations and all orders and decrees
applicable to it or to such business or assets, and
there are no proceedings pending or, to the knowledge
of the Company, threatened, seeking to cancel,
terminate or limit such licenses, approvals or
permits.
(h) The financial statements of the Company, including
the related schedules and notes included or
incorporated by reference into the Registration
Statement and the Prospectus (and any amendment or
supplement thereto), present fairly the consolidated
financial position, results of operations and changes
in financial position of the Company and the
Subsidiaries on the basis stated in the Registration
Statement as of the dates thereof and for the
respective periods indicated therein. Such financial
statements have been prepared in accordance with
generally accepted accounting principles consistently
applied throughout the periods involved, except as
otherwise stated in the Registration Statement and
the Prospectus, and all adjustments necessary for a
fair presentation of results for such periods have
been made. The other financial and statistical
information and data included or incorporated by
reference in the Registration Statement and the
Prospectus (and any amendment or supplement thereto)
are presented fairly and have been compiled on a
basis consistent with that of the financial
statements included or incorporated by reference in
the Registration Statement and the Prospectus and the
books and records of the Company and the
Subsidiaries.
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(i) The accounting firm of KPMG LLP, which has certified
the financial statements included or incorporated by
reference in the Registration Statement and the
Prospectus (or any amendment or supplement thereto),
are independent public accountants within the meaning
of the Act and the Rules and Regulations.
(j) Except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement
thereto), subsequent to the respective dates as of
which information is given in the Registration
Statement and the Prospectus (or any amendment or
supplement thereto), neither the Company nor any of
the Subsidiaries has (i) incurred any material
liability or obligation, direct or contingent, or
entered into any material transactions not in the
ordinary course of business; (ii) sustained any
material loss or interference with its business from
fire, storm, explosion, flood or other casualty
(whether or not such loss is insured against), or
from any labor dispute or court or governmental
action, order or decree; or (iii) paid or declared
any dividend or other distribution on its Common
Stock or its other securities or redeemed or
repurchased any of its Common Stock or other
securities. Except as disclosed in the Registration
Statement and the Prospectus (or any amendment or
supplement thereto), and subsequent to the respective
dates as of which information is given in the
Registration Statement and Prospectus, there have not
been any changes in the capital stock or any material
increase in the long-term debt or other securities of
the Company or any of the Subsidiaries or any
material adverse change in the financial condition,
business, operations, income, net worth or properties
of the Company and its Subsidiaries taken as a whole.
(k) This Agreement and compliance by the Company with the
terms hereof have been duly and validly authorized by
all necessary corporate action, and this Agreement
has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of
the Company enforceable in accordance with its terms,
except to the extent that (i) enforceability may be
limited by any bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or
similar laws affecting creditors' rights generally,
(ii) the remedy of specific performance and
injunction or other forms of equitable relief may be
subject to equitable defenses and the discretion of
the court before which any proceeding therefor may be
brought, and (iii) rights to indemnity and
contribution hereunder may be limited by federal or
state securities laws. The Underwriters' Warrant and
compliance by the Company with the terms thereof have
been duly and validly authorized by all necessary
corporate action and, upon execution and delivery
thereof, the Underwriters' Warrant will be duly
executed and delivered by the Company and will
constitute the valid and binding obligation of the
Company enforceable in accordance with its terms,
except to the extent enforceability may be limited by
any bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws
affecting creditors' rights generally and to the
extent that the remedy of specific performance and
injunction or other forms of equitable relief may be
subject to equitable defenses and the discretion of
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the court before which any proceeding therefor may be
brought. The Company is not presently in violation of
or in default under this Agreement or the
Underwriters' Warrant Agreement and the execution,
delivery and performance by the Company of this
Agreement and the Underwriters' Warrant Agreement and
the consummation of the transactions herein and
therein contemplated, will not, with or without the
giving of notice or the lapse of time or both, (i)
result in a breach of or constitute a default under
any of the terms, conditions or provisions of the
Certificate of Incorporation or By-laws, each as
amended, of the Company or any of the Subsidiaries;
(ii) result in a breach of or conflict with any of
the terms or provisions of, or constitute a default
under, or result in the modification or termination
of, or the creation or imposition of any lien,
security interest, charge or encumbrance upon any
property or asset of the Company or any of the
Subsidiaries pursuant to any material note,
indenture, mortgage, deed of trust, contract,
commitment or other material agreement or instrument
to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the
Subsidiaries or any of their respective properties or
assets may be bound or affected; (iii) violate any
existing law, order, rule, regulation, writ,
injunction or decree of any government, governmental
instrumentality, agency, body or court, domestic or
foreign, having jurisdiction over the Company or any
of the Subsidiaries or any of their respective
properties or businesses; or (iv) have any effect on
any permit, certification, registration, approval,
consent, order, license, franchise or other
authorization (collectively, the "Permits") necessary
for the Company or any of the Subsidiaries to own or
lease and operate its properties and to conduct its
business as presently conducted or the ability to
make use thereof.
(l) To the Company's knowledge, no Permits of any
government or governmental instrumentality, agency,
body or court other than under the Act, the blue sky
or securities laws of any state or the rules of the
National Association of Securities Dealers, Inc.
("NASD") (regarding approval of underwriting
compensation) and The American Stock Exchange LLC
("AMEX") (regarding listing of the Common Stock) are
required (i) for the valid authorization, issuance,
sale and delivery of the Shares to the Underwriters,
and (ii) the consummation by the Company of the
transactions contemplated by this Agreement or the
Underwriters' Warrant Agreement.
(m) Except as disclosed in the Registration Statement and
the Prospectus (and any amendment or supplement
thereto), (i) there is neither pending nor, to the
best of knowledge of the Company, threatened, against
the Company or any of the Subsidiaries any claim,
action, suit, or proceeding at law or in equity,
arbitration (or circumstances known to the Company
that may give rise to the same), investigation or
inquiry to which the Company or any of the
Subsidiaries or any of their respective officers,
directors or shareholders is a party or involving the
Company's or any of the Subsidiaries' properties or
businesses before or by any court, arbitration
tribunal or governmental instrumentality, agency, or
body, which, if determined adversely to the
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Company or any of the Subsidiaries, would
individually or in the aggregate result in any
material adverse change in the condition (financial
or other), business, management of affairs, business
prospects, results of operations, income,
shareholders' equity, net worth or properties of the
Company and its Subsidiaries taken as a whole, or
which question the validity of the capital stock of
the Company or any of the Subsidiaries or would
prevent consummation of the transactions contemplated
hereby; nor are there any such actions, suits or
proceedings against the Company or any of the
Subsidiaries related to consumer protection,
distribution, rental and sales, or environmental
matters or matters related to discrimination on the
basis of age, sex, religion or race; and (ii) no
labor dispute or disturbance by the employees of the
Company or any of the Subsidiaries exists or, to the
knowledge of the Company, is threatened which might
be expected to materially adversely affect the
conduct of the business, property, operations,
financial condition or earnings of the Company or any
of the Subsidiaries, taken as a whole.
(n) There is no contract or other document which is
required by the Act or by the Rules and Regulations
to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the
Registration Statement which has not been so
described or filed as required, and each contract or
document which has been described in the Registration
Statement has been described accurately and presents
fairly the information required to be described and
each such contract or document which is filed as an
exhibit to the Registration Statement or is an
Incorporated Document is and shall be in full force
and effect at the Closing Date or shall have been
terminated in accordance with its terms as set forth
in the Registration Statement and Prospectus or any
Incorporated Document, and no party to any such
contract has given notice to the Company of the
cancellation of or, to the knowledge of the Company,
has threatened to cancel any such contract, and
except as described in the Registration Statement and
the Prospectus (and any amendment or supplement
thereto), the Company is not in default thereunder.
(o) Neither the Company nor any of the Subsidiaries owns
any real property. The Company and each of its
Subsidiaries has good title to all of its personal
property (tangible and intangible) and assets,
including any licenses, trademarks and copyrights,
described in the Registration Statement or Prospectus
as owned by it, free and clear of all security
interests, liens, charges, mortgages, encumbrances
and restrictions other than as described in the
Registration Statement and Prospectus or which are
not material in amount. The leases, subleases and
licenses under which the Company and its Subsidiaries
are entitled to lease, hold or use any real or
personal property are valid, subsisting and
enforceable only with such exceptions as are not
material and do not interfere with the use of such
property made or proposed to be made by the Company
or any of its Subsidiaries, and all rentals,
royalties or other payments accruing thereunder which
become due prior to the date of this Agreement have
been duly paid and neither the Company, nor any of
its Subsidiaries, nor, to the Company's best
knowledge, any other party is in
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default in respect of any of the terms or provisions
of any such leases, subleases and licenses, and no
claim of any sort has been asserted by anyone adverse
to the rights of the Company or any of its
Subsidiaries under any such leases, subleases or
licenses affecting or questioning the rights of the
Company or any of its Subsidiaries to the continued
use or enjoyment of the rights and property covered
thereby, in each case, except as disclosed in the
Registration Statement or the Prospectus. Neither the
Company nor any of its Subsidiaries has received
notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating
to its owned or leased properties. The Company and
its Subsidiaries own or lease all such properties as
are necessary to the conduct of their respective
operations as now conducted as set forth in the
Registration Statement and the Prospectus.
(p) The Company and each of its Subsidiaries has filed
with the appropriate federal, state and local
governmental agencies, and all appropriate foreign
countries and political subdivisions thereof, all tax
returns, including franchise tax returns, which are
required to be filed or have duly obtained extensions
of time for the filing thereof and have paid all
taxes shown on such returns and all assessments
received by them to the extent that the same have
become due (except for such as are being contested in
good faith); and the provisions for income taxes
payable, if any, shown on the financial statements
included or incorporated by reference in the
Registration Statement are sufficient for all accrued
and unpaid foreign and domestic taxes, whether or not
disputed, and for all periods to and including the
dates of such consolidated financial statements.
Except as disclosed in writing to the Underwriters,
neither the Company nor any Subsidiary has executed
or filed with any taxing authority, foreign or
domestic, any agreement extending the period for
assessment or collection of any income taxes and is
not a party to any pending action or proceeding by
any foreign or domestic governmental agency for
assessment or collection of taxes; and since January
1, 1997, no claims for assessment or collection of
taxes have been asserted against the Company or any
Subsidiary.
(q) The Company and its Subsidiaries maintain insurance,
which is in full force and effect, including but not
limited to personal injury and product liability
insurance and insurance covering all personal
property owned or leased by the Company and its
Subsidiaries against theft, damage, destruction, acts
of vandalism and all other risks customarily insured
against. The Company and its Subsidiaries maintain
insurance in amounts as are commercially reasonable
and consistent with those maintained by companies
engaged in the same or similar businesses located in
their geographic area. The Company is not aware of
any facts or circumstances which would require it or
any of its Subsidiaries to notify its insurers of any
claim of which notice has not been made or will not
be made in a timely manner. To the best knowledge of
the Company, there are no facts or circumstances
under any existing insurance policy or surety bond
which would relieve any insurer of its obligation to
satisfy in full any existing valid claim of the
Company or any of its Subsidiaries under such policy
or bond.
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(r) Except as described in the Registration Statement and
the Prospectus (including any amendment or supplement
thereto), (i) each of the Company and its
Subsidiaries owns or otherwise possesses adequate,
enforceable rights to use, without material
restriction, all patents, patent rights, inventions,
trademarks, service marks, trade names and
copyrights, trade secrets, confidential information,
processes and formulations (including all other
unpatented and/or unpatentable proprietary or
confidential information, systems or procedures),
inventions, designs, works of authorship, computer
programs and technical data and information which are
used or proposed to be used in the conduct of its
business as described in the Prospectus
(collectively, the "Intangibles"); (ii) neither the
Company nor any of its Subsidiaries has infringed or
is infringing upon the rights of others with respect
to the Intangibles; (iii) the Company has not
received any notice of conflict with the asserted
rights of others with respect to the Intangibles
which could, singly or in the aggregate, materially
adversely affect the business as presently conducted
or the prospects, financial condition or results of
operations of the Company and its Subsidiaries taken
as a whole, and the Company knows of no basis
therefor; (iv) to the best of the Company's
knowledge, no others have infringed upon the
Intangibles of the Company or any of its
Subsidiaries, except for such instances which are not
expected to have a material adverse effect on the
business, financial condition or results of
operations of the Company and the Subsidiaries taken
as a whole; (v) neither the Company nor any of its
Subsidiaries is obligated or under any liability
whatsoever to make any payment by way of royalties,
fees or otherwise to any owner or licensee of, or
other claimant to, the Intangibles with respect to
the use thereof or in connection with the conduct of
its business or otherwise. The Company has taken
reasonable security measures to protect the secrecy,
confidentiality and value of all its Intangibles in
all material aspects.
(s) Neither the Company nor any of its affiliates has
incurred any liability for, nor is there is any
outstanding claim for services in the nature of, a
finder's fee or similar fee in connection with the
transactions herein contemplated.
(t) No officer or director of the Company, or any
affiliate (as such term is defined in Rule 405
promulgated under the Rules and Regulations) of any
such officer or director, has taken, and each officer
or director has agreed that he will not take,
directly or indirectly, any action designed to
constitute or which has constituted or which might
reasonably be expected to cause or result in the
stabilization of the price of the Common Stock or a
violation of Regulation M of the Rules and
Regulations or in a manipulation of the price of any
security issued by the Company.
(u) Except as disclosed in or contemplated by the
Registration Statement or the Prospectus, no officer,
director or stockholder of the Company, or any
"affiliate" or "associate" (as these terms are
defined in Rule 405 promulgated under the Rules and
Regulations) of any of the foregoing persons or
entities has or has had since January 1, 1997, either
directly or indirectly, (i) an
-9-
<PAGE> 10
interest in any person or entity which (A) furnishes
or sells products which are furnished or sold or are
proposed to be furnished or sold by the Company, or
(B) purchases from or sells or furnishes to the
Company any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the
Company is a party or by which it may be bound or
affected. There are no existing agreements,
arrangements, or transactions, between or among the
Company and any officer, director of the Company, or
any partner, affiliate or associate of any of the
foregoing persons or entities which are required to
be described in the Registration Statement and which
are not so described.
(v) The minute books of the Company have been made
available to the Underwriters and contain a fair
summary of all meetings and actions of the directors
and stockholders of the Company since the time of its
incorporation, and reflect all transactions referred
to in such minutes accurately in all respects.
(w) The Company is not aware of any bankruptcy, labor
disturbance or other event affecting any of its
principal suppliers or customers which could
materially adversely affect the condition, financial
or otherwise, prospects, business or results of
operations of the Company and its Subsidiaries taken
as a whole.
(x) The Common Stock and the other securities of the
Company conform to the descriptions thereof included
or incorporated by reference in the Registration
Statement and the Prospectus; the authorized, issued
and outstanding shares of Common Stock will be set
forth in the Prospectus Supplement under the caption
"Description of Capital Stock"; the outstanding
shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable;
the outstanding options and warrants to purchase
Common Stock have been duly authorized and validly
issued and constitute the valid and binding
obligations of the Company, enforceable in accordance
with their terms; the holders of the outstanding
Common Stock are not subject to personal liability
for obligations of the Company solely by reason of
being stockholders; and none of such outstanding
shares of Common Stock or warrants or options to
purchase Common Stock were issued in violation of the
pre-emptive rights of any stockholder of the Company.
The offers and sales of the outstanding Common Stock
and outstanding options and warrants to purchase
Common Stock were at all relevant times either
registered under the Act and the applicable state
securities or Blue Sky laws or exempt from such
registration requirements. Except as disclosed in the
Registration Statement and Prospectus, on the Closing
Date there will be no outstanding options or warrants
for the purchase of, or other outstanding rights to
purchase or acquire, Common Stock or securities
convertible or exchangeable into Common Stock. No
holder of any securities of the Company has any
rights, "demand", "piggyback" or otherwise to have
such securities registered under the Act.
-10-
<PAGE> 11
(y) The issuance and sale of the Shares have been duly
authorized and, upon delivery against payment
therefor as contemplated by this Agreement, the
Shares will be validly issued, fully paid and
non-assessable, and the holders thereof will not be
subject to personal liability solely by reason of
being such holders. The Shares will not be subject to
pre-emptive rights of any stockholder of the Company.
(z) The issuance and sale of the Warrant Shares have been
duly authorized, and, when duly delivered against
payment therefor as contemplated by the Underwriters'
Warrants Agreement, such Warrant Shares will be
validly issued, fully paid and non-assessable, and
will conform to the description thereof contained or
incorporated by reference in the Registration
Statement and the Prospectus. Holders of Warrant
Shares issuable upon the exercise of the
Underwriters' Warrants will not be subject to
personal liability solely by reason of being such
holders. Neither the Underwriters' Warrants nor the
Warrant Shares issuable upon exercise thereof will be
subject to pre-emptive rights of any stockholder of
the Company. The Company has reserved a sufficient
number of shares of Common Stock from its authorized
but unissued Common Stock for issuance upon exercise
of the Underwriters' Warrants in accordance with the
provisions of the Underwriters' Warrant Agreement.
The Underwriters' Warrants conform to the description
thereof contained in the Prospectus.
(aa) Neither the Company or any Subsidiary, nor any
officer, director or other agent of the Company or
any Subsidiary, has, acting on behalf of the Company
or any Subsidiary, at any time (i) made any
contributions to any candidate for political office
in violation of law, or failed to disclose fully any
such contributions in violation of law, (ii) made any
payment to any state, Federal or foreign governmental
officer or official, or any other person charged with
similar public or quasi-public duties, other than
payments required or allowed by applicable law or
(iii) made any payment of funds of the Company or
received or retained any funds in violation of any
law, rule or regulation and under circumstances
requiring the disclosure of such payment, receipt or
retention of funds in the Prospectus. The Company's
internal accounting controls and procedures are
sufficient to cause the Company to comply in all
material respects with the Foreign Corrupt &
Practices Act of 1977, as amended.
(bb) The Company is not an "Investment Company" or a
company "controlled" by an "investment Company,"
within the meaning of the Investment Company Act of
1940, as amended.
(cc) The employment, consulting, confidentiality and
non-competition agreements between the Company and
its officers, employees and consultants which have
been filed as exhibits to the Registration Statement
or to any of the Incorporated Documents are binding
and enforceable obligations upon the respective
parties thereto in accordance with their terms,
except to the extent
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<PAGE> 12
that (i) enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws
affecting creditors' rights generally, (ii) the
remedy of specific performance and injunction or
other forms of equitable relief may be subject to
equitable defenses and the discretion of the court
before which any proceeding therefor may be brought,
and (iii) such obligations are found by a court to
violate public policy or to be unenforceable by
reason of applicable state statutes, or case law.
(dd) Except as disclosed in the Registration Statement and
the Prospectus, the Company has no employee benefit
plans (including, without limitation, profit sharing
and welfare benefit plans) or deferred compensation
arrangements that are subject to the provisions of
the Employee Retirement Income Security Act of 1974.
(ee) Except as disclosed in the Registration Statement and
the Prospectus, there are no voting or other
shareholder agreements between the Company and any
shareholders of the Company or between or by and
among any shareholders of the Company.
(ff) The Company has filed a registration statement on
Form 8-A with respect to its Common Stock under
Section 12(b) of the Exchange Act, and such
registration statement has been declared effective by
the SEC. The Company has filed an additional listing
application with respect to the Shares with the AMEX
and such listing application has been approved by the
AMEX.
(gg) Each of the Company and its Subsidiaries 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. To
the Company's knowledge, there are no pending
investigations involving the Company or any of its
Subsidiaries, by the U.S. Department of Labor or any
other governmental agency responsible for the
enforcement of such federal, state, local, or foreign
laws and regulations. There is no unfair labor
practice charge or complaint against the Company or
any of its Subsidiaries pending before the National
Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or, to
the Company's best knowledge, threatened against or
involving the Company or any of its Subsidiaries or
any predecessor entity, and none has ever occurred.
No representation question exists respecting the
employees of the Company, and no collective
bargaining agreement or modification thereof is
currently being negotiated by the Company or any of
its Subsidiaries. No grievance or arbitration
proceeding is pending under any expired or existing
collective bargaining agreements of the Company or
any of its Subsidiaries.
(hh) The Shares have been approved for listing on the
AMEX.
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<PAGE> 13
(ii) The Company and its Subsidiaries have not since
December 31, 1999 incurred, and will not incur,
additional significant operating expenses or costs to
ensure that its software, hardware and information
systems will continue to be year 2000 compliant.
(jj) The Company has provided to Blank Rome Tenzer
Greenblatt LLP, counsel to the Underwriters
("Underwriters' Counsel"), all agreements,
certificates, correspondence and other items,
documents and information requested by such counsel's
Corporate Review Memorandum dated February 15, 2000.
(kk) Any certificate signed by an officer of the Company
in his capacity as such and delivered to the
Underwriters or the Underwriters' Counsel shall be
deemed a representation and warranty by the Company
to the Underwriters as to the matters covered
thereby.
(ll) Each of the Company and its Subsidiaries is and has
been doing business in material compliance with all
authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal,
state, and local laws, Rules and Regulations; and
each of the Company and its Subsidiaries has not
received any notice of proceedings relating to the
revocation or modification of any such authorization,
approval, order, license, certificate, franchise, or
permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or
finding, would materially adversely affect the
business operations, condition, financial or
otherwise, or the earnings, business affairs,
position, prospects, value, operation, properties,
business or results of operations of the Company and
its Subsidiaries taken as a whole
2. Purchase, Delivery and Sale of the Shares and the Underwriters'
Warrants.
(a) Subject to the terms and conditions of this
Agreement, and on the basis of the representations,
warranties, and agreements herein contained, the
Company hereby agrees to sell the Shares to the
Underwriters, and the Underwriters agree to purchase
the Shares from the Company, at a net purchase price
of $2.76 per share (net of commissions) as follows:
<TABLE>
<S> <C>
Starr Securities, Inc. 1,400,000 Shares
GunnAllen Financial, Inc. 600,000 Shares
----------------
Total 2,000,000 Shares
</TABLE>
On the Closing Date, as hereinafter defined, the Shares will
be delivered by the Company to the Underwriters against payment of the purchase
price by the Underwriters to the Company by wire transfer of immediately
available funds. Delivery of the Shares against payment therefor shall take
place at the offices of the Underwriters in New York, New York, at 10:00 a.m.,
local New York Time, on April 19, 2000 or at such other location, time and date
as the Underwriters and the Company may agree in writing, such time and date of
payment and delivery for the Shares being herein called the "Closing Date." The
parties acknowledge and
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<PAGE> 14
agree that the Shares shall be maintained in book-entry-only form, and that each
will use its best efforts to comply with the procedures of the DTC. The Shares
to be purchased hereunder shall be registered in such names and in such
denominations as the Underwriters shall request prior to 1:00 P.M., New York
City time, on the second business day preceding the Closing Date.
(b) On the Closing Date, the Company will sell the
Underwriters' Warrants to the Underwriters or to the
Underwriters' designees (which shall be limited to
officers and partners of the Underwriter, members of
the selling group and/or their officers or partners
(collectively, the "Underwriters' Designees")). The
Underwriters' Warrants will be in the form of, and in
accordance with, the provisions of the Underwriters'
Warrant attached as Exhibit A to this Agreement. The
aggregate purchase price for the Underwriters'
Warrants is forty-eight dollars ($48.00). The
Underwriters' Warrants will be restricted from sale,
transfer, assignment or hypothecation for a period of
one (1) year from the Closing Date, except to the
Underwriters' Designees. Payment for the
Underwriters' Warrants will be made to the Company by
check or checks payable to its order on the Closing
Date against delivery of the certificates
representing the Underwriters' Warrants. The
certificates representing the Underwriters' Warrants
will be in such denominations and such names as the
Underwriters may request prior to the Closing Date.
The information set forth on the cover page concerning the
Underwriters and under the caption "Underwriting" or otherwise specifically
relating to the Underwriters in the Prospectus (including any amendment or
supplement thereto) relating to the Shares filed or proposed to be filed by the
Company (insofar as such information relates to the Underwriter) constitutes the
only information furnished by the Underwriters to the Company for inclusion
therein, and the Underwriters represent and warrant to the Company that the
statements made therein are correct and do not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3. Public Offering by Underwriter. The Underwriters agree to cause the
Shares to be offered to the public initially at the price and under the terms
set forth in the Prospectus Supplement to be filed by the Company with the
Commission on or after the effective date of this Agreement. The Underwriters
may allow such concessions and discounts upon sales to other dealers as set
forth in the Prospectus Supplement. The Underwriters agree to notify the Company
in writing when the offering is first made and when it is completed. After the
completion of the initial public offering, the public offering price, the
concessions and the reallowance may be changed by the Underwriters.
4. Agreements of the Company. The Company covenants and agrees with the
Underwriters that:
(a) The Company will prepare a Prospectus Supplement
setting forth the number of Shares covered thereby
and their terms not otherwise specified in the
Prospectus pursuant to which the Shares are being
issued, the name of the Underwriters and the number
of Shares which the Underwriters have agreed
-14-
<PAGE> 15
to purchase, the price at which the Shares are to be
purchased by the Underwriters from the Company and
such other information as the Underwriters and the
Company deem appropriate in connection with the
offering of the Shares and file the Prospectus
Supplement in a form approved by the Underwriters
pursuant to Rule 424(b) under the Act no later than
the Commission's close of business on the second
business day following the date of the determination
of the offering price of the Shares. Prior to the
Closing Date, the Company will not file any amendment
or supplement to the Registration Statement or the
Prospectus, (i) which shall not have been previously
submitted to, and approved by, the Underwriters or
counsel for the Underwriters a reasonable time prior
to the filing thereof, such approval not to be
unreasonably withheld or delayed (ii) to which the
Underwriters or counsel for the Underwriters shall
have reasonably objected in writing as not being in
compliance with the Act or the Rules and Regulations,
or (iii) which is not in compliance with the Act or
the Rules and Regulations.
(b) The Company will notify the Underwriters promptly
after it shall have received notice of the time when
any post-effective amendment to the Registration
Statement has become effective or any supplement to
the Prospectus has been filed, and of the receipt of
any comments of the Commission with respect thereto.
(c) The Company will advise the Underwriters promptly of
any request of the Commission for an amendment or
supplement to the Registration Statement or the
Prospectus, or for any additional information, or of
the issuance by the Commission of any stop order
suspending the effectiveness of the Registration
Statement, or of any judgment, order, injunction or
decree preventing or suspending the use of any
Prospectus, or of the institution of any proceedings
for any of such purposes, of which it has knowledge,
and will use its best efforts to prevent the issuance
of any stop order, and, if issued, to obtain as
promptly as possible the lifting thereof.
(d) If at any time when a Prospectus relating to the
Shares is required to be delivered under the Act, any
event shall have occurred as a result of which, in
the opinion of counsel for the Company or counsel for
the Underwriters, the Prospectus, as then amended or
supplemented, includes an untrue statement of a
material fact or omits to state any material fact
required to be stated therein or necessary to make
the statements therein, in the light of the
circumstances under which they were made, not
misleading, or if it is necessary at any time to
amend or supplement the Registration Statement or 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 satisfactory
to counsel for the Underwriters, and the Company will
furnish to the Underwriters copies of such amendment
or supplement as soon as available and in such
quantities as the Underwriters may reasonably
request.
-15-
<PAGE> 16
(e) Within the time during which the Prospectus is
required to be delivered under the Act, or pursuant
to the undertakings of the Company in the
Registration Statement, the Company will comply, at
its own expense, with all requirements imposed upon
it by the Act, the Rules and Regulations, the
Exchange Act or the Rules and Regulations of the
Commission promulgated under the Exchange Act, each
as now or hereafter amended or supplemented, and by
any order of the Commission so far as necessary to
permit the continuance of sales of, or dealings in,
the Shares.
(f) The Company will furnish to the Underwriters, without
charge, a signed copy of the Registration Statement
and of any amendment or supplement thereto which has
been filed prior to the date of this Agreement,
together with two (2) copies of each exhibit filed
therewith and of each of the Incorporated Documents,
and five (5) conformed copies of such Registration
Statement and as many amendments thereto (unsigned
and exclusive of exhibits) as the Underwriters may
reasonably request. The signed copies of the
Registration Statement so furnished to the
Underwriters will include signed copies of any and
all consents and reports of the independent public
auditors as to the financial statements included in
the Registration Statement and Prospectus, and signed
copies of any and all consents and certificates of
any other person whose profession gives authority to
statements made by them and who are named in the
Registration Statement or Prospectus as having
prepared, certified or reviewed any parts thereof.
(g) The Company will deliver to the Underwriters, without
charge, copies of the Prospectus and, as soon as they
are available, and from time to time thereafter,
copies of each amended or supplemented Prospectus,
and the number of copies to be delivered in each such
case will be such as the Underwriters may reasonably
request. The Company authorizes the Underwriters and
dealers to use the Prospectus in connection with the
sale of the Shares, for such period as, in the
opinion of counsel for the Underwriters, delivery of
the Prospectus is required to comply with the
applicable provisions of the Act and the Rules and
Regulations.
(h) The Company will cooperate with the Underwriters and
Underwriters' Counsel in connection with the
registration or qualification of the Shares for offer
and sale under the blue sky or securities laws of
such states or other jurisdictions as the
Underwriters or counsel for the Underwriters may
designate (provided that such states or jurisdictions
do not require the Company to qualify as a foreign
corporation or to file a general consent to service
of process) and to continue such qualifications in
effect so long as may be required for the purposes of
the distribution of the Shares, all at the Company's
expense. In each state or jurisdiction where the
Company shall qualify the Shares as above provided,
the Company will prepare and file such statements or
reports as may be required by the laws of such state
or jurisdiction, and the Underwriters shall, upon the
written request of the
-16-
<PAGE> 17
Company, supply the Company with all information
known to the Underwriters and required to be included
in such statements or reports.
(i) During the period of two years from the date of this
Agreement, the Company, at its expense, shall furnish
the Underwriters with a copy of each report mailed to
stockholders of the Company, concurrently with such
mailing, and a copy of each report or document,
including, without limitation, reports on Form 8-K,
10-K (or 10-KSB), 10-Q or 10-QSB and exhibits
thereto, filed or furnished by the Company pursuant
to the Exchange Act to the Commission, any securities
exchange or the NASD promptly following the date on
which each such report or document is so filed or
furnished.
(j) For a period of five (5) years from the Closing Date,
the Company shall promptly submit to the Underwriters
copies of all accountants' management reports and
similar correspondence between the Company and its
independent public accountants.
(k) For a period of five (5) years from the Closing Date,
as and to the extent required under the applicable
Rules and Regulations of the Commission under the
Exchange Act, the Company, at its expense, shall
cause its then independent certified public
accountants, to review (but not audit) the Company's
financial statements for each of the first three
fiscal quarters prior to the announcement of
quarterly financial information, the filing of the
Company's 10-Q (or 10-QSB) quarterly report (or other
equivalent report) and the mailing of quarterly
financial information to stockholders.
(l) As soon as practicable, but in any event not later
than 45 days after the end of the 12-month period
beginning on the day after the end of the fiscal
quarter of the Company during which the effective
date of the Registration Statement occurs (90 days in
the event that the end of such fiscal quarter is the
end of the Company's fiscal year), the Company will
make generally available to its security holders in
accordance with Section 11 (a) of the Act an earnings
statement of the Company meeting the requirements of
Rule 158(a) under the Act covering a period of at
least 12 months beginning after the Effective Date,
and advise the Underwriters that such statement has
been so made available.
(m) The Company will apply the net proceeds ("Proceeds")
it realizes from the sale of the Shares in the manner
set forth under the caption "Use of Proceeds" in the
Prospectus Supplement to be filed with the
Commission. Except as set forth in such Prospectus
Supplement, no portion of the net proceeds from the
sale of the Shares will be used to repay any
indebtedness.
(n) The Company, on the Closing Date, will sell to Starr
Securities and GunnAllen the Underwriters' Warrants
(to be divided in such amounts as determined by Starr
Securities) according to the terms specified in
Section 2 (d) hereof. The Company has reserved and
shall continue to reserve a
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<PAGE> 18
sufficient number of shares of Common Stock for
issuance upon exercise of the Underwriters' Warrants.
(o) For a period of two (2) years from the Closing Date,
the Company agrees that it will maintain insurance in
full force and effect of the types and in the amounts
which are customary for similarly situated companies,
including but not limited to, personal injury and
product liability insurance and insurance covering
all personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism
and all other risks customarily insured against.
(p) During the course of the distribution of the Shares,
the Company will not take, 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 the
Shares.
(q) The Company will use its best efforts, at its cost
and expense, to take all necessary and appropriate
action to maintain the listing of the Shares on the
AMEX or on the NASDAQ automated quotation system and
maintain such listing for as long as the Shares are
qualified.
(r) On the Closing Date, all transfer or other taxes
(other than income taxes) which are required to be
paid in connection with the sale and transfer of the
Shares will have been fully paid by the Company and
all laws imposing such taxes will have been fully
complied with.
(s) Subsequent to the dates as of which information is
given in the Registration Statement and Prospectus
and prior to the Closing Date, except as disclosed in
or contemplated by the Registration Statement and
Prospectus, (i) the Company will not 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, any adverse change in the
condition (financial or other), business, operations,
prospects, income, net worth or properties, including
any loss or damage to the properties of the Company
(whether or not such loss is insured against), which
could adversely affect the condition (financial or
other), business, operations, prospects, income, net
worth or properties of the Company and the
Subsidiaries, taken as a whole; and (iii) the Company
shall not have paid or declared any dividend or other
distribution on its Common Stock or its other
securities or redeemed or repurchased any of its
Common Stock or other securities.
(t) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to
provide reasonable assurances that: (i) transactions
are executed in accordance with management's general
or specific authorization; (ii) transactions are
recorded as necessary in order to
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<PAGE> 19
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.
(u) For a period of three (3) years from the Closing
Date, management of the Company shall provide the
Board of Directors, on an annual basis, with an
internal budget for the next fiscal year, which
budget must be approved by the Board of Directors.
(v) Except as set forth under the caption "Use of
Proceeds" in the Prospectus (including any supplement
thereto) or otherwise consented to by the
Underwriters, no proceeds from the sale of the Shares
will be used to pay outstanding loans from officers,
directors or shareholders or to pay any accrued
salaries or bonuses to any current or former
employees or consultants or any affiliates thereof or
to pay off any other outstanding debt other than
current trade payables which arose in the ordinary
course of business.
(w) The Company agrees that for so long as the Common
Stock is registered under the Exchange Act, the
Company will hold an annual meeting of stockholders
for the election of directors and will provide the
Company's stockholders with the audited financial
statements of the Company as of the end of the fiscal
year just completed prior thereto. Such financial
statements shall be those required by applicable
rules under the Exchange Act and shall be included in
an annual report pursuant to the requirements
thereof.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each of the Underwriters and each person, if any, who
controls either of the Underwriters within the
meaning of the Act against any losses, claims,
damages, expenses or liabilities, joint or several
(which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense
and investigation and all reasonable attorney's
fees), to which the Underwriters or any such
controlling person may become subject, under the Act
or otherwise, but only as such losses, claims,
damages or liabilities (or action in respect thereof)
arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Registration Statement or the
Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading; provided,
however, that the Company will not be liable in any
such case (i) to the extent that any such loss,
claim, damages or liability arises out of or is based
upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the
Registration Statement or the Prospectus or any
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<PAGE> 20
amendment or supplement thereto, in reliance upon,
and in conformity with, written information furnished
to the Company by the Underwriters specifically for
use in the preparation thereof; (ii) if the
Underwriters failed to deliver a Prospectus within
the time required by the Act to the claimant seeking
damages from the Company or (iii) if a material
misstatement or omission was corrected by the Company
in an amended or supplemented Prospectus and the
Underwriters failed to deliver such amended or
supplemented Prospectus to the claimant seeking
damages from the Company. The information set forth
on the cover page concerning the Underwriters and
under the caption "Underwriting" or otherwise
specifically relating to the Underwriters in the
Registration Statement shall be deemed to have been
furnished to the Company by the Underwriters for
purposes hereof. This indemnity will be in addition
to any liability which the Company may otherwise
have.
(b) Each of the Underwriters agrees that it will
indemnify and hold harmless the Company, each of its
directors, each nominee (if any) for director named
in the Prospectus, each of its officers who has
signed the Registration Statement, and each person,
if any, who controls the Company within the meaning
of the Act, against any losses, claims, damages,
expenses or liabilities (which shall, for all
purposes of this Agreement, include, but not be
limited to, all costs of defense and investigation
and all attorney's fees), joint or several, to which
the Company or any such director, nominee, officer or
controlling person may become subject under the Act
or otherwise, but only as such losses, claims,
damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in the Registration Statement or the
Prospectus or any amendment or supplement thereto, or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, but in each
case only to the extent that such untrue statement or
alleged untrue statement or omission or alleged
omission was made in the Registration Statement or
the Prospectus or such amendment or supplement
thereto in reliance upon and in conformity with
written information furnished to the Company by such
Underwriters specifically for use in the preparation
thereof, provided, however, that the obligation of
each Underwriter to indemnify the Company (including
any controlling person, director or officer thereof)
shall (i) only relate to any untrue statement or
alleged untrue statement or any omission or alleged
omission which applies to such Underwriter and (ii)
be limited in amount to the net proceeds received by
the Company from such Underwriter. The information
set forth on the cover page concerning the
Underwriters and under the caption "Underwriting" or
otherwise specifically relating to the Underwriters
in the Registration Statement shall be deemed to have
been furnished to the Company by the Underwriters for
purposes hereof. This indemnity will be in addition
to any liability which the Underwriters may otherwise
have.
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<PAGE> 21
(c) Promptly after receipt by an indemnified party under
this Section 5 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 this Section 5, notify the
indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability
which it may have to any indemnified party otherwise
than solely pursuant to this Section 5. In case any
such action is brought against any indemnified party,
which notifies the indemnifying party of the
commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that
it may choose, jointly with any other indemnifying
party similarly notified, reasonably assume the
defense thereof. Subject to the provisions herein
stated and after notice from the indemnifying party
to such indemnified party of its election so to
assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under
this Section 5 for any legal or other expenses
subsequently incurred by such indemnified party in
connection with the defense thereof other than
reasonable costs of investigation, unless the
indemnifying party shall have a default judgment
entered against it or shall settle such action
without the consent of the indemnified party. The
indemnified party shall have the right to employ one
separate counsel in any such action and to
participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party;
provided that the fees and expenses of such counsel
shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been
specifically authorized in writing by the
indemnifying party, (ii) the named parties to such
action (including any impleaded parties) include both
the indemnified and the indemnifying party and the
indemnified party shall have been advised by such
counsel that there may be one or more legal defenses
available to the indemnifying party different from or
in conflict with any legal defenses which may be
available to the indemnified party (in which case the
indemnifying party shall not have the right to assume
the defense of such action on behalf of the
indemnified party, it being understood, however, that
the indemnifying party shall, in connection with any
one such action or separate but substantially similar
or related actions in the same jurisdiction arising
out of the same general allegations or circumstances,
be liable only for the reasonable fees and expenses
of one separate firm of attorneys for the indemnified
party, which firm shall be designated in writing by
the indemnified party), or (iii) the professional
competence of the counsel to be employed by the
indemnifying party is not reasonably acceptable to
the indemnified party. No settlement of any action
against an indemnified party shall be made without
the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld. The
indemnifying party shall not be liable to indemnify
the indemnified party for any settlement of any
action effected without the indemnifying party's
prior written consent to any such settlement, which
consent shall not be unreasonably withheld.
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<PAGE> 22
6. Contribution. In order to provide for just and equitable
contribution under the Act in any case in which (i) the Underwriters make a
claim for indemnification pursuant to Section 5 hereof but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or denial of the last right of
appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 5 provide for
indemnification in such case, or (ii) contribution under the Act may be required
on the part of the Underwriters, then the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all attorneys'
fees) in either such case (after contribution from others) in such proportions
such that the Underwriters shall be responsible in the aggregate for that
portion of such losses, claims, damages or liabilities determined by multiplying
the total amount of such losses, claims, damages or liabilities by the
difference between the public offering price of the Shares and the purchase
price of the Shares to such Underwriters and dividing the product by the public
offering price of the Shares, and the Company shall be responsible for that
portion of such losses, claims, damages or liabilities determined by multiplying
the total amount of such losses, claims, damages or liabilities by the purchase
price of the Shares to the Underwriters and dividing the product thereof by the
public offering price of the Shares. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. The foregoing contribution agreement shall in no way affect
the contribution liabilities of any persons having liability under Section 11 of
the Act other than the Company and the Underwriters. As used in this Section 6,
the term "Underwriter" includes any person who controls either of the
Underwriters within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this Section 6 is not permitted by law, then the
Underwriters shall be entitled to contribution from the Company, its officers,
directors and controlling persons to the fullest extent permitted by law. Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect to
which a claim for contribution may be made against another party or parties
under this Section 6, notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this Section 6, or to the
extent that such party or parties were not adversely affected by such omission.
The contribution agreement set forth above shall be in addition to any
liabilities which any indemnifying party may have at common law or otherwise.
7. Survival of Agreements etc. All statements contained in any
schedule, exhibit or other instrument delivered by or on behalf of the parties
hereto, or in connection with the transactions contemplated by this Agreement,
shall be deemed to be representations and warranties hereunder. Notwithstanding
any investigations made by or on behalf of the parties to this Agreement, all
representations, warranties, indemnities and agreements made by the parties to
this Agreement or pursuant hereto shall remain in full force and effect and will
survive delivery of and the payment for the Shares, for a period of three years
from the date hereof, except that, if a party hereto has actual knowledge at the
time of the Closing Date of facts which would constitute a breach of the
representations and warranties contained herein, such breaches shall be waived
by such party if such party consummates the transactions contemplated by this
Agreement.
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<PAGE> 23
8. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase the Shares hereunder are subject to the following
conditions:
(a) All filings required by Rules 424 and 430A under the
Act shall have been timely made, and no stop order
suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding
for that purpose shall have been initiated or be
pending or, to the knowledge of the Company or the
Underwriters, contemplated or threatened by the
Commission; and any request by the Commission for
additional information to be included in the
Registration Statement or the Prospectus or otherwise
shall have been complied with to the satisfaction of
counsel for the Underwriter; and qualification under
the securities laws of such states as the
Underwriters may designate of the issue and sale of
the Shares upon the terms and conditions herein set
forth or contemplated and containing no provision
unacceptable to the Underwriters shall have been
secured; and no stop order shall be in effect denying
or suspending effectiveness of such qualifications,
nor shall any stop order proceedings with respect
thereto be instituted or pending or threatened under
such laws. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of
the Shares and any price-related information
previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to
Rule 424(b) of the Rules and Regulations within the
prescribed time period, and prior to the 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.
(b) No amendment to the Registration Statement or the
Prospectus to which the Underwriters or counsel for
the Underwriters shall have reasonably objected,
after having received reasonable notice of a proposal
to file the same, shall have been filed.
(c) The Underwriters shall not have discovered and
disclosed to the Company prior to the Closing Date
that the Registration Statement or the Prospectus, or
any amendment or supplement thereto, contains an
untrue statement of fact which, in the reasonable
opinion of counsel for the Underwriters, is material,
or omits to state a fact which, in the reasonable
opinion of such counsel, is material and is required
to be stated therein or is necessary to make the
statements therein not misleading.
(d) Subsequent to the dates as of which information is
given in the Registration Statement and Prospectus
(including any supplement thereto) and on and prior
to the Closing Date, except as disclosed in or
contemplated by the Registration Statement and
Prospectus (including any supplement thereto), (i)
the Company will not have incurred any liabilities or
obligations, direct or contingent, or entered into
any material transactions other than in the ordinary
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<PAGE> 24
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, any adverse change in the condition
(financial or other), business, management of
affairs, business prospects, results of operations,
income, shareholders' equity, net worth or
properties, including any loss or damage to the
properties of the Company (whether or not such loss
is insured against), which could reasonably be
expected to adversely affect the condition (financial
or other), business, management of affairs, business
prospects, results of operations, income,
shareholders' equity, net worth or properties of the
Company and the Subsidiaries, taken as a whole; and
(iii) the Company shall not have paid or declared any
dividend or other distribution on its Common Stock or
its other securities or redeemed or repurchased any
of its Common Stock or other securities.
(e) The Underwriters shall have received from KPMG LLP,
two signed certificates or letters, one dated and
delivered on the date hereof and one dated and
delivered on the Closing Date, in form and substance
satisfactory to the Underwriters, stating that:
(i) they are independent certified public accountants
with respect to the Company within the meaning of the
Act and the Rules and Regulations, and no disclosure
under Item 13 of the Registration Statement is
required insofar as it relates to them;
(ii) the financial statements included or incorporated
by reference in the Registration Statement and the
Prospectus were examined by them and, in their
opinion, comply as to form in all material respects
with the applicable requirements of the Act, the
Rules and Regulations and instructions of the
Commission with respect to Registration Statements on
Form S-3 and that the Underwriters may rely upon the
opinion of such firm with respect to the financial
statements and supporting schedules included in the
Registration Statement;
(iii) on the basis of inquiries and procedures
conducted by them (not constituting an examination in
accordance with generally accepted auditing
standards), including a reading of the latest
available unaudited interim financial statements or
other financial information of the Company (with an
indication of the date of the latest available
unaudited interim financial statements), inquiries of
officers of the Company who have responsibility for
financial and accounting matters, reviews of minutes
of all meetings of the shareholders, the Board of
Directors and any committees of the Board of
Directors of the Company, as set forth in the minute
books of the Company, and other specified inquiries
and procedures, nothing has come to their attention
as a result of the foregoing inquiries and procedures
that causes them to believe that:
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<PAGE> 25
(A) during the period from the date of the latest
financial statements of the Company appearing in the
Incorporated Documents and incorporated by reference
in the Registration Statement and Prospectus to a
specified date not more than three business days
prior to the date of such letter, there has been any
decreases in net current assets or net assets change
in the Common Stock or other securities of the
Company (except as specifically disclosed in such
certificates or letters), any decreases in
shareholders equity or working capital or any
increases in net current liabilities, net liabilities
or long-term debt in each case as compared with
amounts shown in such financial statements; and any
decrease in revenues or in the total or per share
amounts of income before extraordinary items or net
income or loss, or any other material change in each
case as compared with the corresponding period in the
preceding year or any change in the capitalization or
long term debt of the Company, except in each case
for increases, changes or decreases which the
Prospectus discloses have occurred or will or may
occur.
(B) the unaudited interim financial statements of the
Company, if any, appearing in the Incorporated
Documents and incorporated by reference in the
Registration Statement and the Prospectus, do not
comply as to form in all material respects with the
applicable accounting requirements of the Act and the
Regulations or are not fairly presented in conformity
with generally accepted accounting principles and
practices on a basis substantially consistent with
the audited financial statements included in the
Registration Statement or the Prospectus;
(iv) On the basis of certain procedures specified by
the Underwriters and described in their letter, they
have compared specific dollar amounts, numbers of
shares, percentages of revenue and earnings and other
information (to the extent they are contained in or
derived from the accounting records of the Company,
and excluding any questions of legal interpretations)
included in the Incorporated Documents and
incorporated by reference in the Registration
Statement and Prospectus with the accounting records
and other appropriate data of the Company and have
found them to be in agreement.
(f) At the Closing Date, the Underwriters shall have
received from O'Melveny & Myers LLP, counsel for the
Company ("Company Counsel"), signed opinions dated as
of the Closing Date, in the forms attached hereto as
Exhibit B.
(g) The Underwriters shall have received a certificate,
dated and delivered as of Closing Date, of the Chief
Executive Officer, the Chief Financial Officer and
Secretary of the Company stating that:
(i) The Company has complied with all the agreements
and satisfied all the conditions on their respective
part to be performed or satisfied hereunder at or
prior to such date, including but not limited to the
agreements and covenants of the Company set forth in
Section 4 hereof.
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<PAGE> 26
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued nor, to the
Company's knowledge after inquiry of the Commission,
have any proceedings for that purpose have been
instituted or are pending, contemplated or threatened
under the Act.
(iii) Such officers have carefully examined the
Registration Statement and the Prospectus and any
supplement or amendment thereto, each of which
contains all statements required to be stated therein
or necessary to make the statements therein not
misleading and does not contain any untrue statement
of a material fact, and since the Effective Date
there has occurred no event required to be set forth
in the amended or supplemented Prospectus which has
not been set forth.
(iv) As of the date of such certificate, the
representations and warranties contained in Section 1
hereof are true and correct in all material respects
as if such representations and warranties were made
in their entirety on the date of such certificate,
and the Company has complied with all its agreements
herein contained as of the date hereof.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement
and Prospectus, and except as contemplated in the
Prospectus, the Company has not incurred any material
liabilities or obligations, direct or contingent
(other than in the ordinary course of business), or
entered into any material transactions and there has
not been any change in the Common Stock or funded
debt of the Company or any material adverse change in
the condition (financial or other), business,
operations, income, net worth, properties or
prospects of the Company and its Subsidiaries, taken
as a whole, except for such changes as are
contemplated by, or disclosed in the Prospectus.
(vi) Subsequent to the respective dates as of which
information is given in the Registration Statement
and the Prospectus, the Company shall have not
sustained any material loss of or damage to its
properties, whether or not insured, and since such
respective dates, no dividends or distributions
whatever shall have been declared or paid, or both,
on or with respect to any security (except interest
in respect of loans) of the Company.
(vii) Neither the Company nor any of its officers or
affiliates shall have taken, and the Company, its
officers and affiliates will not take, directly or
indirectly, any action designed to, or which might
reasonably be expected to, cause or result in the
stabilization or manipulation of the price of the
Company's securities to facilitate the sale or resale
of the Shares.
(viii) No action, suit or proceeding, at law or in
equity, which may (A) result in the imposition of
damages or penalties against, or payments by, the
Company in excess of $50,000 or (B) materially
adversely affect the operation of the Company's
business shall be pending or, to the knowledge of
such
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<PAGE> 27
officers, threatened against the Company, or
affecting any of its properties, before or by any
commission, board or other administrative agency,
except as otherwise disclosed in the Registration
Statement or the Prospectus.
(h) Neither the Company nor any of its officers or
affiliates shall have taken, directly or indirectly,
any action designed to, or which might reasonably be
expected to, cause or result in the stabilization or
manipulation of the price of the Company's securities
to facilitate the sale or resale of the Shares.
(i) Subsequent to the respective dates as of which
information is given in the Registration Statement
and the Prospectus, the Company shall not have lost
any significant customers or been advised that it may
lose any such significant customers.
(j) On the Closing Date, the Company shall not be a party
to, or be involved in, any arbitration, litigation
(except as set forth in the Registration Statement)
or governmental proceeding, which is then pending,
or, to the knowledge of the Company, threatened, of a
character which is required to be disclosed in the
Registration Statement or which may be reasonably
expected to materially and adversely affect the
condition (financial or other), business, management
of affairs, business prospects, results of
operations, income, shareholders' equity, net worth
or properties of the Company and its Subsidiaries
taken as a whole.
(k) Subsequent to the respective dates as of which
information is given in the Registration Statement
and the Prospectus, the Company shall not have
sustained any loss on account of fire, flood,
accident, or other calamity, whether or not covered
by insurance, which, in the sole judgment of the
Underwriters materially adversely affects the
business of the Company.
(l) At the Closing Date, (i) the representations and
warranties of the Company contained in this Agreement
shall be true and correct in all material respects
with the same effect as if made on and as of the
Closing Dates, and the Company shall have performed,
in all material respects, all its obligations due to
be performed prior thereto; (ii) the Registration
Statement and the Prospectus and any amendment or
supplement thereto shall contain all statements which
are required to be stated therein in accordance with
the Act and the Rules and Regulations and conform in
all material respects to the requirements thereof,
and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto
shall 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; (iii) there shall have been,
since the date as of which information is given in
the Registration Statement and the Prospectus, no
material adverse change in the condition, business,
operations, properties, business prospects,
securities, long-term or short-term debt or general
affairs of the Company and its Subsidiaries taken as
a whole from that set forth in the Registration
Statement or the Prospectus, except changes which the
Registration Statement and the
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<PAGE> 28
Prospectus indicate will occur on or prior to such
Closing Date, and the Company shall not have incurred
any material liabilities or obligations, direct or
contingent, or entered into any material transaction,
contract or agreement not in the ordinary course of
business other than as referred to in the
Registration Statement and the Prospectus; and (iv)
except as set forth in the Prospectus, no action,
suit or proceeding, at law or in equity, shall be
pending or threatened against the Company which might
be required to be set forth in the Registration
Statement, and no proceedings shall be pending or
threatened against the Company before or by any
commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable
decision, ruling or finding might materially
adversely affect the condition, business, operations,
properties, prospects or general affairs of the
Company.
(m) No action shall have been taken by the Commission or
the NASD the effect of which would make it improper,
at any time prior to the Closing Date, for any member
firm of the NASD to execute transactions (as
principal or as agent) in the Shares, and no
proceedings for the purpose of taking such action
shall have been instituted or shall be pending, or,
to the best of the Underwriters' or the Company's
knowledge, shall be contemplated by the Commission or
the NASD.
(n) The Company meets the current and any existing and
proposed criteria for inclusion of the Shares on
AMEX.
(o) All proceedings taken at or prior to the Closing Date
in connection with the authorization, issuance and
sale of the Shares shall be reasonably satisfactory
in form and substance to the Underwriters and to
Underwriters' Counsel, and such counsel shall have
been furnished with all such documents, certificates
and opinions as they may request for the purpose of
enabling them to pass upon the matters referred to in
this Section 8 hereof and in order to evidence the
accuracy and completeness of any of the
representations, warranties or statements of the
Company, the performance of any covenants of the
Company, or the compliance by the Company with any of
the conditions herein contained.
(p) The Company shall have executed and delivered the
Underwriters' Warrants.
9. Termination. This Agreement may be terminated by the Underwriters,
in their absolute discretion, by notice to the Company (i) if, prior to the
Closing Date, the Company shall have failed or refused to fully comply with any
of the provisions of this Agreement on its part to be performed prior thereto,
or if any of the agreements, conditions, covenants, representations or
warranties of the Company herein contained are not correct or shall not have
been performed or fulfilled within the times specified; (ii) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange will have been suspended; (iii) limited or minimum prices will have
been established on either such Exchange or maximum ranges for prices for
securities shall have been required on the over-the-counter market by the NASD;
(iv) a banking moratorium will have been declared either by federal or New York
State authorities; (v) any
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<PAGE> 29
other restrictions on transactions in securities materially affecting the free
market for securities or the payment for such securities, will be established by
either of such Exchanges, by the Commission by any other federal or state
agency, by action of the Congress or by Executive Order; (vi) the Company will
have sustained a material loss, whether or not insured, by reason of fire,
flood, accident or other calamity; (vii) any action has been taken by the
Government of the United States or any department or agency thereof which, in
the sole judgment of the Underwriters, has had a material adverse effect upon
the general market for securities; (viii) if, prior to the Closing Date there
shall have occurred the outbreak of any war or any other event or calamity
which, in the sole judgment of the Underwriter, materially disrupts the
financial markets of the United States; (ix) if trading of any securities of the
Company shall have been suspended, halted or delisted on any exchange or in any
over-the- counter market or by the Commission; or (x) if, prior to the Closing
Date, any materially adverse change shall have occurred in the sole judgment of
the Underwriter, since the date as of which information is given in the
Registration Statement and the Prospectus, in the financial condition, business,
prospects, operations, properties or obligations of the Company and its
Subsidiaries taken as a whole. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 6, 7 and 10 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
10. Expenses.
(a) Whether or not the offering is consummated, the
Company will pay all costs and expenses incident to
the performance of the obligations of the Company
hereunder, including without limiting the generality
of the foregoing, (i) the preparation, printing,
filing, and copying of the Registration Statement,
Prospectus, this Agreement, the Selected Dealer
Agreement, and other underwriting documents, if any,
and any drafts, amendments or supplements thereto,
including the cost of all copies thereof supplied to
the Underwriters in such quantities as reasonably
requested by the Underwriters and the costs of
mailing Prospectuses to offerees and purchasers of
the Shares; (ii) the printing, engraving, issuance
and delivery of certificates representing the Shares,
including any transfer or other taxes payable
thereon; (iii) the registration or qualification of
the Shares under state securities or "blue sky" laws,
in accordance with the provisions of Section 10(c)
below and the cost of printing and mailing the "blue
sky Survey"; (iv) all reasonable fees and expenses of
the Company's counsel and accountants; (v) all NASD
filing fees in connection with the offering; (vi) all
costs and expenses of any listing of the Shares on
the AMEX, NASDAQ or any other stock exchange; (vii)
all costs and expenses of preparing four (4) bound
volumes to be provided to the Underwriters of all
documents, paper exhibits, correspondence and records
forming the materials included in the offering;(viii)
the cost of "tombstone" advertisements to be placed
in one or more daily or weekly periodicals as the
Underwriters may request (up to a maximum of
$10,000); (ix) the cost of printing and mailing the
Selected Dealer Agreement and (ix) all other costs
and expenses incurred or to be incurred by the
Company in connection with the transactions
contemplated by this Agreement. The obligations of
the
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<PAGE> 30
Company under this subsection (a) shall survive any
termination or cancellation of this Agreement.
(b) In addition to the Company's responsibility for
payment of the foregoing expenses, the Company shall,
if the offering is closed, pay to the Underwriters a
non-accountable expense allowance equal to 1 7/8% of
the gross proceeds of the offering. The
non-accountable expense allowance due shall be paid
at the Closing Date. The Underwriters hereby
acknowledge prior receipt from the Company of
$10,000, which amount shall be applied to the
non-accountable expense allowance due when and if the
offering is closed. If the offering is not
consummated because the Underwriters elect to
terminate this Agreement in accordance with Section 9
hereof, then the Company shall reimburse the
Underwriters in full for its actual out-of-pocket
expenses (including, without limitation, the fees and
disbursements of its counsel) up to the aggregate sum
of seventy-five thousand dollars ($75,000), against
which sum shall be applied the $10,000 previously
paid on account. If the Company decides not to
proceed with the offering for any reason, and
subsequently engages in any public offering, private
placement, merger, acquisition, joint venture or
similar transaction with any entity within 12 months
after the Company notifies the Underwriters of its
decision not to proceed, the Underwriters shall be
entitled to receive from the Company a cash fee equal
to five percent (5%) of the consideration paid or
received by the Company in connection with such
transaction.
(c) The Underwriters shall determine and notify the
Company prior to the Closing Date in which states or
jurisdictions the Shares shall be registered or
qualified for sale. The Company shall be responsible
for the cost of state registration or qualification,
including the filing fees (which filing fees are
payable to Underwriters' counsel in advance of such
filings) and the legal fees and disbursements of
Underwriters' counsel in connection with obtaining
such registration or qualification.
11. Notices. Any notice hereunder shall be in writing, unless otherwise
expressly provided herein, and if to the respective persons indicated, will be
sufficient if mailed by certified mail, return receipt requested, postage
prepaid, or hand delivered, and confirmed in writing or by telecopier, addressed
as respectively indicated or to such other address as will be indicated by a
written notice similarly given, to the following persons:
(a) If to the Underwriters - addressed to (i) each of:
Starr Securities, Inc., 60 Broad Street, New York,
New York 10004, Attn.: Martin Vegh and GunnAllen
Financial Inc., 1715 Westshore Blvd. Suite 775,
Tampa, Florida 33607, Attn: Howard Davis, with a copy
to Blank Rome Tenzer Greenblatt LLP, 405 Lexington
Avenue, New York, New York 10174, Attention: James
Martin Kaplan, Esq.
(b) If to the Company - addressed to NTN Communications,
Inc., The Campus, 5966 La Place Court, Carlsbad,
California 92008, Attn: Kendra Berger, with a
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copy to O'Melveny & Myers LLP, 610 Newport Center
Drive, Newport Beach, California 92660, Attention:
Thomas L. Leary, Esq.
Notice shall be deemed delivered upon receipt.
12. Successors. This Agreement will inure to the benefit of and be
binding upon the Underwriters and the Company and their respective successors
and assigns. Nothing expressed or mentioned in this Agreement is intended, or
will be construed, to give any person, corporation or other entity other than
the persons, corporations and other entities mentioned in the preceding sentence
any legal or equitable right, remedy, or claim under or in respect to this
Agreement or any provisions herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other persons; except that the
representations, warranties and indemnities of the Company contained in this
Agreement will also be for the benefit of the directors and officers of the
Underwriters and any person or persons who control any of the Underwriters
within the meaning of Section 15 of the Act, and except that the indemnities of
the Underwriters will also be for the benefit of the directors and officers of
the Company and any person or persons who control the Company within the meaning
of Section 15 of the Act. No purchaser of any of the Shares from the
Underwriters will be deemed a successor or assign solely because of such
purchase.
13. Finders and Holders of First Refusal Rights.
(a) The Company hereby represents and warrants to the
Underwriters that it has not paid any compensation
for services as a finder in connection with any prior
financing of the Company during the twelve-month
period immediately preceding the date hereof and that
no person is entitled, directly or indirectly, to
compensation for services as a finder in connection
with the proposed transactions. The Company further
represents and warrants, no person holds a right of
first refusal or similar right in connection with the
proposed offering, and the Company hereby agrees to
indemnify and hold harmless the Underwriters, its
respective officers, directors, agents and each
person, if any, who controls such Underwriters within
the meaning of Section 15 of the Act, from and
against any loss, liability, claim, damage or expense
whatsoever arising out of a claim by an alleged
finder or alleged holder of a right of first refusal
or similar right in connection with the proposed
offering, insofar as such loss, liability, claim,
damage or expense arises out of any action or alleged
action of the Company.
(b) The Underwriters hereby represent and warrant to the
Company that no person is entitled, directly or
indirectly, to compensation for services as a finder
in connection with the proposed transactions
contemplated by this Agreement; and the Underwriters
hereby agree, severally and not jointly, to indemnify
and hold harmless the Company, its officers,
directors and agents, from and against any loss,
liability, claim, damage or expense whatsoever
arising out of a claim by an alleged finder in
connection with the proposed offering, insofar as
such loss, liability, claim, damage or expense arises
out of any action or alleged action of such
Underwriter.
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<PAGE> 32
14. Applicable Law. This Agreement shall be a deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said state applicable to contracts made
and to be performed entirely within such State. The Company (1) 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, (2) waives any objection which the Company may have now or hereafter to
the venue of any such suit, action or proceeding, and (3) 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 proceeding. 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 and 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.
15. Headings. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
16. Counterparts. This Agreement may be executed in any number of
counterparts which, taken together, shall constitute one and the same
instrument.
17. Entire Agreement. This Agreement sets forth the entire agreement
and understanding between the Underwriters and the Company with respect to the
subject matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between them.
18. Terminology. All personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all other
genders and the singular shall include the plural, and vice versa.
[Balance of page intentionally left blank]
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If the foregoing correctly sets forth our understanding,
please indicate the Underwriters' acceptance thereof, as of the day and year
first above written, in the spaces provided below for that purpose, whereupon
this letter with the Underwriters' acceptance shall constitute a binding
agreement among us.
[SEAL] Very truly yours,
NTN COMMUNICATIONS, INC.
Attest:
/s/ Kendra Berger By: /s/ Stanley B. Kinsey
- ------------------------------- --------------------------------
Name: Kendra Berger Name: Stanley B. Kinsey
Title: Chief Financial Officer Title: Chief Executive Officer
and Secretary and Chairman of the Board
Confirmed and accepted on the
day and year first above written.
STARR SECURITIES, INC.
By: /s/ Martin Vegh
--------------------------
Name: Martin Vegh
Title: President
GUNNALLEN FINANCIAL INC.
By: /s/ Howard Davis
--------------------------
Name:
Title:
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<PAGE> 34
SCHEDULE I
Subsidiaries
1. BUZZTIME.com, Inc., a Delaware corporation, is wholly-owned by NTN.
2. IWN, Inc., a Delaware corporation, is wholly-owned by NTN.
3. IWN, L.P., a Delaware limited partnership, whose general partner is
IWN, Inc.
4. Tapco, Inc., a California corporation, is wholly-owned by NTN.
5. National Telecommunicator Network, Inc., a California corporation, is
wholly-owned by NTN.
The term "Subsidiary" shall be deemed to consist only of the
Subsidiaries of the Company listed above for purposes of this Underwriting
Agreement.
In addition to the Subsidiaries listed above, the Company holds a direct
interest in LearnStar, Inc. and an indirect interest in eBet Limited.
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<PAGE> 1
EXHIBIT 4.1
WARRANT AGREEMENT dated as of April 19, 2000 between NTN
Communications, Inc., a Delaware corporation (the "Company"), and Starr
Securities, Inc. ("Starr") and GunnAllen Financial, Inc. ("GunnAllen" and,
together with Starr, sometimes referred to as the Underwriters").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to GunnAllen warrants
("Warrants") to purchase up to an aggregate of 42,000 shares (the "Shares") of
common stock of the Company, par value $.005 per share (the "Common Stock"); and
WHEREAS, the Underwriters have agreed pursuant to the
underwriting agreement (the "Underwriting Agreement") dated April 14, 2000
between the Underwriters and the Company, to act as the underwriters in
connection with the Company's proposed public offering (the "Public Offering")
of 2,000,000 shares of Common Stock at an initial public offering price of $3.00
per share of Common Stock; and
WHEREAS, the Warrants issued pursuant to this Agreement are
being issued by the Company to the Underwriters or officers, directors or
partners of the Underwriters and members of the selling group (the "Selling
Group") and/or their officers, directors or partners, in consideration for, and
as part of the Underwriters' compensation in connection with, the Underwriters
acting as the underwriters pursuant to the Underwriting Agreement;
NOW, THEREFORE, in consideration of the foregoing premises,
the payment by the Underwriters to the Company of an aggregate of Forty-Two
Dollars and No Cents ($42.00) ($42.00 from GunnAllen), the agreements herein set
forth and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
I. GRANT. THE UNDERWRITERS, AND/OR THEIR DESIGNEES WHO ARE OFFICERS,
DIRECTORS OR PARTNERS OF THE UNDERWRITERS OR MEMBERS OF THE SELLING
GROUP IN CONNECTION WITH THE PUBLIC OFFERING, ARE HEREBY GRANTED THE
RIGHT TO PURCHASE, AT ANY TIME FROM APRIL 14, 2000 UNTIL 5:00 P.M., NEW
YORK CITY TIME, ON APRIL 14, 2005 (THE "WARRANT EXERCISE TERM"), UP TO
AN AGGREGATE OF 42,000 SHARES AT AN INITIAL EXERCISE PRICE (SUBJECT TO
ADJUSTMENT AS PROVIDED IN ARTICLE 8 HEREOF) OF $3.75 PER SHARE.
II. WARRANT CERTIFICATES. THE WARRANT CERTIFICATES (THE WARRANT
CERTIFICATES") DELIVERED AND TO BE DELIVERED PURSUANT TO THIS AGREEMENT
SHALL BE IN THE FORM SET FORTH AS EXHIBIT A ATTACHED HERETO AND MADE A
PART HEREOF, WITH SUCH APPROPRIATE INSERTIONS, OMISSIONS, SUBSTITUTIONS
AND OTHER VARIATIONS AS REQUIRED OR PERMITTED BY THIS AGREEMENT.
III. EXERCISE OF WARRANTS.
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<PAGE> 2
A. Cash Exercise. The Warrants initially are exercisable at a
price of $3.75 per Share, payable in cash or by check to the
order of the Company, or any combination of cash or check,
subject to adjustment as provided in Article 8 hereof. Upon
surrender of the Warrant Certificate with the annexed Form of
Election to Purchase duly executed, together with payment of
the Exercise Price (as hereinafter defined) for the Shares
purchased at the Company's principal offices, currently
located at The Campus, 5966 La Place Court, Suite 100,
Carlsbad, California 92008, the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each Warrant
Certificate are exercisable at the option of the Holder
hereof, in whole or in part (but not as to fractional shares
of the Common Stock). In the case of the purchase of less than
all the Shares purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant
Certificate of like tenor for the balance of the Shares
purchasable thereunder.
B. Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange this Warrant, in
whole or in part (a "Warrant Exchange"), into the number of
Shares determined in accordance with this Section 3.2, by
surrendering this Warrant at the principal office of the
Company or at the office of its transfer agent, accompanied by
a notice stating (i) such Holder's intent to effect such
exchange, (ii) the number of Shares to be exchanged and (iii)
the date on which the Holder requests that such Warrant
Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice
of Exchange or, if later, the date the Notice of Exchange is
received by the Company (the "Exchange Date"). Certificates
for the Shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance
of the Shares remaining subject to this Warrant, shall be
issued as of the Exchange Date and delivered to the Holder
within five (5) business days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of
Shares (rounded to the next highest integer) equal to (i) the
number of Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Shares
equal to the quotient obtained by dividing (A) the product of
the Total Number and the existing Exercise Price (as
hereinafter defined) by (B) the current market value of a
share of Common Stock. For purposes of this Section 3.2, the
term "current market value" shall mean the (i) last reported
sale price on the last trading day or, in case no such
reported sale takes place on such day, the average last
reported sale price for the last three (3) trading days, in
either case as officially reported by the principal securities
exchange on which the Common Stock is listed or admitted to
trading, or by the Nasdaq National Market or SmallCap Market
(referred to hereinafter as "NASDAQ") if the Common Stock is
not listed or admitted to trading on any national securities
exchange but is listed or quoted upon NASDAQ, or (ii) if the
Common Stock is not traded on a national securities exchange
or NASDAQ, the closing bid price on the last trading day, or,
in case no such reported bid takes place on such day, the
average closing bid price for the last three (3) trading days,
as furnished by NASDAQ or similar organization if NASDAQ is no
longer reporting such information, or (iii) if the Common
Stock is not listed upon a principal exchange or quoted on
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<PAGE> 3
NASDAQ, but quotes for the Common Stock are available in the
OTC Bulletin Board or "pink sheets" the closing bid price on
the last trading day, or, in case no such bid takes place on
such day, the average closing bid price for the last three (3)
trading days as furnished on the OTC Bulletin Board or (iv) in
the event the Common Stock is not traded upon a principal
exchange and not listed on NASDAQ and quotes are not available
on the OTC Bulletin Board, the price as determined in good
faith by resolution of the Board of Directors of the Company,
based on the best information available to it.
IV. ISSUANCE OF CERTIFICATES.
A. Issuance. Upon the exercise of the Warrants, the issuance of
certificates for the Shares shall be made forthwith (and in
any event within five (5) business days thereafter) without
charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the
provisions of Article 5 hereof) be issued in the name of, or
in such names as may be directed by, the Holder thereof;
provided however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such
tax has been paid.
B. Form of Certificates. The Warrant Certificates and
certificates representing the Shares shall be executed on
behalf of the Company by the manual or facsimile signature of
the present or any future Chairman or Vice Chairman of the
Board of Directors or president or Vice President of the
Company under its corporate seal reproduced thereon, attested
to by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company.
Warrant Certificates shall be dated the date of execution by
the Company upon initial issuance, division, exchange,
substitution or transfer. The Warrant Certificates and, upon
exercise of the Warrants, in part or in whole, certificates
representing the Shares shall bear a legend substantially
similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that an exemption from
registration under such Act is available. "
V. RESTRICTION ON TRANSFER OF WARRANTS. THE HOLDER OF A WARRANT
CERTIFICATE, BY ITS ACCEPTANCE THEREOF, COVENANTS AND AGREES THAT THE
WARRANTS ARE BEING ACQUIRED AS AN INVESTMENT AND NOT WITH A VIEW TO THE
DISTRIBUTION THEREOF, AND THAT THE WARRANTS MAY NOT BE
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<PAGE> 4
SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF, IN
WHOLE OR IN PART, FOR A PERIOD OF ONE (1) YEAR FROM THE DATE HEREOF,
EXCEPT TO OFFICERS, DIRECTORS OR PARTNERS OF THE UNDERWRITERS OR TO ANY
MEMBER OF THE SELLING GROUP PARTICIPATING IN THE DISTRIBUTION TO THE
PUBLIC OF THE COMMON STOCK AND/OR THEIR RESPECTIVE OFFICERS OR
PARTNERS.
In connection with the transfer or exercise of Warrants, the
purchaser and Holder agree to execute any documents which may be reasonably
required by counsel to the Company to comply with the provisions of the Act and
applicable state securities laws.
VI. PRICE.
A. Initial and Adjusted Exercise Price. The initial exercise
price of each Warrant shall be $3.75 per Share. The adjusted
exercise price shall be the price which shall result from time
to time from any and all adjustments of the initial exercise
price in accordance with the provisions of Article 8 hereof.
B. Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price,
depending upon the context.
VII. REGISTRATION RIGHTS.
A. Registration Under the Securities Act of 1933. The Warrants
and the Shares have not been registered for purposes of public
distribution under the Securities Act of 1933, as amended (the
"Act").
B. Registrable Securities. As used herein the term "Registrable
Security" means each of the Shares and any shares of Common
Stock issued upon any stock split or stock dividend in respect
of such Shares; provided, however, that with respect to any
particular Registrable Security, such security shall cease to
be a Registrable Security when, as of the date of
determination, (i) it has been effectively registered under
the Act and disposed of pursuant thereto, (ii) registration
under the Act is no longer required for the immediate public
distribution of all or any portion of such security or (iii)
it has ceased to be outstanding. The term "Registrable
Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security. "
In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure
affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights
granted pursuant to this Article 7.
C. Piggyback Registration. If, at any time during the seven years
following the date of this Agreement, the Company proposes to
prepare and file any new registration statement or
post-effective amendments thereto covering equity or debt
securities of the Company, or any such securities of the
Company held by its shareholders (other than pursuant to a
Form S-4 or pursuant to a Form S-8 or comparable forms) (for
purposes of this Article 7, collectively, a "Registration
Statement"), it will, with respect to each
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<PAGE> 5
such registration statement and amendment, give written notice
of its intention to do so by registered mail ("Notice"), at
least thirty (30) days prior to the filing of each such
Registration Statement, to all holders of the Registrable
Securities. Upon the written request of such a holder (a
"Requesting Holder"), made within twenty (20) days after
receipt of the Notice, that the Company include any of the
Requesting Holder's Registrable Securities in the proposed
Registration Statement, the Company shall, as to each such
Requesting Holder, use its best efforts to effect the
registration under the Act of the Registrable Securities which
it has been so requested to register ("Piggyback
Registration"), at the Company's sole cost and expense and at
no cost or expense to the Requesting Holders (other than
underwriting discounts and commissions applicable to the sale
of such Registrable Securities and the fees and disbursements,
if any, of counsel or any advisor to the Requesting Holders),
provided that, if such Registration Statement relates to an
underwritten public offering and the managing underwriter
advises the Company and the Requesting Holders that the number
of Registrable Securities which can be included in such
offering must be limited, priority will be given to any
securities proposed to be offered and sold by the Company,
and, thereafter, the Requesting Holders will agree to reduce
the number of Registrable Securities included in such
Registration Statement on a pro rata basis with any other
selling security holder on whose behalf other securities of
the Company may be included therein for registration.
Notwithstanding the provisions of this Section 7.3, the
Company shall have the right at any time after it shall have
given written notice pursuant to this Section 7.3
(irrespective of whether any written request for inclusion of
Registrable Securities shall have already been made) to elect
not to file any such proposed Registration Statement, or to
withdraw the same after the filing but prior to the effective
date thereof.
D. Demand Registration
1. At any time during the Warrant Exercise Term, any
"Demand Holder" (as such term is defined in Section
7.4(d) below) of the Registrable Securities shall
have the right (which right is in addition to the
piggyback registration rights provided for under
Section 7.3 hereof), exercisable by written notice to
the Company (the "Demand Registration Request"), to
have the Company prepare and file with the Securities
and Exchange Commission (the "Commission"), on one
occasion for all Demand Holders, at the sole expense
of the Company (other than underwriting discounts and
commissions applicable to the sale of the Registrable
Securities which are the subject of the Demand
Registration Request, and the fees and disbursements,
if any, of counsel or any advisor to the Demand
Holder), a Registration Statement and such other
documents, including a prospectus, as may be
necessary (in the opinion of both counsel for the
Company and counsel for such Demand Holder), in order
to comply with the provisions of the Act, so as to
permit a public offering and sale of the Registrable
Securities by the holders thereof, for nine (9)
consecutive months; provided, however, that the
Company shall not be required to effect such
registration if, in the opinion of counsel for the
Company, all of such Registrable Securities can be
sold publicly, pursuant to Rule 144 or otherwise,
without registration under the
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Act; provided further, that neither Underwriter
(and/or any person who may acquire Warrants and/or
Registrable Securities from such Underwriter or
transferees of such Underwriter) shall be entitled to
exercise any registration right pursuant to this
Section 7.4(a) without the prior written consent of
the other Underwriter. Any such demand request by the
Holders shall coincide with the availability of the
Company's audited financial statements, unless the
holders demanding registration agree to pay the costs
to the Company of any special audit which may be
required under the rules and regulations of the
Securities and Exchange Commission. Notwithstanding
anything to the contrary herein contained, the
Company may postpone, for not more than 90 days, the
filing of a Registration Statement under this Section
7.4(a) (or suspend the use of any Registration
Statement filed under this Section 7.4 for a period
of not more than 30 days) for valid business reasons,
including the acquisition or divestiture of assets,
public filings with the Commission, pending corporate
developments and similar events.
2. The Company covenants and agrees to give written
notice of any Demand Registration Request to all
holders of the Registrable Securities within ten (10)
days from the date of the Company's receipt of any
such Demand Registration Request. After receiving
notice from the Company as provided in this Section
7.4(b), holders of Registrable Securities may request
the Company to include their Registrable Securities
in the Registration Statement to be filed pursuant to
Section 7.4(a) hereof by notifying the Company of
their decision to have such securities included
within ten (10) days of their receipt of the
Company's notice.
3. In addition to the registration rights provided for
under Section 7.3 hereof and subsection (a) of this
Section 7.4, at any time during the Warrant Exercise
Term, any Demand Holder (as defined below in Section
7.4(d)) of Registrable Securities shall have the
right, exercisable by written request to the Company,
to have the Company prepare and file with the
Commission, on one occasion in respect of all holders
of Registrable Securities, a Registration Statement
so as to permit a public offering and sale of such
Registrable Securities for nine (9) consecutive
months; provided, however, that all costs incident
thereto shall be at the expense of the holders of the
Registrable Securities included in such Registration
Statement; and, provided further, that the Company
shall not be required to effect such registration if,
in the opinion of counsel for the Company, all of
such Registrable Securities can be sold publicly,
pursuant to Rule 144 or otherwise, without
registration under the Act; and, provided, further,
that neither Underwriter (and/or any person who may
acquire Warrants and/or Registrable Securities from
such Underwriter or transferees of such Underwriter)
shall be entitled to exercise any registration right
pursuant to this Section 7.4(c) without the prior
written consent of the other Underwriter. If a Demand
Holder shall give notice to the Company at any time
of its or their desire to exercise the registration
right granted pursuant to this Section 7.4(c), then
within ten (10) days after the Company's receipt of
such notice, the
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Company shall give notice to the other holders of
Registrable Securities advising them that the Company
is proceeding with such registration and offering to
include therein the Registrable Securities of such
holders, provided they furnish the Company with such
appropriate information in connection therewith as
the Company shall reasonably request in writing.
Notwithstanding contained herein shall require the
Company to undergo an audit of its financial
statements other than in the ordinary course of
business.
4. The term "Demand Holder" as used in this Section 7.4
shall mean any holder or any combination of holders
of Registrable Securities, if included in such
holders' Registrable Securities are that aggregate
number of Shares (including Shares already issued and
Shares issuable pursuant to the exercise of
outstanding Warrants) as would constitute 50% or more
of the aggregate number of Shares (including Shares
already issued and Shares issuable pursuant to the
exercise of outstanding Warrants) included in all of
the Registrable Securities, but in any event not less
than 30,000 Shares.
E. Covenants of the Company With Respect to Registration. The
Company covenants and agrees as follows:
1. In connection with any registration under Section 7.4
hereof, the Company shall file the Registration
Statement as expeditiously as possible, but in no
event later than forty-five (45) days following
receipt of any demand therefor (unless delayed by the
failure of a holder of Registrable Securities to
promptly furnish such information necessary to
complete such registration statement), shall use its
best efforts to have any such Registration Statement
declared effective at the earliest possible time and
shall furnish each holder of Registrable Securities
such number of prospectuses as shall reasonably be
requested.
2. The Company shall pay all costs, fees and expenses in
connection with all Registration Statements filed
pursuant to Sections 7.3 and 7.4(a) hereof (excluding
any underwriting discounts and commissions which may
be incurred in connection with the sale of any
Registrable Securities and fees of counsel or any
advisor to the Holders of Registrable Securities)
including, without limitation, the Company's legal
and accounting fees, printing expenses, and blue sky
fees and expenses.
3. The Company will take all reasonably necessary action
which may be required in qualifying or registering
the Registrable Securities included in a Registration
Statement for offering and sale under the securities
or blue sky laws of such states as are reasonably
requested by the holders of such securities, provided
that the Company shall not be obligated to execute or
file any general consent to service of process or to
qualify as a foreign corporation to do business under
the laws of any such jurisdiction.
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<PAGE> 8
4. The Company shall indemnify any holder of the
Registrable Securities to be sold pursuant to any
Registration Statement and any underwriter or person
deemed to be an underwriter under the Act and each
person, if any, who controls such holder or
underwriter or person deemed to be an underwriter
within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), against all loss, claim,
damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any
of them may become subject under the Act, the
Exchange Act or otherwise, arising from such
Registration Statement to the same extent and with
the same effect as the provisions pursuant to which
the Company has agreed to indemnify the Underwriters
contained in Section 5 of the Underwriting Agreement
and to provide for just and equitable contribution as
set forth in Section 6 of the Underwriting Agreement.
5. Any holder of Registrable Securities to be sold
pursuant to a Registration Statement, and its
successors and assigns, shall severally, and not
jointly, indemnify, the Company, its officers and
directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, against all
loss, claim, damage or expense or liability
(including all expenses reasonably incurred in
investigating, preparing or defending against any
claim whatsoever) to which they may become subject
under the Act, the Exchange Act or otherwise, arising
from information furnished in writing by or on behalf
of such holder, or its successors or assigns, for
specific inclusion in such Registration Statement to
the same extent and with the same effect as the
provisions contained in Section 5 of the Underwriting
Agreement pursuant to which the Underwriters have
agreed to indemnify the Company and to provide for
just and equitable contribution as set forth in
Section 6 of the Underwriting Agreement.
6. Nothing contained in this Agreement shall be
construed as requiring any Holder to exercise his
Warrants prior to the initial filing of any
Registration Statement or the effectiveness thereof.
7. The Company shall deliver promptly to each holder of
Registrable Securities participating in the offering
copies of all correspondence between the Commission
and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission
or its staff with respect to the Registration
Statement and permit each holder of Registrable
Securities and underwriters to do such investigation,
upon reasonable advance notice, with respect to
information contained in or omitted from the
Registration Statement as it deems reasonably
necessary to comply with applicable securities laws
or rules of the National Association of Securities
Dealers, Inc. ("NASD"); provided that each such
holder of Registrable Securities agrees not to
disclose such information without the prior consent
of the Company. Such investigation shall include
access to books, records and properties and
opportunities to discuss the business of the Company
with its officers and
-8-
<PAGE> 9
independent auditors, all to such reasonable extent
and at such reasonable times and as often as any such
holder of Registrable Securities or underwriter shall
reasonably request.
8. If required by the underwriter in connection with an
underwritten offering which includes Registrable
Securities pursuant to Article 7, the Company shall
enter into an underwriting agreement with one or more
underwriters selected for such underwriting, such
agreement shall contain such representations,
warranties and covenants by the Company and such
other terms as are customarily contained in
agreements of that type used by the underwriters. If
required by the underwriter, the holders of
Registrable Securities shall be parties to any
underwriting agreement relating to an underwritten
sale of their Registrable Securities and may, at
their option, require that any or all the
representations and warranties of the Company to or
for the benefit of such underwriters shall, to the
extent that they may be applicable, also be made to
and for the benefit of such holders of Registrable
Securities. Such holders of Registrable Securities
shall not be required to make any representations or
warranties to or agreements with the Company or the
underwriters except as they may relate to such
holders of Registrable Securities and their intended
methods of distribution.
VIII. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES.
A. Computation of Adjusted Price. In case the Company shall at
any time after the date hereof pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock,
then upon such dividend or distribution the Exercise Price in
effect immediately prior to such dividend or distribution
shall forthwith be reduced to a price determined by dividing:
1. an amount equal to the total number of shares of
Common Stock outstanding immediately prior to such
dividend or distribution multiplied by the Exercise
Price in effect immediately prior to such dividend or
distribution, by
2. the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in
accordance with the provisions of this Section 8. 1,
the following provisions shall be applicable: Common
Stock issuable by way of dividend or other
distribution on any stock of the Company shall be
deemed to have been issued immediately after the
opening of business on the date following the date
fixed for the determination of stockholders entitled
to receive such dividend or other distribution.
B. Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall forthwith be proportionately
decreased in the case of subdivision or increased in the case
of combination.
C. Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article 8,
the number of Shares
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<PAGE> 10
issuable upon the exercise of each Warrant shall be adjusted
to the nearest full Share, by multiplying a number equal to
the Exercise Price in effect immediately prior to such
adjustment by the number of Shares issuable upon exercise of
the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
D. Reclassification Consolidation Merger etc. In case of any
reclassification or change of the outstanding shares of Common
Stock (other than a change in par value to no par value, or
from no par value to par value, or as a result of a
subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company
into, another corporation (other than a consolidation or
merger in which the Company is the surviving corporation and
which does not result in any reclassification or change of the
outstanding shares of Common Stock, except a change as a
result of a subdivision or combination of such shares or a
change in par value, as aforesaid), or in the case of a sale
or conveyance to another corporation of the property of the
Company as an entirety, the Holders shall thereafter have the
right to purchase the kind and number of shares of stock and
other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owners of the shares of
Common Stock underlying the Warrants immediately prior to any
such events at a price equal to the product of (x) the number
of shares issuable upon exercise of the Warrants and (y) the
Exercise Price in effect immediately prior to the record date
for such reclassification, change, consolidation, merger, sale
or conveyance as if such Holders had exercised the Warrants.
E. Determination of Outstanding Shares of Common Stock. The
number of shares of Common Stock at any one time outstanding
shall include the aggregate number of shares issued or
issuable upon the exercise of options, rights, warrants and
upon the conversion or exchange of convertible or exchangeable
securities (excluding shares issuable upon the exercise of
options and warrants outstanding on the date hereof).
F. Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time
prior to the exercise of all Warrants declare a dividend
(other than a dividend consisting solely of shares of Common
Stock or a cash dividend or distribution payable out of
current or retained earnings) or otherwise distribute to its
shareholders any monies, assets, property, rights, evidences
of indebtedness, securities (other than shares of Common
Stock), whether issued by the Company or by another person or
entity, or any other thing of value, the Holder or Holders of
the unexercised Warrants shall thereafter be entitled to
receive, upon the exercise of such Warrants, in addition to
the shares of Common Stock or other securities receivable upon
the exercise thereof, the same monies, property, assets,
rights, evidences of indebtedness, securities or any other
thing of value that they would have been entitled to receive
at the time of such dividend or distribution. At the time of
any such dividend or distribution, the Company shall make
appropriate reserves to ensure the timely performance of the
provisions of this Section 8.6.
IX. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
A. Exchange. Each Warrant Certificate is exchangeable without
expense,
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<PAGE> 11
upon the surrender hereof by the registered Holder at the
principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the
aggregate the right to purchase the same number of Shares in
such denominations as shall be designated by the Holder
thereof at the time of such surrender.
B. Replacement. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction
or mutilation of any Warrant Certificate, and, in case of
loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the
Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of the Warrants, if mutilated,
the Company will make and deliver a new Warrant Certificate of
like tenor, in lieu thereof.
X. ELIMINATION OF FRACTIONAL INTERESTS. THE COMPANY SHALL NOT BE REQUIRED
TO ISSUE CERTIFICATES REPRESENTING FRACTIONS OF SHARES OF COMMON STOCK
AND SHALL NOT BE REQUIRED TO ISSUE SCRIP OR PAY CASH IN LIEU OF
FRACTIONAL INTERESTS, IT BEING THE INTENT OF THE PARTIES THAT ALL
FRACTIONAL INTERESTS SHALL BE ELIMINATED BY ROUNDING ANY FRACTION UP TO
THE NEAREST WHOLE NUMBER OF SHARES OF COMMON STOCK.
XI. RESERVATION AND LISTING OF SECURITIES. THE COMPANY SHALL AT ALL TIMES
RESERVE AND KEEP AVAILABLE OUT OF ITS AUTHORIZED SHARES OF COMMON
STOCK, SOLELY FOR THE PURPOSE OF ISSUANCE UPON THE EXERCISE OF THE
WARRANTS, SUCH NUMBER OF SHARES OF COMMON STOCK AS SHALL BE ISSUABLE
UPON THE EXERCISE THEREOF. THE COMPANY COVENANTS AND AGREES THAT, UPON
EXERCISE OF THE WARRANTS AND PAYMENT OF THE EXERCISE PRICE THEREOF, ALL
SHARES OF COMMON STOCK ISSUABLE UPON SUCH EXERCISE SHALL BE DULY AND
VALIDLY ISSUED, FULLY PAID, NON-ASSESSABLE AND NOT SUBJECT TO THE
PREEMPTIVE RIGHTS OF ANY SHAREHOLDER. AS LONG AS THE WARRANTS SHALL BE
OUTSTANDING, THE COMPANY SHALL USE ITS BEST EFFORTS TO CAUSE ALL SHARES
OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE WARRANTS TO BE LISTED
ON OR QUOTED BY THE EXCHANGE UPON WHICH THE COMPANY'S COMMON STOCK IS
THEN LISTED OR QUOTED.
XII. NOTICES TO WARRANT HOLDERS. NOTHING CONTAINED IN THIS AGREEMENT SHALL
BE CONSTRUED AS CONFERRING UPON THE HOLDER OR HOLDERS THE RIGHT TO VOTE
OR TO CONSENT OR TO RECEIVE NOTICE AS A SHAREHOLDER IN RESPECT OF ANY
MEETINGS OF SHAREHOLDERS FOR THE ELECTION OF DIRECTORS OR ANY OTHER
MATTER, OR AS HAVING ANY RIGHTS WHATSOEVER AS A SHAREHOLDER OF THE
COMPANY. IF, HOWEVER, AT ANY TIME PRIOR TO THE EXPIRATION OF THE
WARRANTS AND THEIR EXERCISE, ANY OF THE FOLLOWING EVENTS SHALL OCCUR:
1. the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a
cash
-11-
<PAGE> 12
dividend or distribution payable otherwise than out of current
or retained earnings, as indicated by the accounting treatment
of such dividend or distribution on the books of the Company;
or
2. the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of
capital stock of the Company, or any option, right or warrant
to subscribe therefor; or
3. a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale
of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing of the transfer
books, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend or distribution, or the issuance of
any convertible or exchangeable securities or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
XIII. NOTICES. ALL NOTICES, REQUESTS, CONSENTS AND OTHER COMMUNICATIONS
HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE BEEN DULY
MADE WHEN DELIVERED, TELECOPIED OR MAILED BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED:
1. If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the
Company; or
2. If to the Company, to the address set forth in
Section 3 of this Agreement or to such other address
as the Company may designate by notice to the
Holders.
XIV. SUPPLEMENTS AND AMENDMENTS. THE COMPANY AND THE UNDERWRITERS MAY FROM
TIME TO TIME SUPPLEMENT OR AMEND THIS AGREEMENT WITHOUT THE APPROVAL OF
ANY HOLDERS OF WARRANT CERTIFICATES IN ORDER TO CURE ANY AMBIGUITY, TO
CORRECT OR SUPPLEMENT ANY PROVISION CONTAINED HEREIN WHICH MAY BE
DEFECTIVE OR INCONSISTENT WITH ANY PROVISIONS HEREIN, OR TO MAKE ANY
OTHER PROVISIONS IN REGARD TO MATTERS OR QUESTIONS ARISING HEREUNDER
WHICH THE COMPANY AND THE UNDERWRITERS MAY DEEM NECESSARY OR DESIRABLE
AND WHICH THE COMPANY AND THE UNDERWRITERS DEEM NOT TO ADVERSELY AFFECT
THE INTERESTS OF THE HOLDERS OF WARRANT CERTIFICATES.
-12-
<PAGE> 13
XV. SUCCESSORS. ALL THE COVENANTS AND PROVISIONS OF THIS AGREEMENT BY OR
FOR THE BENEFIT OF THE COMPANY AND THE HOLDERS INURE TO THE BENEFIT OF
THEIR RESPECTIVE SUCCESSORS AND ASSIGNS HEREUNDER.
XVI. TERMINATION. THIS AGREEMENT SHALL TERMINATE AT THE CLOSE OF BUSINESS ON
APRIL 19, 2008. NOTWITHSTANDING THE FOREGOING, THIS AGREEMENT WILL
TERMINATE ON ANY EARLIER DATE WHEN ALL WARRANTS HAVE BEEN EXERCISED AND
ALL THE SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS HAVE BEEN RESOLD
TO THE PUBLIC; PROVIDED, HOWEVER, THAT THE PROVISIONS OF SECTION 7.5
SHALL SURVIVE SUCH TERMINATION UNTIL THE CLOSE OF BUSINESS ON APRIL 19,
2011.
XVII. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED
HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK WITH RESPECT TO CONTRACTS MADE AND TO BE WHOLLY
PERFORMED IN SAID STATE AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE. THE COMPANY, THE UNDERWRITERS
AND ANY OTHER REGISTERED HOLDER OR HOLDERS AGREE OF THE WARRANT
CERTIFICATES (1) AGREE 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,
(2) WAIVE ANY OBJECTION WHICH THE THEY MAY HAVE NOW OR HEREAFTER TO THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND (3) IRREVOCABLY
CONSENT 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. THE
COMPANY, THE UNDERWRITERS AND ANY OTHER REGISTERED HOLDER OR HOLDERS OF
THE WARRANT CERTIFICATES, WARRANTS OR THE SHARES FURTHER AGREE 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 AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND AGREE THAT SERVICE OF PROCESS UPON
THEM MAILED BY CERTIFIED MAIL TO THEIR RESPECTIVE ADDRESSES SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THEM 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.
XVIII. BENEFITS OF THIS AGREEMENT. NOTHING IN THIS AGREEMENT SHALL BE
CONSTRUED TO GIVE TO ANY PERSON OR CORPORATION, OTHER THAN THE COMPANY
AND THE UNDERWRITERS AND ANY OTHER REGISTERED HOLDER OR HOLDERS OF THE
WARRANT CERTIFICATES, WARRANTS OR THE SHARES, ANY LEGAL OR EQUITABLE
RIGHT, REMEDY OR CLAIM UNDER THIS AGREEMENT; AND THIS AGREEMENT SHALL
BE FOR THE SOLE AND EXCLUSIVE
-13-
<PAGE> 14
BENEFIT OF THE COMPANY AND THE UNDERWRITERS AND ANY OTHER HOLDER OR
HOLDERS OF THE WARRANT CERTIFICATES, WARRANTS OR THE SHARES.
XIX. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS AND EACH OF SUCH COUNTERPARTS SHALL FOR ALL PURPOSES BE
DEEMED TO BE AN ORIGINAL, AND SUCH COUNTERPARTS SHALL TOGETHER
CONSTITUTE BUT ONE AND THE SAME INSTRUMENT.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] NTN COMMUNICATIONS, INC.
By: /s/ Stanley B. Kinsey
----------------------------------
Name: Stanley B. Kinsey
Title: Chief Executive Officer and
Chairman of the Board
Attest:
/s/ Kendra S. Berger
- --------------------------------------
Name: Kendra Berger
Title: Chief Financial Officer
and Secretary STARR SECURITIES, INC.
By: /s/ Martin Vegh
----------------------------------
Name: Martin Vegh
Title: President
GUNNALLEN FINANCIAL, INC.
By: /s/ Howard Davis
----------------------------------
Name:
Title:
-15-
<PAGE> 16
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (11) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (111) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, ______________, 200_
No. W- ________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ________________ or
registered assigns is the registered holder of _______ Warrants to purchase, at
any time from ______________ until 5:00 P.M. New York City time on
______________, 200_ ("Expiration Date") up to _______ shares ("Shares") of
fully-paid and nonassessable common stock, par value $.005 per share ("Common
Stock"), of NTN Communications, Inc., a Delaware corporation (the "Company"), at
the initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $_____ per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of ____________ ("Warrant Agreement") between the Company,
Starr Securities, Inc. and GunnAllen Financial, Inc. Payment of the Exercise
Price may be made in cash, or by certified or official bank check in New York
Clearing House funds payable to the order of the Company, or any combination of
cash or check, or in accordance with Section 3.2 of the Warrant Agreement.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
-16-
<PAGE> 17
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: NTN COMMUNICATIONS, INC.
-------------------
By:
---------------------------------
Name:
Title:
Attest:
- ----------------------------------
Name:
Title:
[SEAL]
-2-
<PAGE> 18
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase Shares and herewith
tenders in payment for such Shares cash or a certified or official bank check
payable in New York Clearing House Funds to the order of _____________________
in the amount of $_______ all in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of ____________________, whose address is _____________________ and that
such Certificate be delivered to whose address is ___________________________.
[ ] The Undersigned hereby elects to exercise of the Warrants held by it in
accordance with Section ___ of the Warrant Agreement dated ______________, 2000.
Dated: Signature: ___________________________________
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 19
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________________________ hereby
sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature:
-----------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 1
EXHIBIT 4.2
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (11) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (111) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, APRIL 14, 2005
No. W-1 42,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that GunnAllen Financial,
Inc. or registered assigns is the registered holder of Forty-Two Thousand
(42,000) Warrants to purchase, at any time from April 14, 2001 until 5:00 P.M.
New York City time on April 14, 2005 ("Expiration Date") up to Forty-Two
Thousand (42,000) shares ("Shares") of fully-paid and nonassessable common
stock, par value $.005 per share ("Common Stock"), of NTN Communications, Inc.,
a Delaware corporation (the "Company"), at the initial exercise price, subject
to adjustment in certain events (the "Exercise Price"), of $3.75 per Share upon
surrender of this Warrant Certificate and payment of the Exercise Price or
notice of cashless exchange at an office or agency of the Company, but subject
to the conditions set forth herein and in the warrant agreement dated as of
April 19, 2000 ("Warrant Agreement") between the Company, Starr Securities,
Inc., and GunnAllen Financial, Inc. Payment of the Exercise Price may be made in
cash, by certified or official bank check in New York Clearing House funds
payable to the order of the Company, or any combination of cash or check, or in
shares of Common Stock pursuant to a Notice of Exchange in accordance with
Section 3 of the Warrant Agreement.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder
<PAGE> 2
of the Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
<PAGE> 3
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: April 19, 2000 NTN COMMUNICATIONS, INC.
By: /s/ Stanley B. Kinsey
---------------------------------
Name: Stanley B. Kinsey
Title: Chairman of the Board and
Chief Executive Officer
[SEAL]
Attest:
/s/ Kendra S. Berger
- -------------------------------------
Name: Kendra S. Berger
Title: Chief Financial Officer
<PAGE> 4
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase Shares and herewith
tenders in payment for such Shares cash or a certified or official bank check
payable in New York Clearing House Funds to the order of _____________________
in the amount of $_______ all in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of ____________________, whose address is _____________________ and that
such Certificate be delivered to whose address is ___________________________.
[ ] The Undersigned hereby elects to exercise the Warrants held by it in
accordance with Section ___ of the Warrant Agreement dated ______________, 2000.
Dated: Signature:________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE> 5
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________________________ hereby
sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature:
--------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
