COMPU-XXXX, INC.
1,000,000 Shares of Common Stock
UNDERWRITING AGREEMENT
Xxxxxx Heights, New York
_______, 1997
European Community Capital, Ltd.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx Xxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, COMPU-XXXX, INC., a Delaware corporation (the
"Company"), hereby confirms its agreement with European Community Capital, Ltd.
(being referred to herein variously as "you" or the "Underwriter"), as follows:
1. Purchase and Sale of Securities.
1.1 Firm Securities.
1.1.1 Purchase of Firm Securities. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, 1,000,000
shares of the Company's Common Stock, par value $.01 per share ("Common Stock"),
at a purchase price of $5.00 per share (or $4.50 per share net of discounts and
commissions). (such shares of Common Stock being also referred to herein as the
"Firm Securities").
1.1.2 Payment and Delivery. Delivery of, and payment
for the Firm Securities shall be made at 10:00 A.M., New York time, on the fifth
business day following the Effective Date (as that term is hereinafter defined)
of the Registration Statement (as that term is hereinafter defined) or at such
earlier time as the Underwriter shall determine, or at such other time as shall
be agreed upon by the Underwriter and the Company, at the offices of the
Underwriter or at such other place as shall be agreed upon by the Underwriter
and the Company.
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The hour and date of delivery and payment for the Firm Securities are called the
"Closing Date." Payment for the Firm Securities shall be made on the Closing
Date at the Underwriter's election by certified or bank cashier's check(s) in
immediately available New York Clearing House funds, payable to the order of the
Company upon delivery to you of certificates (in form and substance complying
with applicable law and satisfactory to the Underwriter) representing the Firm
Securities for the account of the Underwriter. The Firm Securities shall be
registered in such name or names and in such authorized denominations as the
Underwriter may request in writing at least three full business days prior to
the Closing Date. The Company will permit the Underwriter to examine and package
the Firm Securities for delivery, at the Company's transfer agent or copies ____
at least one full business day prior to the Closing Date. The Company shall not
be obligated to sell or deliver the Firm Securities except upon tender of
payment by the Underwriter for all the Firm Securities.
1.2 Over-Allotment Option.
1.2.1 Option Securities. For the purposes only of
covering any over-allotments in connection with the distribution and sale of the
Firm Securities, the Underwriter is hereby granted a non-transferable option to
purchase up to an additional 150,000 shares of Common Stock from the Company
("Over-allotment Option"). Such additional shares of Common Stock are
hereinafter referred to as the "Option Securities." The Firm Securities and the
Option Securities are, hereinafter referred to collectively as the "Public
Securities." The purchase price to be paid for the Option Securities will be the
same price per Option Security as the price per Firm Security set forth in
Section 1.1.1 hereof.
1.2.2 Exercise of Option. The Over-allotment Option
granted pursuant to Section 1.2.1 hereof may be exercised by the Underwriter as
to all or any part of the Option Securities at any time, from time to time,
within forty-five days after the effective date of the Registration Statement
("Effective Date"). The Underwriter will not be under any obligation to purchase
any Option Securities prior to the exercise of the Over-allotment Option. The
Over-allotment Option granted hereby may be exercised by the giving of oral or
written notice to the Company from the Underwriter, any such oral notice which
must be confirmed by a letter or telecopy with notice within twenty-four hours
or such oral notice setting forth the number of Option Securities to be
purchased, the date and time for delivery of, and payment for, the Option
Securities, and stating that the Option Securities referred to therein are to be
used only for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Securities. If such notice is given at least
two full business days prior to the Closing
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Date, the date set forth therein for such delivery and payment will be the
Closing Date. If such notice is given thereafter, the date set forth therein for
such delivery and payment will not be earlier than five full business days after
the date of the notice. If such delivery and payment for the Option Securities
does not occur on the Closing Date, the date and time of the closing for such
Option Securities will be as set forth in the notice (hereinafter the "Option
Closing Date"). Upon exercise of the Over-allotment Option, the Company will
become obligated to convey to the Underwriter, and, subject to the terms and
conditions set forth herein, the Underwriter will become obligated to purchase,
the number of Option Securities specified in such notice.
1.2.3 Payment and Delivery. Payment for the Option
Securities shall be made at the Option Closing Date at the Underwriter's
election by certified or bank cashier's check(s) in immediately available New
York Clearing House funds, payable to the order of the Company, at the offices
of the Underwriter or at such other place as shall be agreed upon by the
Underwriter and the Company upon delivery to you of certificates representing
such securities for the account of the Underwriter. The certificates
representing the Option Securities to be delivered will be in such authorized
denominations and registered in such names as the Underwriter requests in
writing not less than three full business days prior to the Closing Date or the
Option Closing Date, as the case may be. The Company will permit the Underwriter
to examine and package the Option Securities for delivery at the aforesaid
office of the Company's transfer agent or correspondent at least one full
business day prior to such Option Closing Date.
1.3 Underwriter's Warrants.
1.3.1 Purchase Option. The Company hereby agrees to
issue and sell to the Underwriter (and/or its designees) on the Closing Date, in
exchange for a check in the amount of $100, an aggregate of 100,000 Warrants
("Underwriter's Warrants"), each Underwriters Warrant to purchase one share of
Common Stock of the Company at an initial exercise price of $8.25 per share. The
Underwriter's Warrants are exercisable for a four-year period commencing on the
one-year anniversary of the Effective Date and shall be substantially in the
form attached thereto as Exhibit A. The Underwriter's Warrants and the shares of
Common Stock issuable upon exercise of the Underwriter's Warrants are
hereinafter referred to collectively as the "Underwriter's Securities." The
Public Securities and the Underwriter's Securities are hereinafter referred to
collectively as the "Securities."
1.3.2 Payment and Delivery. Delivery and Payment
for the Underwriter's Purchase Options in the names and denominations designated
by the Underwriter shall be made on the Closing Date.
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2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriter as follows:
2.1 Filing of Registration Statement.
2.1.1 Pursuant to the Act. The Company has filed with
the Securities and Exchange Commission ("Commission") a registration statement
and an amendment or amendments thereto, on Form SB-2 (Reg. No. 333-18667),
including any related prospectus subject to completion ("Preliminary
Prospectus"), for the registration of the Public Securities under the Securities
Act of 1933, as amended ("Act"), which registration statement and amendment or
amendments have been prepared by the Company in conformity with the requirements
of the Act, and the rules and regulations ("Regulations") of the Commission
under the Act. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430A of the Regulations), is hereinafter
called the "Registration Statement," and the form of the final prospectus dated
the Effective Date (or, if applicable, the form of final prospectus filed with
the Commission pursuant to Rule 424 of the Regulations), is hereinafter called
the "Prospectus." The Registration Statement will be declared effective by the
Commission on the date hereof.
2.1.2 Pursuant to the Exchange Act. The Company has
filed with the Commission a registration statement on Form 8-A (File No. )
providing for the registration under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), of the Public Securities. Such registration of the
Public Securities will be declared effective by the Commission on or prior
to the thirtieth day following the Closing date.
2.2 No Stop Orders, Etc. Neither the Commission nor, to the
Company's knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or has instituted
or, to the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
2.3 Disclosures in Registration Statement. At the time the
Registration Statement became effective and at all times subsequent
thereto up to the Closing Date:
2.3.1 Securities Act Representation and 10b-5
Representation: The Registration Statement and the Prospectus will
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contain, with respect to the Company and the persons listed on Schedule 2.3.1
attached hereto, all material statements which are required to be stated therein
in accordance with the Act and the Regulations, and will in all material
respects conform to the requirements of the Act and the Regulations. Neither the
Registration Statement nor any amendment or supplement thereto, on the Effective
Date, contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and that on the Closing Date, the Prospectus and any
amendment or supplement thereto will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto, at the time such filing was made,
complied in all material respects with the applicable provisions of the Act and
the Regulations. The representation and warranty made in this Section 2.3.1 does
not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use in the Registration Statement, Preliminary Prospectus, or
Prospectus or any amendment thereof or supplement thereto ("Underwriter's
Information").
2.3.2 Disclosure of Contracts. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate and presents fairly the information required to be disclosed and there
are no contracts or other documents required to be described in the Registration
Statement or the Prospectus or to be filed with the Commission as exhibits to
the Registration Statement which have not been so described or filed. Each
contract or other instrument (however characterized or described) to which the
Company is a party or by which its property or business is or may be bound or
affected and (i) which is referred to in the Prospectus, or (ii) is material to
the business of the Company has been duly and validly executed, is in full force
and effect in all material respects and is enforceable in accordance with its
terms, and none of such contracts or instruments has been assigned by the
Company and the Company, to the best of its knowledge, is not in default
thereunder and, to the Company's knowledge, no event has occurred which, with
the lapse of time or the giving of notice, or both, would constitute a default
thereunder except as otherwise disclosed in the Prospectus). None of the
material provisions of such contracts or instruments violates or will result in
a violation of any existing applicable law, rule, regulation, judgment, order or
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decree of any governmental agency or court having jurisdiction over the Company,
or any of its respective assets, including, without limitation, those relating
to environmental laws and regulations.
2.3.3 Prior Securities Transactions. No securities of
the Company have been sold by the Company or by or on behalf of, or for the
benefit of, any person or persons controlling, controlled by, or under common
control with the Company within the three years prior to the date hereof, except
as disclosed in the Registration Statement.
2.4 Changes After Dates in Registration Statement.
2.4.1 No Material Adverse Change. Since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, except as otherwise specifically stated therein, (i) there
has been no material adverse change in the condition, financial or otherwise, or
in the results of operation, business or business prospects of the Company
("Material Adverse Change"), including, but not limited to, a material loss of,
or interference with, its business from fire, storm, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, whether or not arising in the
ordinary course of business, and (ii) there have been no transactions entered
into by the Company, other than those in the ordinary course of business, which
are material with respect to the condition, financial or otherwise, or the
results of its operations, business or business prospects.
2.4.2 Recent Securities Transactions. Etc. Subsequent
to the respective dates as of which information is given in the Registration
Statement and the Prospectus, and except as may otherwise be indicated or
contemplated herein or therein, the Company has not (i) issued any securities or
incurred any liability or obligation, direct or contingent, for borrowed money;
or (iii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
2.5 Independent Accountants. Xxxxx, Xxxxxx & Company, LLP,
whose reports are filed with the Commission as part of the Registration
Statement, are independent accountants as required by the Act and the
Regulations.
2.6 Financial Statements. The financial statements, including
the notes thereto and supporting schedules included in the Registration
Statement and Prospectus, fairly present the financial condition and the results
of operations of the Company at the dates and for the periods to which they
apply; such financial statements have been prepared in conformity with generally
accepted accounting principles,
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consistently applied; and the supporting schedules, if any, included in the
Registration Statement present fairly the information required to be stated
therein.
2.7 Authorized Capital; Options: Etc. The Company had at the
date or dates indicated in the Prospectus, the duly authorized, issued and
outstanding capitalization as set forth in the Registration Statement and the
Prospectus. Based on the assumptions stated in the Registration Statement and
the Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date there are, and on the
Closing Date there will be, no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8 Valid Issuance of Securities; Etc.
2.8.1 Outstanding Securities. All issued and
outstanding securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the Company
or similar contractual rights granted by the Company. The outstanding options
and warrants to purchase shares of Common Stock constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms, except
(i) such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, marshaling and/or similar laws, now or
hereafter in effect affecting creditors' rights and remedies and (including such
as may deny giving effect to waivers of debtor's rights), (ii) as enforceability
of any indemnification provision may be limited under Federal and State laws,
(iii) that the remedy of specific performance and injunction and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the courts before which any proceeding therefor may be brought (regardless of
whether such enforceability is considered a proceeding in equity or in law). The
authorized Common Stock and outstanding options and warrants to purchase shares
of Common Stock conform to all statements relating thereto contained in the
Registration Statement and the Prospectus. The offers and sales of the
outstanding Common Stock, options and warrants to purchase shares of Common
Stock were at all relevant times either registered under the Act and registered
or qualified under the applicable state securities or Blue Sky Laws or exempt
from such registration requirements.
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2.8.2 Securities Sold Pursuant to this Agreement. The
Securities have been duly authorized and, when issued and paid for, will be
validly issued, fully paid and non-assessable; the Securities are not and will
not be subject to the preemptive rights of any holders of any security of the
Company or similar contractual rights granted by the Company; and all corporate
actions required to be taken for the authorization, issuance and sale of the
Securities have been duly and validly taken. When issued, the Underwriter's
Warrants will constitute valid and binding obligations of the Company to issue
and sell, upon exercise thereof and payment therefor, the number of shares of
common stock of the Company called for thereby and the Underwriter's Purchase
Options, the Underwriter's Warrants and the Warrants are enforceable against the
Company in accordance with their respective terms, except (i) such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, marshaling and/or similar laws, now or hereafter in
effect affecting creditors' rights and remedies and (including such as may deny
giving effect to waivers of debtor's rights), (ii) as enforceability of any
indemnification provision may be limited under Federal and State laws, (iii)
that the remedy of specific performance and injunction and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the courts before which any proceeding therefor may be brought (regardless of
whether such enforceability is considered a proceeding in equity or in law).
2.9 Registration Rights of Third Parties. Except as set forth
in the Prospectus, no holders of any securities of the Company or of any options
or warrants of the Company exercisable for or convertible or exchangeable into
securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities
in a registration statement to be filed by the Company except as set forth in
the letter of intent dated September 16, 1996 between the Company and the
Underwriter.
2.10 Validity and Binding Effect of Agreements. This
Agreement, the employment agreements with each of Xxxx X. Xxx ("Lew") and Xxxx
Xxxxxxxxxx ("Xxxxxxxxxx") ("Employment Agreements"), and the Underwriter's
Warrant have been duly and validly authorized by the Company and constitute, or
when executed and delivered will constitute, the valid and binding agreements of
each of the Company, Lew and Honigsfeld, as the case may be, enforceable against
each of them in accordance with their respective terms, except (i) such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, marshaling and/or similar laws, now or hereafter in
effect affecting creditors' rights and remedies and (including such as may deny
giving effect to waivers of debtor's rights), (ii) as enforceability of any
indemnification provision may be limited under Federal and State
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laws, (iii) that the remedy of specific performance and injunction and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the courts before which any proceeding therefor may be brought
(regardless of whether such enforceability is considered a proceeding in equity
or in law). Representation is made that stock ownership will be in accordance
with Exhibit B annexed hereto.
2.11 No Conflicts, Etc. The execution, delivery, and
performance by the Company of this Agreement, the consummation by the Company of
the transactions herein contemplated and the compliance by the Company with the
terms hereof do not and will not, with or without the giving of notice or the
lapse of time or both, (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any of its property or assets pursuant to the terms of any
indenture, mortgage, deed of trust, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other agreement or instrument to which it is a party or by which it may be bound
or to which any of its property or assets is subject; (ii) result in any
violation of the provisions of its Certificate of Incorporation or By-Laws;
(iii) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or its operations or any of its properties or business; or
(iv) have a material adverse effect on any permit, license, certificate,
registration, approval, consent, license or franchise concerning it or its
operations; except in the case of (i) or (iii), where such default, breach,
violation or effect, either singly or in the aggregate, would not have a
material adverse effect on its financial condition or results of operations.
2.12 No Defaults: Violations. Except as described in the
Prospectus, no default exists in the due performance and observance of any term,
covenant or condition of any material license, contract, indenture, mortgage,
deed of trust, note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any other material
agreement or instrument to which the Company, or any of its subsidiaries, if
any, is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject, except in each case where such
default would not have a material adverse effect on the Company's financial
condition or results of operations. Neither the Company nor any of its
subsidiaries, if any, is in violation of any term or provision of its
Certificate Incorporation or By-Laws or in violation of any franchise, license,
permit, applicable law, rule, regulation, judgment or decree of any governmental
agency or court, domestic or foreign, having jurisdiction
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over it or its operations, properties or business, except as described in the
Prospectus and except where such violation would not have a material adverse
effect on its financial condition, results of operations, business, prospectus
or properties.
2.13 Corporate Power; Licenses; Consents.
2.13.1 Conduct of Business. The Company has all
requisite corporate power and authority, and has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies to own or lease its properties and
conduct its business as described in the Prospectus, and is and has been doing
business in compliance with all such material authorizations, approvals, Orders
licenses, certificates and permits and all federal, state and local laws, rules
and regulations, except where failure to so comply would not have a material
adverse effect on the condition (financial or otherwise), business prospectus or
properties of the Company.
2.13.2 Transactions Contemplated Herein. The Company
has all corporate power and authority to enter into this Agreement and to carry
out the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been obtained. No
consent, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid issuance, sale and delivery of
the Securities pursuant to this Agreement, the warrant Agreement and the
Underwriter's Purchase Options, and as contemplated by the Prospectus, except
with respect to applicable federal and state securities laws.
2.14 Title to property: Insurance. The Company has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property (tangible and intangible) owned or leased by it,
respectively free and clear of all liens, encumbrances, Claims security
interests, defects and restrictions of any material nature whatsoever, other
than those referred to in the Prospectus, liens for taxes not yet due and
payable and liens of an immaterial nature arising by operation of law. The
Company has insured its properties against loss or damage by fire, other
casualty and other insurance in amounts and on terms as is usually maintained by
similarly situated companies engaged in the same or similar business.
2.15 Litigation; Governmental Proceedings. Except as set
forth in the Prospectus, there is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding pending
or, to the Company's knowledge, threatened against, or involving the
properties or business of the Company which might materially and
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adversely affect the financial position, prospects, value or the operation of
the properties or the business of the Company or which question the validity of
the capital stock of the Company or this Agreement or of any action taken or to
be taken by the Company pursuant to, or in connection with, this Agreement.
There are no outstanding orders, judgments or decrees of any court, governmental
agency or other tribunal naming the Company and enjoining the Company from
taking, or requiring the Company, to take, any action, or to which the Company,
or its respective properties or business, is bound or subject.
2.16 Good Standing. The Company has been duly organized and is
validly existing as a corporation and is in good standing under the laws of its
state of incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on its financial condition or results of operations.
2.17 Taxes. The Company has filed all returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof. The Company has
paid all taxes (as hereinafter defined) shown as due on such returns that were
filed and has paid all taxes imposed on or assessed against it, other than any
which the Company is contesting in good faith. The provisions for taxes payable,
if any, shown on the financial statements filed with, or as part of the
Registration Statement are sufficient for all accrued and unpaid 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 Underwriter, (i) no issues have been
raised (and are currently pending) by any taxing authority in connection with
any of the returns or taxes asserted as due from the Company, and (ii) no
waivers of statutes of limitation with respect to the returns or collection of
taxes have been given by or requested from the Company. The term "taxes" mean
all federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments, or charges of any kind whatever, together with any
interest and any penalties, additions to tax, or additional amounts with respect
thereto. The term "returns" means all returns, declarations, reports,
statements, and other documents required to be filed in respect of taxes.
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2.18 Employee Options. No shares of Common Stock are eligible
for sale pursuant to Rule 701 promulgated under the Act in the 12-month
period following the Effective Date.
2.19 Transactions Affecting Disclosure to NASD.
2.19.1 Finder's Fees. There are no claims, payments,
issuances, arrangements or understandings for services in the nature of a
finder's or origination fee with respect to the sale of the Securities hereunder
or any other arrangements, agreements, understandings, payments or issuance with
respect to the Company that may affect the Underwriter's compensation, as
determined by the National Association of Securities Dealers, Inc. ("NASD"),
other than payments or future payments to the Underwriters, as a placement agent
fee with respect to the Company's private placement of promissory notes in the
aggregate principal amount of $770,000.00 and $431,200.00 Common Stock Purchase
Warrants (the "Bridge Warrants") which closed on October 28, 1996.
2.19.2 Payments Within Twelve Months. Except as set
forth in the Registration Statement, the Company has not made any direct or
indirect payments (in cash, securities or otherwise) to (i) any person, as a
finder's fee, investing fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company persons who
provided capital to the Company, (ii) to any NASD member, or (iii) to any person
or entity that has any direct or indirect affiliation or association with any
NASD member, within the twelve month period prior to the date on which the
Registration Statement was filed with the Commission ("Filing Date") or
thereafter, other than payments to the Underwriter.
2.19.3 Use of Proceeds. None of the net proceeds of
the offering will be paid by the Company to any NASD member or any affiliate
or associate of any NASD member, except as specifically authorized herein.
2.19.4 Insiders' NASD Affiliation. No officer or
director of the Company or holder of five percent (5%) or more of any class of
the Company's securities has any direct or indirect affiliation or association
with any NASD member. The Company will advise the Underwriter and the NASD if
any 5% or greater stockholder of the Company is or becomes an affiliate or
associated person of an NASD member participating in the distribution.
2.20 Foreign Corrupt Practices Act. Neither the Company nor
any of its subsidiaries, officers, directors, employees, agents or any other
person acting on behalf of the Company has, directly
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or indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer or supplier, or official
or employee of any governmental agency or instrumentality of any government
(domestic or foreign) or any political party or candidate for office (domestic
or foreign) or any political party or candidate for office (domestic or foreign)
or other person who was, is, or may be in a position to help or hinder the
business of the Company (or assist it in connection with any actual or proposed
transaction) which (i) might subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, might have a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
2.21 Nasdaq Eligibility. As of the Effective Date, the Public
Securities have been approved for quotation on the Nasdaq Small Cap Market.
2.22 Intangibles. The Company owns or possesses the requisite
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as being licensed to, or owned by, it in
the Registration Statement. The Intangibles which have been registered by the
Company, if any, in the United States Patent and Trademark Office have been
fully maintained and are in full force and effect. There is no claim or action
by any person pertaining to, or proceeding pending or threatened and the Company
has not received any notice of conflict with the asserted rights of others which
challenges its exclusive right with respect to any Intangibles used in the
conduct of its business except as described in the Prospectus. To the Company's
knowledge, the Intangibles and the Company's current products, services and
processes do not infringe on any intangibles held by any third party. To the
Company's knowledge, no others have infringed upon the Intangibles of the
Company.
13
2.23 Relations with Employees.
2.23.1 Employee Matters. The Company is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its employees and employment practices,
terms and conditions of employment and wages and hours relating thereto. There
are no pending investigations involving the Company by the U.S. Department of
Labor or any other governmental agency responsible for the enforcement of such
federal, state or local laws and regulations. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, showdown or stoppage
pending or threatened against or involving the Company or any predecessor
entity, and none has ever occurred. No question concerning representation exists
respecting the employees of the Company and no collective bargaining agreement
or modification thereof is currently being negotiated by the Company. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements, if any, of the Company.
2.23.2 Employee Benefit Plans. Other than as set
forth in the Registration Statement, the Company does not maintain, sponsor or
contribute to, or is it required to contribute to, any program or arrangement
that is an "employee" pension benefit plan," an "employee welfare benefit plan,"
or a, multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). The Company has not, at any time, maintained
or contributed to a defined benefit plan, as defined in Section 3(35) of ERISA.
If the Company does maintain or contribute to a defined benefit plan, any
termination of the plan on the date hereof would not give rise to liability
under Title IV of ERISA. No ERISA Plan (or any trust created thereunder) has
engaged in any prohibited transactions within the meaning of Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended ("Code"),
which could subject the Company to any tax penalty for prohibited transactions
and which has not adequately been corrected. Any ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Code and
ERISA as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply
14
with Code Section 401(a), stating that such ERISA Plan and the attendant trust
are qualified thereunder. The Company has never completely or partially
withdrawn from a "multi-employer plan."
2.24 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered to you or to your counsel shall
be deemed a representation and warranty by the Company to the Underwriter as to
the matters covered thereby.
2.25 [Reserved]
2.26 Agreements With Insiders and Others. The Company has
caused to be duly executed lock-up agreements, in substantially the form
provided by the Underwriter, pursuant to which (i) all of the officers and
directors of the Company agree not to sell any shares of Common Stock for twelve
(12) months following the Effective Date of the Registration Statement, except
with respect to shares of Common Stock underlying Bridge Warrants, which shares
are being registered for resale in the Registration Statement, with respect to
which such persons agree not to sell such shares of Common Stock for six (6)
months, following the Effective Date of the Registration Statement, (ii) certain
persons who beneficially own or hold five percent (5%) or more of the
outstanding Common Stock of the Company agree not to sell any shares of Common
Stock owned by them or their family members and affiliates (either pursuant to
Rule 144 of the Regulations or otherwise) for a period of twelve (12) months
following the Effective Date, except with respect to shares of Common Stock
underlying Bridge Warrants, which shares are being registered for resale in the
Registration Statement, with respect to which such persons agree not to sell
such shares of Common Stock for six (6) months, following the Effective Date of
the Registration Statement, except with the consent of the Underwriter and, if
applicable, the Pennsylvania Securities Commission, and (iii) certain persons,
including persons who own Bridge Warrants who are covered by subsections (i) and
(ii) of this Section 2.26) who beneficially own or hold Bridge Warrants to
purchase shares of Common Stock agree not to sell any shares of Common Stock
owned by them or their family members and affiliates (either pursuant to Rule
144 of the Regulations or otherwise) underlying the Bridge Warrants for a period
of six (6) months following the Effective Date except with the consent of the
Underwriter and, if applicable, the Pennsylvania Securities Commission.
15
2.27 Employment Agreements. The Company has entered into an
Employment Agreement with each of Messrs. Lew and Honigsfeld in substantially
the same form as set forth in an exhibit to the Registration Statement, for a
term of three (3) years commencing on the Effective Date.
2.28 [Reserved]
2.29 Sale, Disposal or Conversion of Securities. For
------------------------------------------
the twelve (12) month period commencing on the Effective Date, the Company will
not sell or otherwise dispose of any equity securities or securities convertible
into, or exchangeable or exercisable for, equity securities of the Company,
except for (i) the issuance of stock options, or shares of Common Stock issuable
upon the exercise thereof, which have been or may be granted up to an aggregate
of 1,100,000 shares of Common Stock, (ii) the issuance of Public Securities,
(iii) shares of Common Stock issuable directly, or indirectly, upon the exercise
of the Underwriter's Warrants, (iii) the issuance of common or preferred
securities in connection with a merger or acquisition by the Company, (iv)
issuance of shares, (v) the issuance of common or preferred securities in
connection with the establishment of any joint venture relationship with a
third party to manufacture products or develop products or technology, and (vi)
the issuance of common or preferred securities to raise capital specifically for
the manufacture of products or the development of products or technology of
Common Stock upon the exercise of the Bridge Warrants, only with the consent of
the underwriter which consent will not be unreasonably withheld.
3. Covenants of the Company. The Company covenants and agrees as
follows:
3.1 Amendments to Registration Statement. The Company will
deliver to the Underwriter, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Underwriter
shall reasonably object.
3.2 Federal Securities Laws.
3.2.1 Compliance. During the time when (i) a Prospectus is
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements
16
imposed upon it by the Act, the Regulations and the Exchange Act and by the
regulations under the Exchange Act, as from time to time in force, in accordance
with the provisions hereof and the Prospectus which requires the Company to keep
the Registration Statement effective until the Termination Date. If at any time
when a Prospectus or a Warrant Exercise Prospectus relating to the Public
Securities or the Underwriter's Securities is required to be delivered under the
Act and, in any event, until the Termination Date, any event shall have occurred
as a result of which, in the feasible opinion of counsel for the Company or
counsel for the Underwriter, such Prospectus, as then amended or supplemented,
includes an untrue statement of material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Underwriter promptly and prepare and file with the
Commission, subject to Section 3.1 hereof, an appropriate amendment or
supplement in accordance with Section 10 of the Act.
3.2.2 [Reserved]
3.2.3 Exchange Act Registration. For a period of
five (5) years from the Effective Date, the Company will use its best efforts to
maintain the registration of the Common Stock and the Warrants under the
provisions of the Exchange Act.
3.3 Blue Sky Filing. The Company will endeavor in good faith,
in cooperation with the Underwriter, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities and the
Underwriter's Securities for offering and sale under the securities laws of such
jurisdictions as the Underwriter may reasonably designate, provided that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Company would be subject to service of general process or to taxation as a
foreign corporation doing business in such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriter agrees that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or report at such
times as are or may be required by the laws of such jurisdiction.
17
3.4 Delivery to Underwriter of Prospectuses. The Company will
deliver such number of Prospectuses to the Underwriter as reasonably needed,
without charge, from time to time, during the period when such prospectuses are
required to be delivered under the Act. Additionally, the Company will deliver,
as soon as the Registration Statement or any amendment or supplement thereto
becomes effective, two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
file therewith or incorporated therein by reference and all original executed
consents of certified experts.
3.5 Events Requiring Notice to Underwriter. The Company will
notify the Underwriter immediately and confirm the notice in writing (i) filing
of any post-effective amendment or supplement to the Registration Statement or
Prospectus, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding for that purpose, (iii) of the
issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering of sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments or request for any additional
information from the Commission and the Company's response thereof, if any, and
(v) of the happening of any event during the period described in Section 3.4
hereof which, in the judgment of the Company, makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or which
requires the making of any changes in the Prospectus in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or which requires the making of any changes in the Registration
Statement in order to make the statements therein not misleading. If the
Commission or any state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable
effort to obtain promptly the lifting of such order.
3.6 Review of Financial Statements. For a period of five years
from the Effective Date, the Company, at its expense, shall cause its regularly
engaged 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 Form 10-Q quarterly report and the mailing of quarterly
18
financial information to stockholders.
3.7 Unaudited Financials. The Company will furnish to the
Underwriter as early as practicable subsequent to the date hereof and at least
two full business days prior to the Closing Date, a copy of the latest available
unaudited interim financial statements ("Unaudited Financials") of the Company
(which in no event shall be as of a date more than thirty days prior to the
Effective Date) which have been read by the Company's independent accountants,
as stated in their letter to be furnished pursuant to Section 4.3 hereof.
3.8 Secondary Market Trading, Xxxxx'x OTC Industrial Manual
and Standard & Poor's. The Company will use its best efforts and take all
necessary and appropriate actions to achieve accelerated publication in Standard
and Poor's Corporation Records Corporate Descriptions or Xxxxx'x OTC Industrial
Manual within ten (10) days after the Effective Date, and to maintain such
publication with updated quarterly information for a period of five years from
the Effective Date, including the payment of any necessary fees and expenses.
This obligation shall exist only so long as the Company qualifies for such
listing and shall be at the reasonable discretion of the Underwriter. The
Company shall take such action as may be reasonably requested by the Underwriter
to obtain a secondary market trading exemption in such States as may be
requested by the Underwriter, including the payment of any necessary fees and
expenses.
3.9 [Reserved]
3.10 [Reserved]
3.11 [Reserved]
3.12 Reports to the Underwriter.
3.12.1 Periodic Reports, Etc. For a period of five
years from the Effective Date, the Company will furnish to the Underwriter
copies of such financial statements and other periodic and special reports as
the Company from time to time furnishes generally to holders of any class of its
securities, and promptly furnish to the Underwriter (i) a copy of each periodic
report to the Company shall be required to file with the Commission, (ii) a
19
copy of every press release released by the Company, (iii) copies of each Form
SR, (iv) a copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received
or prepared by the Company, and (v) such additional documents and information
with respect to the Company and the affairs of any future subsidiaries of the
Company, which may be properly disclosed to the Underwriter, as the Underwriter
may from time to time, reasonably request.
3.12.2 [Reserved]
3.13 [Reserved]
3.14 Application of Net Proceeds. The Company will apply the
net proceeds from the offering received by it in a manner consistent with the
application described under the caption "USE OF PROCEEDS" in the Prospectus.
3.15 Payment of Expenses.
3.15.1 General Expenses. The Company hereby
agrees to pay on each of the Closing Date and the Option Closing Date, if any,
to the extent not paid at Closing Date, all expenses incident to the performance
of the obligations of the Company under this Agreement, including but not
limited to (i) the preparation, printing, filing, delivery and mailing
(including the payment of postage with respect to such mailing) of the
Registration Statement, the Prospectus and the Preliminary Prospectuses and the
printing and mailing of this Agreement and related documents, including the cost
of all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriter in quantities as may be required by the Underwriter, (ii) the
printing, engraving, issuance and delivery of the shares of Common Stock and the
Underwriter's Warrants, including any transfer or other taxes payable thereon,
(iii) the qualification of the Public Securities and Bridge Securities under
state or foreign securities or Blue Sky laws, including the filing fees under
such Blue Sky laws the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," and all amendments and supplements thereto, fees of Underwriter's
Blue Sky counsel, which fees shall not exceed an aggregate of $25,000.00
($10,000.00 of which has already been paid) and disbursements of such counsel,
and fees and disbursements of local counsel, if any, retained for such purpose
and approved by the Company, (iv) costs associated with applications for
assignments of a rating of the
20
Public Securities by qualified rating agencies, (v) filing fees, costs and
expenses (including fees and disbursements for the Underwriter's counsel)
incurred in registering the offering with the NASD, (vi) costs not to exceed, in
the aggregate, $10,000 for placing "tombstone" advertisements in The Wall Street
Journal, the Northeast editions of The New York Times, or the Investment Dealer
Digest, (vii) fees and disbursements of the transfer and warrant agent, (viii)
the Company's expenses associated with "due diligence" meetings arranged by the
Underwriter, (ix) the preparation, binding and delivery of four sets of
transactions "bibles," in form and style satisfactory to the Underwriter, (x)
any listing of the Public Securities on the Nasdaq SmallCap Market, or any
listing in Standard & Poor's Corporation Records or Xxxxx'x OTC Industrial
Manual, and (xi) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section 3.15.1. Since an important part of the public offering process is for
the Company to appropriately and accurately describe both the background of the
principals of the Company and the Company's competitive position in its
industry, the Company will engage as reasonably requested by the Underwriter,
and will pay for, an investigative search firm of the Underwriter's choice to
conduct an investigation of principals of the Company mutually selected by the
Underwriter and the Company (this amount will be credited against the
Underwriter's non-accountable expense allowance if the offering is consummated
as provided herein). The Underwriter may deduct from the net proceeds of the
Public Offering payable to the Company on the Closing Date, or the Option
Closing Date, if any, the expenses set forth herein to be paid by the Company to
the Underwriter and/or to third parties, only to the extent such deduction does
not conflict with the description or "Use of Proceeds" in the Registration
Statement and Prospectus.
3.15.2 Non-Accountable Expenses. The Company
further agrees that, in addition to the expenses payable pursuant to Section
3.15.1, it will pay to the Underwriter a non-accountable expense allowance equal
to three (3%) percent of the gross proceeds received by the Company from the
sale of the Public Securities, of which $50,000.00 has been paid to date, and
the Company will pay the balance on the Closing Date and any additional monies
owed attributable to the Option Securities or otherwise on the Option Closing
Date by certified or bank cashier's check or, at the election of the
Underwriters by deduction from the proceeds of the
21
offering contemplated herein. If the offering contemplated by this Agreement is
not consummated for any reason whatsoever then the Company's liability for
payment to the Underwriter of the non-accountable expense allowance shall be
equal to the sum of the Underwriter's actual out-of-pocket expenses (including,
but not limited to, counsel fees, "roadshow" and due diligence expenses). The
Underwriter shall retain such part of the non-accountable expense allowance
previously paid as shall equal its actual out-of-pocket expenses. If the amount
previously paid is insufficient to cover such actual out-of-pocket expenses, the
Company shall remain liable for and promptly pay any other actual out-of-pocket
expenses. If the amount previously paid exceeds the amount of the actual
out-of-pocket expenses, the Underwriter shall promptly remit to the Company any
such excess.
3.16 Financial Consulting Agreement. At the closing of the
Public Offering, the Company shall engage the Underwriter as its non-exclusive
financial consultant pursuant to a Financial Consulting Agreement for a period
of three (3) years following the date of Closing, providing for a monthly
consulting fee of $3,000 with the payment of the aggregate of said monthly fees
in the amount of $108,000 to be paid at the closing of the Public Offering.
3.17 Non-exclusive Merger and Acquisition Agreement. At
the Close of the Public Offering, the Company shall enter into a non-exclusive
merger and acquisition agreement with the Underwriter, compensating the
Underwriter at the rate of 5% for the first $1,000,000, 4% of the next
$1,000,000, 3% of the next $1,000,000, and 2% thereafter, of the value of any
transaction that was introduced by the Underwriter to the Company, and
consummated by the Company and such introduced party, in connection with any
merger, acquisition, business combination or like transaction. Such fee shall be
payable in cash at the Closing of said transaction.
3.18 Stabilization. Neither the Company, nor, to its
knowledge, any of its employees, directors or stockholders has taken or will
take, directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result in, under the Exchange Act
or otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.
22
3.19 Internal Controls. 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 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.
3.20 Printer. The Company agrees to use a printer for the
printing of the Preliminary Prospectus and Prospectus with an office located in
New York which is reasonably acceptable to the Underwriter.
3.21 Transfer Agent. The Company shall retain American Stock
Transfer Company as its transfer agent for the Common Stock and the Warrants.
For a period of five years following the Effective Date, the Company will not
switch transfer agents without the Underwriter's consent, which shall not be
unreasonably withheld.
3.22 Sale of Securities. To the extent that the Company is
legally permitted to do so, it shall not permit or cause a private or public
sale or private or public offering of any of its securities (in any manner,
including pursuant to Rule 144 under the Act) owned nominally or beneficially by
the officers, directors and shareholders owning beneficially more than one (1%)
percent of the outstanding shares of Common Stock of the company (the Insiders)
if such offering or sale would be in violation of the Insider's "lockup"
agreement with the Underwriter.
3.23 DTC Securities Position Reports. For a period of five (5)
years, the Company, at its expense, shall provide the Underwriter with copies of
the Company's DTC Securities Position Reports on a monthly basis, if requested
by the Underwriter to do so.
3.24 Public Relations Firm. The Company agrees if
23
requested that they will engage a public relations firm reasonably acceptable to
the Underwriter and the Company for a minimum of 12 months from the Effective
Date.
3.25 CUSIP Numbers. The Company shall obtain CUSIP numbers for
the Public Securities as promptly as practicable after the initial filing of the
Registration Statement with the Commission.
4. Conditions of Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof, and to the performance by the
Company of its obligations hereunder and to the following conditions:
4.1 Regulatory Matters.
4.1.1 Effectiveness of Registration Statement.
The Registration Statement shall have become effective not later than 5:00 P.M.,
New York time, on the next day following the date of this Agreement, or such
other time and date, not later than 5:00 p.m. New York City time, on the seventh
(7th) day thereafter, as may be approved by you, and such Registration Statement
shall be effective at each of the Closing Date and the Option Closing Date, and
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been instituted
or shall be pending or contemplated by the Commission at the Closing Date and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Blodnick, Blodnick & Xxxxx,
P.C., counsel to the Underwriter.
4.1.2 NASD Clearance. By the Closing Date, the
Underwriter shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriter as described in the
Registration Statement.
4.1.3 No Blue Sky Stop Orders. No order suspending
the sale of the Securities in any jurisdiction designated by you
24
pursuant to Section 3.3 hereof shall have been issued either on the Closing Date
or the Option Closing Date, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
4.1.4 NASDAQ SmallCap Market; Other Markets. The
Company will apply to include the Public Securities for quotation on the Nasdaq
SmallCap Market and other such markets as the Underwriter shall reasonably
request, including, without limitation, the Boston Stock Exchange, the Chicago
Stock Exchange, and the Pacific Stock Exchange, as soon as reasonably
practicable following the filing of the registration statement relating to the
Public Offering with the Commission.
4.2 Company Counsel Matters.
4.2.1 Opinion of Counsel. On the Closing Date,
the Underwriter shall have received the favorable opinion of Certilman Balin
Xxxxx & Xxxxx, LLP, counsel to the Company, dated the Closing Date, addressed to
the Underwriter, and in form and substance satisfactory to Blodnick, Blodnick &
Xxxxx, P.C., counsel to the Underwriter, to the effect that:
(i) The Company has been duly organized and
is validly existing as a corporation and is in good standing under the laws of
its state of incorporation and to such counsel's knowledge, is duly qualified
and licensed and in good standing as a foreign corporation in New York, which to
the knowledge of such counsel is the only jurisdiction in which it owns or
leases any real property or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on its financial condition or results of operations.
(ii) The Company has all requisite corporate
power and authority, to own or lease its properties and conduct its business as
described in the Prospectus. The Company has all corporate power and authority
to enter into this Agreement and to carry out the provisions and conditions
hereof, and to such counsel's knowledge, all consents, authorizations, approvals
and orders hereof required in connection with the execution and delivery of, and
entry into this Agreement have been obtained. To such counsel's knowledge, no
consents, approvals, authorizations or orders of, and no filing with any court
or governmental agency or
25
body (other than such as may be required under the Act and applicable Blue Sky
laws), is required for the valid authorization, issuance, sale and delivery of
the Securities and the consummation of the transactions and agreements
contemplated by this Agreement, the Underwriter's Warrant, and as contemplated
by the Prospectus, other than all such authorizations, approvals, consents,
orders, registrations, licenses and permits which have been duly obtained and
are in full force and effect and have been disclosed to the Underwriter, other
than the continuing effectiveness of the Registration Statement [and the
delivery of the Warrant Exercise Prospectus].
(iii) All issued and outstanding securities of
the Company have been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with respect
thereto; and none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The outstanding options and warrants to purchase
shares of Common Stock constitute the valid and binding obligations of the
Company, enforceable in accordance with their terms. The offers and sales of the
outstanding Common Stock and options and warrants to purchase shares of 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. The authorized and outstanding capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectus.
(iv) The Securities have been duly authorized
and, when issued and paid for, will be validly issued, fully paid and
non-assessable. The Securities are not, and will not, be subject to the
preemptive rights of any holders of any security of the Company or, to such
counsel's knowledge, similar contractual rights granted by the Company. All
corporate action required to be taken for the authorization, issuance and sale
of the Securities has been duly and validly taken. When issued, the
Underwriter's Warrants will constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number of shares of Common Stock of the Company called for thereby and such and
the Underwriter's Warrants, when issued, in each case, will be enforceable
against the Company in accordance with their respective terms, except (i) such
26
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, marshaling and/or similar laws, now or hereafter in
effect affecting creditors' rights and remedies and (including such as may deny
giving effect to waivers of debtor's rights), (ii) as enforceability of any
indemnification provision may be limited under Federal and State laws, (iii)
that the remedy of specific performance and injunction and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the courts before which any proceeding therefor may be brought (regardless of
whether such enforceability is considered a proceeding in equity or in law). The
certificates representing the Securities are in due and proper form.
(v) To such counsel's knowledge, except as
set forth in the Prospectus, no holders of any securities of the Company or of
any options, warrants or securities of the Company exercisable for or
convertible or exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company under the Act
or to include any such securities in a registration statement to be filed by the
Company.
(vi) To such counsel's knowledge, there is
no claim or action by any person pertaining to, or proceeding, pending or to
such counsel's knowledge threatened, which challenges the exclusive rights of
the Company with respect to any Intangibles used in the conduct of its business
(including, without limitation, any such licenses or rights described in the
Prospectus as being owned or possessed by the Company); and to such counsel's
knowledge, the Company's current products, services and processes do not
infringe on any intangibles held by third parties.
(vii) This Agreement and the Underwriter's
Warrant have each been duly and validly authorized and, when executed and
delivered by the Company, will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except (i) such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, marshaling and/or similar laws, now or
hereafter in effect affecting creditors' rights and remedies and (including such
as may deny giving effect to waivers of debtor's rights), (ii) as enforceability
of any indemnification provision may be limited under Federal and State laws,
(iii) that the remedy of specific performance and injunction and other forms
27
of equitable relief may be subject to the equitable defenses and to the
discretion of the courts before which any proceeding therefor may be brought
(regardless of whether such enforceability is considered a proceeding in equity
or in law).
(viii) The execution, delivery and performance
by the Company of this Agreement, and the Underwriter's Warrant Agreement, the
issuance and sale of the Securities, the consummation of the transactions
contemplated hereby and thereby and the compliance by the Company with the terms
and provisions hereof and thereof, do not and will not, with or without the
giving of notice or the lapse of time, or both, (a) to such counsel's knowledge,
conflict with, or result in a breach of, any of the terms or provisions of, or
constitute a default under, or result in the creation or modification of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of any of the Company pursuant to the terms of, any material mortgage,
deed of trust, note, indenture, loan, contract, commitment or other material
agreement or instrument, to which it is a party or by which it or any of its
properties or assets may be bound, (b) result in any violation of the provisions
of the Company's Certificate of Incorporation or By-Laws, (c) to such counsel's
knowledge, violate any statute or any material judgment, order or decree, rule
or regulation applicable to the Company of any court, domestic or foreign, or of
any federal, state or other regulatory authority or other governmental body
having jurisdiction over any of the Company's or its properties or assets, which
might result in any material and adverse change in the condition (financial or
otherwise), business prospects or properties of the Company, or might materially
affect the properties or assets thereof, or (d) to such counsel's knowledge,
have a material adverse effect on any material permit, certification,
registration, approval, consent, license or franchise of the Company.
(ix) The Registration Statement and the
Prospectus and any post-effective amendments or supplements thereto (other than
the financial statements, schedules and data included therein, as to which no
opinion need be rendered) comply as to form in all material respects with the
requirements of the Act and Regulations. The Securities and all other securities
issued or issuable by the Company conform in all material respects to the
description thereof contained in the Registration Statement and
28
the Prospectus. The descriptions in the Registration Statement and the
Prospectus of statutes, regulations, government classifications, contracts and
other documents have been reviewed by us, and, based upon such review, are
accurate in all material respects and present fairly the information required to
be disclosed with respect thereto. To such counsel's knowledge, each statute or
regulation or legal or governmental proceeding required to be described in the
Prospectus is not described as required, and all contracts or documents known to
counsel, of a character required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement are
so described or filed as required .
(x) Counsel has participated in one or more
personal or telephonic conferences with officers and other representatives of
the Company, representatives of the independent public accountants for the
Company and representatives of the Underwriter at which the contents of the
Registration Statement, the Prospectus and related matters were discussed and
although such counsel is not passing upon and does not assume any responsibility
for the accuracy completeness or fairness of the statements contained in the
Registration Statement and Prospectus (except as otherwise set forth in this
opinion), to such counsel's knowledge, no facts have come to the attention of
such counsel which lead them to believe that either the Registration Statement
or any amendment or supplement thereto, as of the date of such opinion,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and schedules and other financial and
statistical data included in the Registration Statement or Prospectus), and that
on the Closing Date, the Prospectus and any amendment or supplement thereto
contained any untrue statement or a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(xi) The Registration Statement has become
effective under the Act, and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or
threatened under the Act or applicable
29
state securities laws.
(xii) DELETED
(xiii) Except as described in the Prospectus,
to such counsel's knowledge, no default exists in the due performance and
observance of any material term, covenant or condition of any material license,
contract, indenture, mortgage, deed of trust, note, loan or credit agreement
known to such counsel, or any other material agreement or instrument evidencing
an obligation for borrowed money known to such counsel, or any other material
agreement or instrument to which the Company is a party or by which the Company
may be bound or to which any of the properties or assets of the Company is
subject. To such counsel's knowledge, the Company is not in violation of any
term or provision of its Certificate of Incorporation or By-Laws or of any
material term of any material, material franchise, license, permit, applicable
law, rule, regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over it or any of its properties or
business, except as described in the Prospectus.
(xiv) To such counsel's knowledge, except as
described in the Prospectus, the Company does not own an interest in any
corporation, partnership, joint venture, trust or other business entity.
(xv) To such counsel's knowledge, except as
set forth in the Prospectus, there is no action, suit or proceeding before or by
any court of governmental agency or body, domestic or foreign, now pending, or
threatened against the Company, which might result in any material and adverse
change in the condition (financial or otherwise), business or prospects of the
Company, or might materially and adversely affect the properties or assets
thereof.
(xvi) To such counsel's knowledge, except as
described in the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder or
financial consulting arrangements or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriter's
compensation, as
30
determined by the NASD in connection with the offer and sale of the Securities.
Unless the context clearly indicates otherwise, the
term "Company" as used in this Section 4.2.1 shall include each subsidiary, if
any, of the Company. The opinion of counsel for the Company and any opinion
relied upon by such counsel for the Company shall include a statement to the
effect that it may be relied upon by counsel for the Underwriter.
4.2.2 [Reserved]
4.2.3 Option Closing Date Opinion of Counsel. On
any Option Closing Date, the Underwriter shall have received the opinions of
Certilman, Balin, Xxxxx & Xxxxx, LLP, counsel to the Company, dated the Option
Closing Date addressed to the Underwriter and in the form and substance
reasonably satisfactory to Blodnick, Blodnick & Xxxxx, P.C., counsel to the
Underwriter, confirming as of the Option Closing Date, file statements made by
such counsel to the Company in their opinion delivered on the Closing Date.
4.2.4 Reliance. In rendering such opinion, such
counsel may rely (i) as to matters involving the application of laws other than
the laws of the United States and jurisdictions in which they are admitted, to
the extent such counsel deems proper and to the extent specified in such
Opinions if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriter's counsel) of other counsel reasonably
acceptable to Underwriter's counsel, familiar with the applicable laws, and (ii)
as to matters of fact, to the extent they deem proper, on certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company, provided that copies of any such statements or certificates shall be
delivered to Underwriter's counsel if requested. The opinion of counsel for the
Company shall include a statement to the effect that it may be relied upon by
counsel for the Underwriter in its opinion delivered to the Underwriter.
4.2.5 Secondary Market Trading Survey. On the
Effective Date the Underwriter shall have received the Secondary Market Trading
Survey.
31
4.3 Cold Comfort Letter. At the time this Agreement is
executed and at each of the Closing Date and the Option Closing Date, if any,
you shall have received a letter, addressed to the Underwriter and in form and
substance satisfactory in all respects (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) to you and to
Blodnick, Blodnick & Xxxxx, P.C., counsel for the Underwriter, from Xxxxx,
Xxxxxx & Company, LLP, dated as of the date of this Agreement and as of the
Closing Date and the Option Closing Date.
4.4 Officers' Certificates.
4.4.1 Officers' Certificate. At each of the
Closing Date and the Option Closing Date, if any, the Underwriter shall have
received a certificate of the Company signed by the Chairman of the Board or the
President, Principal Accounting Officer and the Secretary of the Company, dated
the Closing Date or the Option Closing Date, as the case may be, respectively,
to the effect that the Company has performed or complied with by the Company
prior to and as of the Closing Date, or the Option Closing Date, as the case may
be, and that the conditions set forth in Section 4.5 hereof have been satisfied
as of such date and that, as of the Closing Date and the Option Closing Date, as
the case may be, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct in all material respects. In addition, the
Underwriter will have received a certificate signed by the Chairman of the Board
of the Company in connection with information supplied to state securities
commissions.
4.4.2 Secretary's Certificate. At each of the
Closing Date and the Option Closing Date, if any, the Underwriter shall have
received a certificate of the Company signed by the Secretary of the Company,
dated the Closing Date or the Option Closing Date, as the case may be,
respectively, certifying (i) that the By-Laws and Certificate of Incorporation
of the Company are true and complete, have not been modified and are in full
force and effect, (ii) that the resolutions relating to the public offering
contemplated by this Agreement are in full force and effect and have not been
modified, (iii) all correspondence between the Company or its counsel and the
Commission, (iv) all correspondence between the Company or its counsel and the
NASD concerning inclusion on Nasdaq and (v) as to the incumbency of the officers
of the Company. The documents referred to in such certificate shall
32
be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing
Date and the Option Closing Date, if any, (i) there shall have been no Material
Adverse Change since the Effective Date, (ii) the Company shall not be in
default under any provision of any instrument relating to any outstanding
indebtedness which default would have a material adverse effect on the Company,
(iii) no material amount of the assets of the Company shall have been pledged or
mortgaged, except as set forth in the Registration Statement and Prospectus,
(iv) no action suit or proceeding, at law or in equity, shall have been pending
or threatened against the Company, or affecting any of its property or business
before or by any court or federal or state commission, board or other
administrative agency wherein an unfavorable decision, ruling or finding may
materially adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus, (v) no stop order shall have been issued under the Act
and no proceedings therefor shall have been initiated or threatened by the
Commission, and (vi) the Registration Statement and the Prospectus and any
amendments or supplements thereto contain all material statements which are
required to be stated therein in accordance with the Act and the Regulations and
conform in all material respects to the requirements of the Act and the
Regulations, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
4.6 Delivery of Agreements. The Company has delivered to the
Underwriter executed copies of the Underwriter's Purchase Option.
4.7 Opinion of Counsel for Underwriter. All proceedings taken
in connection with the authorization, issuance or sale of the Securities as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to Blodnick, Blodnick & Xxxxx, P.C., counsel to the Underwriter, and you
shall have received from such counsel a favorable opinion, dated the Closing
Date and the Option Closing Date, if any, with respect to such of these
proceedings as you may reasonably require. On or prior to
33
the Effective Date, the Closing Date and the Option Closing Date, as the case
may be, counsel for the Underwriter shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in this Section
4.7, or in order to evidence the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained.
5. Underwriter's Representations and Warranties. The Underwriter
Represents and Warrants to the Company that:
5.1 Organization; Good Standing. The Underwriter has been
duly organized and is validly existing as a corporation and is in good standing
under the laws of its state of incorporation.
5.2 Corporate Power; Licenses; Consents. The Underwriter is
registered as a broker-dealer with the Securities and Exchange Commission and in
each state where such registration is required where the Underwriter acts as a
broker-dealer.
5.3 [Reserved]
5.4 Binding Obligation; Enforceability. This Agreement and the
transactions contemplated hereby have been duly authorized by, and executed on
behalf of the Underwriter and constitute the valid and binding obligations of
the Underwriter, enforceable in accordance with its terms.
6. Indemnification.
6.1 Indemnification of Underwriter.
6.1.1 General. Subject to the conditions set
forth below, the Company agrees to indemnify and hold harmless the Underwriter,
its directors, officers, agents and employees and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all legal or other expenses reasonably incurred in investigating,
preparing or defending against any litigation, commenced or
34
threatened, or any claim whatsoever) to which they or any of them may become
subject under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
(i) any Preliminary Prospectus, the Registration Statement or the Prospectus (as
from time to time each may be amended and supplemented); (ii) in any
post-effective amendment or amendments or any new registration statement and
prospectus in which is included securities of the Company issued or issuable
upon exercise of the Underwriter's Warrants; or (iii) any application or other
document or written communication (in this Section 5 collectively called
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Securities
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, Nasdaq or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein in the light of the
circumstances under which they were made, not misleading, and with respect to
the Registration Statement and any amendment thereto, as of the effective date
thereof, unless such statement or omission was made in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in any Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be;
provided, however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of the Underwriter from
whom the person asserting such losses, claims, damages or liabilities purchased
Public Securities, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Public Securities to
such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability. The
Company agrees promptly to notify the Underwriter of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the
35
Securities or in connection with the Registration Statement or Prospectus.
6.1.2 Procedure. If any action is brought against
the Underwriter or controlling person in respect of which indemnity may be
sought against the Company pursuant to Section 5.1.1, the Underwriter shall
promptly notify the Company in writing of the institution of such action and the
Company shall assume the defense of such action, including the employment and
fees of counsel (subject to the approval of the Underwriter) and payment of
actual expenses. The Underwriter or controlling person shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Underwriter or such controlling
person unless (i) the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action, or (ii)
the Company shall not have employed counsel to have charge of the defense of
such action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the Company (in which case the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys selected by the Underwriter and
controlling person, as a single group, shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if the Underwriter or
controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.
6.2 Indemnification of the Company. The Underwriter agrees to
indemnify and hold harmless the Company, its directors, officers, agents,
employees and controlling persons against any and all loss, liability, claim,
damage and expense described in the foregoing indemnity from the Company to the
Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this offering, made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto, or in any application, in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to
36
the Underwriter by or on behalf of the Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or an application, and in respect of which
indemnity may be sought against the Underwriter, the Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the Underwriter by the
provisions of Section 5.1.2.
6.3 Contribution.
6.3.1 Contribution Rights. In order to provide for
just and equitable contribution under the Act in any case in which (i) any
person entitled to indemnification under this Section 5 makes claim for
indemnification pursuant hereto but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 5 provides for indemnification in such case, or (ii)
contribution under the Act, the Exchange Act or otherwise may be required on the
part of any such person in circumstances for which indemnification is provided
under this Section 5, then, and in each such case, the Company and the
Underwriter shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and the Underwriter, and their respective directors,
officers, agents, employees and controlling persons as incurred, in such
proportions that the Underwriter is responsible for that portion represented by
the percentage that the underwriting discount appearing on the cover page of the
Prospectus bears to the initial offering price appearing thereon and the Company
is responsible for the balance; provided, that, 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 was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 5.3, the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total
37
price at which the Public Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay in respect of such losses,
liabilities, claims, damages and expenses. For purposes of this Section, each
director, officer and employee of the Underwriter, and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act shall have
the same rights to contribution as the Underwriter.
6.3.2 Contribution Procedure. Within fifteen days
after receipt by any party to this Agreement (or its representative) of notice
of the commencement of any action, suit or proceeding, such party will, if a
claim for contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding which was effected
by such party without the written consent of such contributing party. The
contribution provisions contained in this Section are intended to supersede, to
the extent permitted by law, any right to contribution under the Act, the
Exchange Act or otherwise available.
7. Additional Covenants.
7.1 Board Designee. For a period of three years from the
Effective Date, the Underwriter shall have the right to send a representative
(who need not be the same individual from meeting to meeting) to observe each
meeting of the Board of Directors. The Company agrees to give the Underwriter
written notice of each such meeting at the same time and in the same manner as
Directors of the Company are informed and to provide the Underwriter with an
agenda
38
and minutes of the meeting no later than it gives such notice and provides such
items to the other directors. Such observer will have the right to attend all
meetings of the Board of Directors, but shall have no voting rights. Such
observer shall be entitled to receive reimbursement for all reasonable
out-of-pocket expenses incurred in attending such meetings, including but not
limited to food, lodging and transportation.
7.2 [Reserved]
7.3 [Reserved]
7.4 Press Releases. The Company will not issue a press release
or engage in any other publicity until 25 days after the Effective Date without
the Underwriter's prior written consent.
7.5 Form S-8 or any Similar Form. The Company shall not file a
Registration Statement on Form S-8 (or any similar or successor form) for the
registration of shares of Common Stock underlying stock options for a period of
________ year(s) from the Effective Date without the Underwriters written
consent.
7.6 [Reserved]
7.7 Compensation and Other Arrangements. The Company hereby
agrees that for a period of three years from the Effective Date, all the
compensation and other arrangements between the Company and its officers,
directors and affiliates shall be determined by a compensation committee of the
Company's Board of Directors, a majority of whom are not employed by the
Company.
8. Covenants of the Underwriter. The Underwriter, covenants
and agrees with the Company as follows:
8.1 Compliance with NASD Rules of Fair Practice. The
Underwriter hereby agrees to comply with the National Association of Securities
Dealers Regulation, Inc.'s Rules of Fair Practice.
8.2 Waiver of "Lock-Up". The Underwriter shall not consummate
any transactions with the Company's bridge lender described in the Prospectus,
or waiver the "lock-up" applicable to such bridge lender's securities until the
Company has complied with its undertaking to the Registration Statement to file
"sticker"
39
supplements to the Prospectus pursuant to rule 424(c) of the Act, or to file a
post-effective amendment to the Registration Statement.
9. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates or the Option Closing Date and such
representations, warranties and agreements of the Underwriter and Company,
including the indemnity agreements contained in Section 5 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Underwriter, the Company or any controlling person, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriter until the earlier of the expiration of any
applicable statute of limitations and the seventh anniversary of the later of
the Closing Date or the Option Closing Date, if any, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
10. Effective Date of This Agreement and Termination Thereof
10.1 Effective Date. This Agreement shall become effective on
the Effective Date at the time that the Registration Statement is declared
effective. The time of the initial public offering of the Public Securities, for
the purpose of this Section 9 shall mean the time, after the Registration
Statement becomes effective, of the release by you for publication of the first
newspaper advertisement which is subsequently published relating to the Public
Securities or the time, after the Registration Statement becomes effective, when
the Public Securities are first released by you for offering to the pubic by the
Underwriter or dealers by letter or telegram, whichever shall first occur. You
may prevent this Agreement from becoming effective without liability to any
other party, except as noted below, by giving the notice indicated below in this
Section 9 before the time this Agreement becomes effective. The Underwriter
agrees to give the Company notice of the commencement of the offering described
herein.
10.2 Termination.
10.2.1 By the Underwriter. The Underwriter shall have
40
the right to terminate this Agreement at any time prior to any Closing Date, (i)
if any domestic or international event or act or occurrence has materially
disrupted, or in your opinion will in the immediate future materially disrupt,
general securities markets in the United States; or (ii) if trading on the New
York Stock Exchange, the American Stock Exchange or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities shall have been fixed,
or maximum ranges for prices for securities shall have been required on the
over-the-counter market by the NASD or by order of the Commission or any other
government authority having jurisdiction, or (iii) if the United States shall
have become involved in a war or material hostilities, or (iv) if a banking
moratorium has been declared by a New York State or federal authority, or (v) if
a moratorium on foreign exchange trading has been declared which materially
adversely impacts the United States securities market, or (vi) if the Company
shall have sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether or
not such loss shall have been injured, will, in your opinion, make it
inadvisable to proceed with the delivery of the Securities, or (vii) if either
Lew or Honigsfeld shall no longer serve the Company in his present capacity, or
(viii) if the Company has materially breached any of its representations,
warranties or obligations hereunder, or (ix) if the Underwriter shall have
become aware after the date hereof of a Material Adverse Change, or such adverse
material change in general market conditions as in the Underwriter's reasonable
judgment would make it impracticable to proceed with the offering, sale and/or
delivery of the Securities or to enforce contracts made by the Underwriter for
the sale of the Securities.
10.2.2 By the Company. The Company shall have the right to
terminate this Agreement as set forth in Section ___ (Conditions of the
Obligation of the Company) and (ii) in the event any action or proceeding of the
nature referred to in section [6].3 shall be instituted against the Underwriter
at any time prior to the Closing Date hereunder, or in the event there shall be
filed by or against the Underwriter in any court pursuant to any federal, state,
local or municipal statute, a petition in bankruptcy or insolvency, or for
reorganization or for the appointment of a receiver or trustee of its assets or
if the Underwriter shall make an assignment for the benefit of creditors, the
Company shall have the right on three
41
days notice to the Underwriter to terminate this Agreement without any liability
to the Underwriter of any kind.
10.3 Notice. If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section 9,
the Company shall be notified on the same day as such election is made by you by
telephone or telecopy, confirmed by letter.
10.4 Expenses. In the event that this Agreement shall not be
carried out for any reason, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
expenses related to the transactions contemplated herein shall be governed by
Section 3.15 hereof.
10.5 Indemnification. 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 5 shall not be in any way effected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Miscellaneous.
11.1 Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or telecopied and confirmed:
If to the Underwriter:
European Community Capital, Ltd.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx Xxxxxxx, Xxx Xxxx 00000
Attention: Mr. Xxxx Xxxxx
Fax: (000) 000-0000
42
Copy to:
Blodnick, Blodnick & Xxxxx, P.C.
Expressway Xxxxx Xxx, Xxxxx 000
Xxxxxx Xxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax (000) 000-0000
If to the Company:
Compu-Xxxx, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxxxx
Fax (000) 000-0000
Copy to:
Xxxxxx X. Xxxxxxx, Esq.
00 Xxxx Xxxx Xxxxxx
Xxxx Xxxxx, Xxx Xxxx 00000
Fax (000) 000-0000
-and-
Certilman Balin Xxxxx & Xxxxx, LLP
00 Xxxxxxx Xxxxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
Fax No. (000) 000-0000
11.2 Headings. The headings contained herein are for the sole
purpose of convenience of reference and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.
11.3 Amendment. This Agreement may only be amended by a
written instrument executed by each of the parties hereto.
11.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof, and supersede all prior agreements and
understandings of the parties, oral and written,
43
with respect to the subject matter hereof.
11.5 Binding Effect. This Agreement shall inure solely to the
benefit of and shall be binding upon, the Underwriter, the Company and the
controlling persons, directors and officers referred to in Section 5 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have nay legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.
11.6 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflicts of law, principles of such
state. The Company hereby agrees that any action, proceeding or claim against it
arising out of, relating in any way to this Agreement shall be brought and
enforced in the courts of the State of New York, New York County or the Federal
District Court of the United States of America for the Southern District of New
York, and irrevocably submits to such jurisdictions, which jurisdictions shall
be exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any such
process or summons to be served upon the Company or the Underwriter may be
served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 10 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the Company or the Underwriter, as the case may be, in
any action, proceeding or claim. The Company and the Underwriter agree that the
prevailing party(ies) in any such action shall be entitled to recover from the
other party(ies) all of its reasonable attorneys' fees and expenses relating to
such action or proceeding and/or incurred in connection with the preparation
therefor.
11.7 Execution in Counterparts; Facsimile Signatures. This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has been
signed by each of the parties hereto and delivered to each of the other parties
hereto. Facsimile signatures hereon shall be deemed to be original signatures.
11.8 Waiver. Etc. The failure of any of the parties hereto to
at any time enforce any of the provisions of this Agreement shall not be deemed
or construed to be a waiver of any such provision, nor to in any way effect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto to thereafter enforce each and every
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provision of this Agreement. No wavier of any breach, non-compliance or
non-fulfillment of any of the provisions of this Agreement shall be effective
unless set forth in a written instrument executed by the party or parties
against whom or which enforcement of such waiver is sought and no waiver of any
such breach, non-compliance or non-fulfillment shall be construed or deemed to
be a waiver of any other or subsequent breach, non-compliance or
non-fulfillment.
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If the foregoing correctly sets forth the understanding
between the Underwriter and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement between us.
Very truly yours,
COMPU-XXXX, INC.
By:_______________________
Accepted as of the date first above written.
Xxxxxx Heights, New York
EUROPEAN COMMUNITY CAPITAL, LTD
----------------------------------
Name: Xxxx Xxxxx
Title: President
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