Exhibit 1.1
UNDERWRITING AGREEMENT
____________, 0000
Xxxxxxxxxx & Weeks, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Dear Sirs:
Stratus Services Group, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you, 1,500,000 shares of the common stock, $.01 par value (the "Common
Stock") of the Company (the "Firm Shares"). In addition, solely for the purpose
of covering over-allotments, the Company proposes to grant to you the option to
purchase up to 225,000 additional shares of Common Stock (the "Additional
Shares"). The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "Shares". The Shares are more fully described in the
Registration Statement and Prospectus referred to below.
The Company confirms as follows its agreement with you:
1. Registration Statement and Prospectus: The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission"), in
accordance with the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder (the "Rules and
Regulations", and together with said Act, the "Act"), a registration statement
on Form SB-2 (File No. 333 - ____) and may have filed one or more amendments
thereto, including in such registration statement and in certain amendments
thereto a related preliminary prospectus for the registration under the Act of
the Shares. In addition, subject to the provisions of Section 4(e) hereof, the
Company has filed or will promptly file a further amendment to such registration
statement prior to the effectiveness of such registration statement, unless an
amendment is not required pursuant to Rule 430A of the Rules and Regulations. As
used in this Agreement, the term "Registration Statement" means such
registration statement, including the prospectus, financial statements and
schedules thereto, exhibits and other documents filed as part thereof, as
amended when, and in the form in which, it is declared effective by the
Commission, and, in the event any post-effective amendment thereto is filed
thereafter and on or before the Closing Date (as hereinafter defined), shall
also mean (from and after the date such post-effective amendment is effective
under the Act) such registration statement as so amended, provided that such
Registration Statement, at the time it becomes effective, may omit such
information as is permitted to be omitted from the Registration Statement when
it becomes effective pursuant to Rule 430A of the Rules and Regulations, which
information ("Rule 430 Information") shall be deemed to be included in such
Registration Statement when a final prospectus is filed with the Commission in
accordance with Rules 430A and 424(b)(1) or (4) of the Rules and Regulations;
the term "Preliminary Prospectus" means each prospectus included in the
Registration Statement, or any amend ments thereto, before it becomes effective
under the Act, the form of prospectus omitting Rule 430A Information included in
the Registration Statement when it becomes effective, if applicable (the "Rule
430A Prospectus"), and any prospectus filed by the Company with your consent
pursuant to Rule 424(a) of the Regulations; the term "Prospectus" means the
final prospectus included as part of the Registration Statement, except that (i)
if any prospectus (including any preliminary prospectus) which differs from such
prospectus included in the Registration Statement is provided to you for use in
connection with the offering of the Shares (whether or not such differing
prospectus is required to be filed by the Company pursuant to Rule 424(b)
under the Act), the term "Prospectus" as used herein shall mean such differing
prospectus from and after the date on which it shall have been first used, and
(ii) in the event any supplement to or amendment of such prospectus is made
after the date on which the Registration Statement is declared effective and on
or prior to the Closing Date, the term "Prospectus" shall also mean (with
respect to any supplement, from and after the date such supplement is first used
or, with respect to any amendment, the date such amendment is effective under
the Act) such prospectus as so supplemented or amended; and the term "Effective
Date" means (i) if the Company and you have determined not to proceed pursuant
to Rule 430A under the Act, the date on which the Registration Statement becomes
effective, or (ii) if the Company and you have determined to proceed pursuant to
Rule 430A under the Act, the date of this Agreement.
2. Agreements to Sell and Purchase: Subject to the terms and conditions
herein set forth, the Company agrees to sell to you and each of you agree,
severally and not jointly, to purchase from the Company, at a purchase price of
$___ per Firm Share, the number of Shares (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Firm Shares to be sold by a fraction, the numerator of which is the aggregate
number of Firm Shares to be purchased by each of you as set forth opposite your
respective names in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased hereunder.
Subject to the terms and conditions herein set forth, the Company agrees
to sell to you, and you shall have the right to purchase from the Company, up to
225,000 Additional Shares at a purchase price of $___ per Additional Share.
Additional Shares may be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each of you, severally, agrees to
purchase from the Company that proportion (subject to such adjustments as you
may both determine to avoid fractional Additional Shares) of the number of
Additional Shares to be purchased which the number of Firm Shares set forth
opposite your name in Schedule I bears to the aggregate number of Firm Shares to
be purchased from the Company hereunder. Additional Shares may be purchased at
any time and from time to time on or before the thirtieth business day following
the date of this Agreement upon written notice from you to the Company
specifying the number of Additional Shares to be purchased.
You will offer the Shares for sale at the initial public offering price
set forth on the cover of the Prospectus. After the initial public offering, you
may from time to time increase or decrease the public offering price, in your
sole discretion, by reason of changes in general market conditions or otherwise.
3. Delivery and Payment: Delivery of and payment for the Firm Shares shall
be made at the offices of Hornblower & Weeks ("HBW") at 000 Xxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or such other place as shall be mutually agreed
upon) at such time and date, not later than the third full business day
following the Effective Date (unless the time of effectiveness is after 4:00
P.M. New York time, in which case the date of closing shall be no later than
four business days following the Effective Date), as you shall designate by at
least forty-eight hours prior notice to the Company (the "Closing Date").
Delivery of and payment for Additional Shares shall be made at said
offices of HBW, or at such other place, and at such time(s) and date(s) (each an
"Optional Closing Date") as may be agreed upon in writing by you and the
Company; provided, however, that in no event may an Optional Closing Date be (i)
earlier than the Closing Date or (ii) later than three business days after the
date on which the related notice to purchase Additional Shares is given.
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The Closing Date and the time and place of delivery of and payment for the
Shares may be varied by agreement between you and the Company. The Optional
Closing Date and the time and place of delivery of and payment for the
Additional Shares may be varied by agreement between you, and the Company.
Delivery of certificates for the Shares (in definitive form, registered in such
names and in such denomina tions as you shall request at least two business days
prior to the Closing Date by written notice to the Company) shall be made to you
against payment of the purchase price therefor by certified or official bank
check or checks payable in New York Clearing House funds to the order of the
Company. For the purpose of expediting the checking and packaging of
certificates for the Shares, the Company agrees to make such certificates
available for inspection at the offices of HBW at least 24 hours prior to the
Closing Date and each Optional Closing Date, as the case may be.
On the Closing Date, at the time of the delivery and payment for the Firm
Shares, (i) the Company shall pay to you as a non-accountable expense allowance
a sum equal to $___ per Share for each Firm Share purchased by you hereunder (or
an aggregate of $150,000 in respect of the Firm Shares), less the $___
heretofore paid to you in respect thereof, by certified or official bank check
or checks payable in New York Clearing House funds payable to the order of, and
in accordance with instructions from, you and (ii) the Company shall issue, sell
and deliver to you, for an aggregate purchase price of $10, a warrant to
purchase up to an aggregate of 150,000 Shares (the "Underwriters' Warrant") in
substantially in the form filed as an exhibit to the Registration Statement. The
shares of Common Stock issuable upon exercise of the Underwriters' Warrant are
hereinafter referred to collectively as the "Underwriters' Warrant Shares". The
Underwriters' Warrant will be exercisable at an initial exercise price of $___
per Share at any time and from time to time, in whole or in part, during a
four-year period commencing one year following the Effective Date. The Company
has granted you certain registration rights with respect to the Underwriters'
Warrant and the securities issuable upon exercise thereof, as set forth in said
Underwriters' Warrant.
On each Additional Closing Date, at the time of the delivery and payment
for the Additional Shares, the Company shall pay to you as a non-accountable
expense allowance, a sum equal to $___ per Additional Share for each Additional
Share purchased by you on such date by certified or official bank check or
checks payable in New York Clearing House funds payable to the order of, and in
accordance with instructions from, you.
4. Covenants and Agreements of the Company: (A) The Company covenants and
agrees with you as follows:
(a) The Company will notify you promptly by telephone and (if requested by
you) will confirm such advice in writing, (1) when the Registration
Statement has become effective and when any post- effective amendment
thereto becomes effective, (2) if Rule 430A under the Act is used, or the
Prospectus is otherwise required to be filed with the Commission pursuant
to Rule 424(b) under the Act, when the Prospectus is filed with the
Commission pursuant to Rule 424(b) under the Act, (3) of any request by
the Commission for amendments or supplements to the Registration Statement
or the Prospectus or for additional information, (4) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement, preventing or suspending the use of the
Preliminary Prospectus, the Prospectus, the Registration Statement or any
amendment or supplement thereto, or refusing to permit the effectiveness
of the Registration Statement ("Stop Order"), or the initiation of any
proceedings for any of those purposes, (5) of the happening of any event
during the period mentioned in paragraph (f) below which in the reasonable
judgment of the Company makes any statement made in the Registration
Statement or the Prospectus untrue or which requires the making of any
changes in the Registration Statement or the Prospectus in order to make
the
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statements therein not misleading, and (6) of the receipt of any comments
from the Commission or the Blue Sky or securities authorities of any
jurisdiction regarding the Registration Statement, any post-effective
amendment thereto, the Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto. The Company will use its best efforts to
prevent the issuance of any Stop Order by the Commission or any
notification from the Blue Sky or securities authorities of any
jurisdiction suspending the qualification or registration of the Shares
for sale in such jurisdictions, and if at any time the Commission shall
issue any Stop Order, or if the Blue Sky or securities authorities of any
jurisdiction shall issue notification suspending the qualification or
registration of the Shares, the Company will make every reasonable effort
to obtain the withdrawal of such Stop Order or notification at the
earliest possible moment. The Company will promptly advise you of its
receipt of any notification with respect to the suspension of the
qualification or registration of the Shares for offer or sale in any
jurisdiction or the initiation or threatening of any action or proceeding
for such purpose.
(b) Prior to any public offering of the Shares by you, the Company will
cooperate with you and your counsel in registering or qualifying the
Shares for offer or sale under the Blue Sky or securities laws, rules or
regulations of such jurisdictions as you may reasonably request; provided
that in no event shall the Company be obligated to register or qualify to
do business as a foreign corporation in any jurisdiction where it is not
now so registered or qualified or to take any action which would subject
it to general service of process, or to taxation as a foreign corporation
doing business, in any jurisdiction where it is not now so subject. The
Company will pay all fees and expenses relating to the registration or
qualification of the Shares under such Blue Sky or securities laws of such
jurisdictions as you may designate (including the legal fees, expenses and
disbursements of counsel to you for the registration or qualification of
the Shares in such jurisdictions as you shall determine). After
registration, qualification or exemption of the Shares for offer and sale
in such jurisdictions, and for as long as any offering pursuant to this
Agreement continues, the Company, at your reasonable request, will file
and make such statements or reports, and pay the fees applicable thereto,
at such times as are or may be required by the laws, rules or regulations
of such jurisdictions in order to maintain and continue in full force and
effect the registration, qualification or exemption for offer or sale of
the Shares in such jurisdictions. After the termination of the offering
contemplated hereby, and as long as any of the Shares are outstanding, the
Company will file and make, and pay all fees applicable thereto, such
statements and reports and renewals of registration as are or may be
required by the laws, rules or regulations of such jurisdictions to
maintain and continue in full force and effect the registration,
qualification or exemption for secondary market transactions in the
Shares, in the various jurisdictions in which the Shares were originally
registered, qualified or exempted for offer or sale. The Company shall
further cause its counsel to provide to HBW at the Effective Date a list
to be updated as of the Closing Date and at least annually thereafter for
a minimum of three years, of those states in which the Company's
securities may be traded in non- issuer transactions under the Blue Sky
laws of the 50 states.
(c) The Company will furnish to you, without charge, four manually-signed
copies of the Registration Statement as originally filed on Form SB-2 and
of any amendments (including post-effective amend ments thereto),
including financial statements and schedules, if any, and all consents,
certificates and exhibits (including those incorporated therein by
reference to the extent not previously furnished to you), heretofore or
hereafter made, signed by or on behalf of its officers whose signatures
are required thereon and a majority of its board of directors.
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(d) The Company will use its best efforts to cause the Registration Statement
to become effective under the Act. Upon such effectiveness, if the Company
and you have determined not to proceed pursuant to Rule 430A under the
Act, the Company will timely file a Prospectus pursuant to, and in
conformity with, Rule 424(b), if required, and if the Company and you have
determined to proceed pursuant to Rule 430A under the Act, the Company
will timely file a Prospectus pursuant to, and in conformity with, Rules
424(b) and 430A under the Act.
(e) The Company will give you and your counsel advance notice of its intention
to file any amendment to the Registration Statement or any amendment or
supplement to the Prospectus, whether before or after the effective date
of the Registration Statement, and will not file any such amendment or
supplement unless the Company shall have first delivered copies of such
amendment or supplement to you and your counsel and you and your counsel
shall have given your consent to the filing of such amendment or
supplement. Any such amendment or supplement shall comply with the Act.
(f) From and after the Effective Date, the Company will deliver to you,
without charge, as many copies of the Prospectus or any amendment or
supplement thereto as you may reasonably request. The Company consents to
the use of the Prospectus or any amendment or supplement thereto by you
and by all dealers to whom the Shares may be sold, both in connection with
the offering or sale of the Shares and for such period of time thereafter
as the Prospectus is required by law to be delivered in connection
therewith. If during such period of time any event shall occur which in
the judgment of you or your counsel should be set forth in the Prospectus
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with law, the Company will
forthwith prepare and duly file with the Commission an appropriate
supplement or amendment thereto, and will deliver to each of you, without
charge, such number of copies thereof as you may reasonably request.
(g) The Company will promptly pay all expenses in connection with (1) the
preparation, printing, filing, distribution and mailing (including,
without limitation, express delivery service) of the Registration
Statement, each preliminary prospectus, the Prospectus, and the
preliminary and final forms of Blue Sky memoranda (if any); (2) the
issuance and delivery of the Shares; (3) the fees and expenses of legal
counsel and independent accountants for the Company relating to, among
other things, opinions of counsel, audits, review of unaudited financial
statements and cold comfort review; (4) the fees and expenses of a
registrar or transfer agent for the Common Stock; (5) the printing,
filing, distribution and mailing (including, without limitation, express
delivery service) of this Agreement, the Agreement Among Underwriters, if
any, and the Selected Dealers Agreement; (6) furnishing such copies of the
Registration Statement, the Prospectus and any preliminary prospectus, and
all amendments and supplements thereto, as may be requested for use in
connection with the offering and sale of the Shares by you or by dealers
to whom Shares may be sold; (7) any fees and communication expenses with
respect to filings required to be made by you with the National
Association of Securities Dealers Regulatory, Inc. (the "NASDR"); and (8)
the quotation of the Shares on NASDR's Automated Quotation System
("NASDAQ"); (9) tombstone advertisements (not to exceed $10,000) and
lucite cubes for the offering; and (10) costs of "road shows", if any
(with respect to such road shows, each party shall pay its own travel
expenses and the Company will pay all other costs associated with holding
such shows including expenses in connection with any meetings or
presentations).
(h) On the Closing Date, the Company shall sell to you, the Underwriters'
Warrant to purchase 150,000 Shares for an aggregate purchase price of $10.
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(i) If this Agreement shall be terminated pursuant to any of the provisions
hereof (otherwise than by notice given by you pursuant to Section 8
hereof) or if for any reason the Company shall be unable to perform its
obligations hereunder, the Company will reimburse you for all of your
out-of-pocket expenses (including the fees and expenses of your counsel)
reasonably incurred by you in connection herewith.
(j) For a period of one (1) year after the commencement of the public offering
of the Shares by you, without HBW's prior written consent, the Company
will not:
(1) offer, issue, sell, contract to sell, grant any option for the sale
of, or otherwise dispose of, directly or indirectly, any securities
of the Company, except as provided for and as contemplated by this
Agreement, as specifically disclosed in the Registration Statement
respecting certain post-offering issuances to Company employees, or
for stock options granted to employees pursuant to the Company's
Stock Option Plan attached as an exhibit to the Registration
Statement; or
(2) redeem any of its securities outstanding as of the closing date of
the Public Offering, or pay any dividends or make any other cash
distribution in respect of its securities in excess of the amount of
the Company's current or retained earnings after the closing date of
the Public Offering.
HBW shall either approve or disapprove any such contemplated stock
redemption or dividend or distribution within five business days after the
date HBW receives written notice of the proposed action.
(k) On or prior to the Closing Date, the Company shall obtain:
(1) from each of its officers and directors, his or her enforceable
written agreement, in form and substance satisfactory to your
counsel, that for a period of twenty-four (24) months after the
Effective Date (or any longer period required by any jurisdiction in
which the offer and sale of the Shares is to be registered or
qualified);
(3) from each of other shareholders, his or her enforceable written
agreement, in form and substance satisfactory to your counsel, that
for a period of twelve (12) months after the Effective Date (or any
longer period required by any jurisdiction in which the offer and
sale of the Shares is to be registered or qualified)
that he or she will not offer for sale, sell, contract to sell, assign,
pledge, transfer, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any securities of the Company (including without
limitation any shares of Common Stock), owned by him or her as of the Closing
Date, whether upon exercise of warrants, stock options or otherwise, without
HBW's prior written consent (the "Lock-up Letter"). An appropriate legend shall
be marked on the face of stock certificates representing all of such shares of
capital stock prior to the Effective Date, as well as a stop order being issued
to the Company's transfer agent. Notwithstanding the foregoing, the Company's
directors, officers and existing stockholders may make gifts and intrafamily
transfer of the Common Stock provided such transferees agree to be bound by the
terms of this restriction on transfer.
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(l) The Company has reserved and shall continue to reserve and keep available
the maximum number of shares of its authorized but unissued Common Stock
and other securities for issuance upon exercise of the Underwriters'
Warrant.
(m) For a period of five years after the date of this Agreement, the Company
shall:
(1) retain Amper, Politzinert Xxxxxx P.A. or another regionally
recognized firm of independent public accountants, as its auditors,
and at its own expense, shall cause such independent certified
public accountants to review the Company's financial statements for
each of the first three fiscal quarters of each fiscal year prior to
the announcement of quarterly financial information, the filing of
the Company's 10-Q quarterly reports and the mailing of quarterly
financial information to its shareholders;
(2) cause the Company's Board of Directors to meet not less frequently
than quarterly, upon proper notice, and cause an agenda and minutes
of the preceding meeting to be distributed to directors prior to
each such meeting;
(3) distribute to its security holders, within 120 days after the end of
each fiscal year, an annual report (containing certified financial
statements of the Company) prepared in accordance with those
required under Rule 14a-3(b) of Regulation 14A promulgated by the
Commission under the Securities Exchange Act of 1934, as amended;
and
(4) appoint a transfer agent for the Common Stock, in each case
acceptable to you.
(n) For a period of five years after the date of this Agreement, the Company
shall furnish you, free of charge, with the following:
(1) within 90 days after the end of each fiscal year, financial
statements for the Company certified by the independent certified
public accountants referred to in Section 4(m)(1) above, including a
balance sheet, statement of operations, statement of shareholders'
equity and statement of cash flows, for the Company, with supporting
schedules, prepared in accordance with generally accepted accounting
principles, as at the end of such fiscal year and for the twelve
months then ended, accompanied by a copy of the certificate or
report thereon of such independent certified public accountants;
(2) (x) for so long as the Company is a reporting company under any of
Sections 12(b), 12(g) or 15(d) of the Securities Exchange Act, as
amended, and the rules and regulations of the Commission promulgated
thereunder (collectively, the "Exchange Act"), promptly after filing
with the Commission, copies of all reports and proxy soliciting
material which the Company is required to file under the Exchange
Act, or (y) at such times as the Company is not a reporting company
under the aforesaid provisions of the Exchange Act, as soon as
practicable after the end of each of the first three fiscal quarters
of each fiscal year, financial statements of the Company, including
a balance sheet, statement of operations, statement of shareholders'
equity and statement of cash flows as at the end of, or for each
such fiscal quarter and the comparable period of the preceding year,
which statements need not be audited;
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(3) as soon as practicable after they have first been distributed to
shareholders of the Company, copies of each annual and interim
financial or other report or communication sent by the Company to
its shareholders (except to the extent duplicative of information
furnished pursuant to any other clause of this Section 4(n));
(4) as soon as practicable following release or other dissemination,
copies of every press release and every material news item and
article in respect of the Company or its affairs released or
otherwise disseminated by the Company;
(5) promptly following receipt thereof, copies of the Company's daily
transfer sheets prepared by the Company's transfer agent, monthly
DTC Transfer Sheets and a list of shareholders; and
(6) such additional documents and information with respect to the
Company and its affairs, if any, as you may from time to time
reasonably request.
(o) Prior to the Effective Date, the Company shall apply, on expedited basis,
for listing in the Corporation Records Service published by Standard and
Poor's Corporation and/or Xxxxx'x Industrial Manual and shall use its good
faith efforts to have the Company listed in one of such reports at or
prior to the Closing Date. Further, the Company shall use its good faith
efforts to remain listed in one of such reports for a period of five years
from the Effective Date.
(p) On or prior to the Effective Date, the Company will have accomplished the
quotation of the Shares on the NASDAQ SmallCap Market, subject only to
notice of issuance and the registration of such securities under the
Exchange Act. For a period of five years from the date of this Agreement,
the Company agrees, at its sole cost and expense, to take all necessary
and appropriate action such that its securities continue to be quoted on
NASDAQ, provided that the Company otherwise complies with the prevailing
requirements of NASDAQ.
(q) For a period of two years after the date of this Agreement, the Company
will not seek to amend its certificate of incorporation to authorize the
issuance of any other class of its capital stock, including, without
limitation, any preferred stock, without your prior written consent.
(r) The Company agrees, at its own cost and expense, to deliver to you and
your counsel, within 180 days after the Optional Closing Date, or the
expiration of the period in which you may exercise the over-allotment
option, five bound volumes containing copies of all documents and
correspondence filed with, or received from, the Commission and the NASD
relating to the offering of the Shares and the closing thereof, including
related matters.
(s) The Company will make generally available to its security holders and
deliver to you as soon as it is practicable to do so (but in no event
later than the 45th day after the end of the twelve-month period beginning
at end of fiscal quarter of the Company during which the Registration
Statement becomes effective, or, if the Registration Statement becomes
effective during the Company's last fiscal quarter, the 90th day after the
end of such twelve-month period), an earnings statement of the Company
(which need not be audited) covering a period of at least twelve
consecutive months commencing after the effective date of the Registration
Statement, which shall satisfy the require ments of Section 11(a) of the
Act.
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(t) The Company will, promptly upon your request, prepare and file with the
Commission any amend ments or supplements to the Registration Statement,
any Preliminary Prospectus or the Prospectus and take any other action,
which in the reasonable opinion of Xxxxxx & Xxxxx, counsel to you, may be
reasonably necessary or advisable in connection with the distribution of
the Shares, and will cause the same to become effective as promptly as
possible.
(u) The Company will furnish to you as early as practicable prior to the
Closing Date and any Optional Closing Date, as the case may be, but no
less than two full business days prior thereto, a copy of the latest
available unaudited interim financial statements of the Company which have
been reviewed by the Company's independent certified public accountants,
as stated in their letters to be furnished pursuant to Section 7(e)
hereof.
(v) The Company will apply the net proceeds from the issuance and sale of the
Shares for the purposes and in the manner set forth under the caption "Use
of Proceeds" in the Prospectus, and will file on a timely basis such
reports with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required pursuant to Rule
463 under the Act. The Company will operate its business in such a manner
and, pending application of the net proceeds of the offering for the
purposes and in the manner set forth under the caption "Use of Proceeds"
in the Prospectus, will invest such net proceeds in certain types of
securities so as not to become an "investment company" as such term is
defined under the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(w) The Company has filed a registration statement on Form 8-A covering the
Shares pursuant to Section 12(b) of the Exchange Act and will use its best
efforts to cause said registration statement to become effective on the
Effective Date. The Company will comply with all registration, filing and
reporting requirements of the Exchange Act, which may from time to time be
applicable to the Company. The Company shall comply with the provisions of
all undertakings contained in the Reg istration Statement.
(x) Prior to the Closing Date or any Optional Closing Date, as the case may
be, the Company shall neither issue any press release or other
communication, directly or indirectly, nor hold any press conference with
respect to the offering of the Shares, the Company or its business,
results of opera tions, condition (financial or otherwise), property,
assets, liabilities or prospects of the Company, without your prior
written consent.
(y) For a period of ninety (90) days after the date hereof, the Company will
not, directly or indirectly, take any action designed, or which will
constitute or which might reasonably be expected to cause or result in,
stabilization or manipulation of the market price of the Shares, or the
facilitation of the sale or resale of the Shares.
(aa) The Company maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset ac countability; (iii) access to cash and cash
equivalents is permitted only in accordance with manage ment's general or
specific authorization; and (iv) the recorded accountability for cash and
cash equivalents is compared with the existing cash and cash equivalents
at reasonable intervals and appropriate action is taken with respect to
any differences.
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(bb) There are no business relationships or related party transactions of the
nature described in Item 404 of Regulation S-B of the Rules and
Regulations involving the Company and any person referred to in Items 401
or 404, except as required to be described in the Prospectus and as so
described.
(cc) The Company will not grant any person or entity registration rights with
respect to any of its securities, except such rights as are subordinate to
the registration rights contained in the Underwriters' Warrant and are
exercisable no earlier than six months after the securities to be regis
tered upon exercise of such registration rights have been offered for sale
pursuant to an effective registration statement under the Act and
registered or qualified for sale under the Blue Sky or state securities
law, rules or regulations of the jurisdictions in which such securities
are to be offered for sale.
(dd) The Company shall enter into a consulting agreement with HBW on the
Closing Date, pursuant to which HBW will provide financial consulting
services to the Company for a period of twelve (12) months after the
Closing Date. In consideration for performing such services, HBW shall
receive a cash amount equal to 1% of the gross proceeds, which amount is
payable in full on the Closing Date. HBW shall furnish the Company with
the form of such financial consulting agreement.
(ee) It is understood that, except for the issuance of shares of Common Stock
to be issued (a) upon the exercise of any options described herein, (b)
pursuant to and in order to consummate a merger with or acquisition from
an unaffiliated party in a transaction negotiated at arms' length and
approved by a majority of the Company's Board of Directors, (c) in a
public offering, at a price not less than ninety percent (90%) of the
average of the closing bid prices of the Common Stock as reported on the
NASDAQ for the 21 consecutive trading day period immediately preceding the
date of sale (the "Exempt Price"), and (d) in a private sale at a price
not less than seventy percent (70%) of the Exempt Price, during the period
of the Public Offering and for 12 months from the Effective Date, the
Company will not sell or otherwise dispose of any securities without the
prior written consent of HBW.
(ff) The Company shall elect a minimum of two (2) "outside" persons (excluding
affiliates of the Company and family members of the Company's existing
directors, officers and stockholders) to the Company's Board of Directors
within 90 days of the Effective Date. The underwriting agreement shall
provide, unless waived by HBW, that HBW shall have the right to designate
a member to the Company's Board of Directors for a period of 60 months
after the Effective Date, which member shall be responsibly acceptable to
the Company. Management of the Company will obtain, prior to the Effective
Date, agreements from each of the Company's directors, officers and 5%
shareholders to vote all shares of the Company's securities owned by him,
her or it, whether directly or indirectly in favor of such designee. To
the extent permitted by law and on the same basis as all other directors,
the Company will agree to indemnify HBW's designee for the actions of its
designee as a director of the Company. In the event the Company maintains
a liability insurance policy affording coverage for the acts of its
officers and directors, it will agree to include HBWs' designee and HBW as
an insured under such policy. In addition, the Company will obtain
directors and officers insurance and "key man" life insurance in the
amount of $1,500,000 on the life or lives of certain officers, directors
and/or key employees of the Company that the Company and HBW mutually deem
reasonably necessary, with the Company as the beneficiary thereof. The
Company shall pay the annual premiums for a period of not less than five
years.
10
(gg) The Company hereby grants HBW a right of first refusal for a period of
three years after the Effective Date of the Registration Statement for the
underwriting of any public or private sale of securities of the Company to
be made by the Company, or for any public or private sale of securities by
the Company to be made by its principal stockholders or subsidiaries.
Notwithstanding the foregoing, should an investment banking firm which is
generally recognized to be of a higher tier than HBW agree to the
underwriting of any public or private sale of securities of the Company
resulting in aggregate gross proceeds of $15,000,000 or more and HBW is
permitted to participate in such offering to the extent of at least ten
percent (10%), then the right of first refusal provided herein shall not
apply with respect to that offering and any related offering. Should the
Company prefer to work with another investment banking firm in connection
with a future underwriting of any public or private sale of securities of
the Company and the investment banking firm is not generally to be of a
higher tier than HBW and/or the underwriting will not result in aggregate
gross proceeds of at least $15,000,000, then upon payment to HBW of a fee
in the amount $200,000, the right of first refusal provided herein shall
not apply with respect to that offering and any related offerings.
(hh) The Company will pay HBW a finder's fee based on the Transaction Value of
any covered transactions, in the event that HBW originates a merger,
acquisition, joint venture or other similar transaction to which the
Company or a subsidiary of the Company is a party, in the amount of five
percent (5%). "Transaction Value" shall mean the aggregate value of all
cash, securities, and other property (a) paid to the Company, it
affiliates, or their stockholders in connection with any transaction
referred to above involving at investment in or acquisition of the Company
or any affiliate (or the assets of either), (b) paid by the Company or any
affiliate in any such transaction involving an investment in or
acquisition of another party or its equity holdings by the Company or any
affiliate, or (c) paid or contributed by the Company or any affiliate and
by the other party or parties in the event of any such transaction
involving a joint venture or similar joint enterprise or undertaking. The
value of any such securities (whether debt or equity) or other property
shall be the fair market value thereof as deter-mined by mutual agreement
of the Company and HBW or by an independent appraiser jointly selected by
the Company and HBW.
5. Representations and Warranties of the Company: (A) The Company
represents and warrants to you that:
(a) When the Registration Statement becomes effective, and at all times
subsequent thereto to and including the Closing Date and each Optional
Closing Date, and during such longer period as the Prospectus may be
required to be delivered in connection with sales by you or any dealer,
and during such longer period until any post-effective amendment thereto
shall become effective, the Registration Statement (and any post-effective
amendment thereto) and the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment or
supplement to the Registration Statement or the Prospectus) will contain
all statements which are required to be stated therein in accordance with
the Act, will comply with the Act, and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and no event will have occurred which should have been set
forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not then been set forth in such an amendment or
supplement; if a Rule 430A Prospectus is included in the Registration
Statement at the time it becomes effective, the Prospectus filed pursuant
to Rules 430A and 424(b) (1) or (4) will contain all Rule 430A Information
11
and all statements which are required to be stated therein in accordance
with the Act, will comply with the Act, and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading; and each Preliminary Prospectus, as of the date filed with the
Commission, did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading; except that no representation or warranty
is made in this Section 5(A)(a) with respect to statements or omissions
made in reliance upon and in conformity with written information furnished
to the Company as stated in Section 6(b) with respect to you expressly for
inclusion in any Preliminary Prospectus, the Registration Statement, or
the Prospectus, or any amendment or supplement thereto.
(b) Neither the Commission nor the Blue Sky or securities authorities of any
jurisdiction has issued an order suspending the effectiveness of the
Registration Statement, preventing or suspending the use of any
Preliminary Prospectus, the Prospectus, the Registration Statement, or any
amendment or supplement thereto, refusing to permit the effectiveness of
the Registration Statement, or suspending the registration or
qualification of the Shares, nor has the Commission or any of such
authorities instituted or threatened to institute any proceedings with
respect to such an order.
(c) The Company is a corporation duly incorporated and validly existing in
good standing under the laws of Delaware, its jurisdiction of
incorporation. The Company has full corporate power and authority and has
obtained all necessary consents, authorizations, approvals, orders,
licenses, certificates, declarations and permits of and from, and have
made all required filings with, all federal, state, local and other
governmental authorities and all courts and other tribunals, to own,
lease, license and use its properties and assets and to carry on its
business in the manner described in the Prospectus. All such consents,
authorizations, approvals, orders, licenses, certificates, declarations,
permits and filings are in full force and effect and the Company is in all
material respects complying therewith. The Company is duly registered or
qualified to do business as a foreign corporation and is in good standing
in each other jurisdiction in which their ownership, leasing, licensing,
or use of property and assets or the conduct of its business requires such
registration or qualification.
(d) The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, of which 5,631,000 shares are outstanding. The Company
does not have any subsidiaries or own any capital stock or equity interest
in any other corporation, partnership, limited liability company or other
entity. Each outstanding share of Common Stock, including the Additional
Shares to be sold by the Company to you hereunder, are validly authorized,
validly issued, fully paid, and nonassess able, without any personal
liability attaching to the ownership thereof, and has not been issued and
is not owned or held in violation of any preemptive rights of
shareholders. There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the issuance of,
any share of capital stock of the Company or any security or other
instrument which by its terms is convertible into, exercisable for, or
exchangeable for capital stock of the Company, except as disclosed in the
Prospectus. There is outstanding no security or other instrument which by
its terms is convertible into or exchangeable for capital stock of the
Company.
(e) The financial statements of the Company included in the Registration
Statement and the Prospectus fairly present the financial position, the
results of operations and the other information purported to be shown
therein at the respective dates and for the respective periods to which
they apply. Such financial statements have been prepared in accordance
with generally accepted accounting principles
12
and are prepared in accordance with the books and records of the Company.
The accountants whose reports on the audited financial statements are
filed with the Commission as a part of the Registra tion Statement are,
and during the periods covered by their report(s) included in the
Registration Statement and the Prospectus were, independent certified
public accountants with respect to the Company within the meaning of the
Act. No other financial statements are required by Form SB-2 or otherwise
to be included in the Registration Statement or the Prospectus. Except as
disclosed in the Prospectus, there has at no time been a material adverse
change in the condition (financial or otherwise), results of operations,
business, property, assets, liabilities or prospects of the Company from
the latest information set forth in the Registration Statement or the
Prospectus.
(f) There is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or
in prospect (or any basis therefor known to the Company) with respect to
or affecting the Company, its operation, business, property or assets,
except as disclosed in the Prospectus or such as individually or in the
aggregate do not now have and are not expected to have a material adverse
effect upon the operations, businesses, property, assets, condition
(financial or otherwise) or prospects of the Company. The Company is not
in violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as disclosed in the Prospectus or such
as individually or in the aggregate do not now have and are not expected
to have a material adverse effect upon the operations, businesses,
property, assets, condition (financial or otherwise) or prospects of the
Company; nor is the Company required to take any action in order to avoid
any such violation or default.
(g) The Company has good and marketable title in fee simple absolute to all
real properties and good title to all other properties and assets which
the Prospectus indicates are owned by them, free and clear of all liens,
security interests, pledges, charges, mortgages and other encumbrances
(except as may be required to be disclosed in the Prospectus). The
properties held under lease by the Company are held by it under valid and
enforceable leases and the interests of the Company in such leases are
free and clear of all liens, encumbrances and defects, except as disclosed
in the Prospectus, and the Company is in full compliance with all material
terms and conditions thereunder and such leases are in full force and
effect. No real property owned, leased, licensed or used by the Company is
situated in an area which is, or to the knowledge of the Company, will be,
subject to zoning, use, or building code restrictions which would prohibit
(and no state of facts relating to the actions or inaction of another
person or entity or his or its ownership, leasing, licensing, or use of
any real or personal property exists or will exist which would prevent)
the continued effective ownership, leasing, licens ing, or use of such
real property in the business of the Company as presently conducted or as
the Prospectus indicates any of them contemplate conducting, except as
disclosed in the Prospectus).
(h) Neither the Company nor any other party is now or is expected by the
Company to be in violation or breach of, or in default with respect to
complying with, any material provision of any indenture, mortgage, deed of
trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or license, or arrangement or understanding
which is material to the Company, and each such indenture, mortgage, deed
of trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or license is in full force and is the legal,
valid and binding obligation of the Company, and to the knowledge of the
Company, of the other contracting party and is enforceable as to them in
accordance with its terms. The Company enjoys peaceful and undisturbed
possession under all leases and licenses under which they are operating.
The Company is not a party to or bound by any contract, agreement,
instrument, lease, license, arrangement or understanding, or subject to
any charter or other restriction, which has had or is expected in the
13
future to have a material adverse effect on the condition (financial or
otherwise), results of operations, businesses, property, assets or
liabilities of the Company. The Company is not in xxxxx tion or breach of,
or in default with respect to, any term of its Certificate of
Incorporation or By- laws.
(i) The Company does not own or have any licensed rights to, in or under any
patents, patent applica tions, trademarks, servicemarks, trademark or
servicemark applications, trade names, service marks, copyrights,
technology, know-how or other intangible properties or assets (all of the
foregoing being herein called "Intangibles") that are material to the
business of the Company. There is no right under any Intangibles of the
Company necessary to the business of the Company as presently conducted or
as proposed to be conducted as indicated in the Prospectus, except as may
be disclosed in the Prospectus. The Company have not received notice of
infringement with respect to asserted Intangibles of others. To the
knowledge of the Company, there is no infringement by others of
Intangibles of the Company. To the knowledge of the Company, there is no
Intangible of others which has had or may in the future have a materially
adverse effect on the condition (financial or otherwise), results of
operations, businesses, property, assets, liabilities or prospects of the
Company.
(j) Neither the Company, any director or officer of the Company, or to the
best knowledge of the Company, any agent, employee, or other person
authorized to act on behalf of the Company have, directly or indirectly:
used any corporate funds of the Company for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity;
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds of the Company; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, as relates to the business of
the Company; or made any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment in connection with the business of the
Company.
(k) Any contract, agreement, instrument, lease or license required to be
described in the Registration Statement or the Prospectus has been
properly described therein. Any contract, agreement, instrument, lease or
license required to be filed as an exhibit to the Registration Statement
has been filed with the Commission as an exhibit to or has been
incorporated as an exhibit by reference into the Registration Statement.
(l) The Company has all requisite corporate power and authority to execute,
deliver and perform under the terms and conditions of this Agreement and
the Underwriters' Warrant. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery and
perfor xxxxx by the Company of this Agreement and the Underwriters'
Warrant. This Agreement has been duly authorized, executed and delivered
by the Company, is a legal, valid, and binding agreement of the Company,
and is enforceable as to the Company in accordance with its terms. The
Underwriters' Warrant has been duly authorized by the Company and, when
executed and delivered by the Company, assuming the due execution and
delivery thereof by the other parties thereto, will be a legal, valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms. No consent, authorization, approval, order,
license, certificate, declara tion or permit of or from, or filing with,
any governmental or regulatory authority, agent, board or other body is
required for the issue and sale of the Shares by the Company and the
execution, delivery or performance by the Company of this Agreement or the
Underwriters' Warrant (except filings with and orders of the Commission
pursuant to the Act which have been or will be made or obtained prior to
the Closing Date, and such filings, consents or permits as are required
under Blue Sky or securi-
14
ties laws in connection with the transactions contemplated by this
Agreement). No consent of any party to any contract, agreement,
instrument, lease, license, arrangement or under standing to which the
Company is a party, or to which any of their properties or assets are
subject, is required for the execution, delivery or performance of this
Agreement or the Underwriters' Warrant; and the execution, delivery and
performance of this Agreement and the Underwriters' Warrant will not
violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement or understanding, result in the
creation or imposition of, any lien, security interest, pledge, charge, or
other encumbrance upon any of the property or assets of the Company
pursuant to the terms of any indenture, mortgage, deed of trust, loan or
credit agreement, lease or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is sub ject or violate or result in a
breach of any term of the Certificate of Incorporation or By-laws of the
Company, or violate, result in a breach of, or conflict with any law,
rule, regulation, order, judgment or decree binding on the Company or to
which its operations, business, properties or assets are subject.
(m) The Shares are validly authorized, and when issued, paid for and delivered
in accordance with this Agreement, will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive rights of
shareholders. You will receive good title to the Shares and the
Underwriters' Warrant purchased by it, upon payment of the purchase price
therefor in accordance with the provisions of this Agreement, free and
clear of all liens, security interests, pledges, charges, encumbrances,
shareholders' agree ments and voting trusts (collectively,
"Encumbrances").
(n) The Underwriters' Warrant Shares are validly authorized and reserved for
issuance and, when issued, paid for and delivered upon exercise of the
Underwriters' Warrant, in accordance with the provisions of the
Underwriters' Warrant will be validly issued, fully paid and
non-assessable and will not be issued in violation of any preemptive
rights of shareholders; and the holders of the Underwriters' Warrant
Shares will receive good title to them, free and clear of all
Encumbrances.
(o) The Shares and the Underwriters' Warrant conform to all statements
relating thereto contained in the Registration Statement and the
Prospectus.
(p) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as otherwise may be
stated therein, (i) the Company has not entered into any transaction or
incurred any liability or obligation, contingent or otherwise, which is
material to the Company, except in the ordinary course of business, (ii)
there has not been any change in the outstanding capital stock of the
Company, or any issuance of options, warrants or rights to purchase the
capital stock of the Company, or any material increase in the long-term
debt of the Company, or any material adverse change in the business,
condition (financial or otherwise) or results of opera tions of the
Company, (iii) no loss or damage (whether or not insured) to the
properties of the Company has been sustained which is material to the
Company, (iv) the Company has not paid or declared any dividend or other
distribution with respect to its stock, and (v) there has not been any
change, contingent or otherwise, in the direct or indirect control of the
Company nor, to the best knowledge of the Company, do there exist any
circumstances which would likely result in such a change.
15
(q) Neither the Company nor any officers or directors of the Company or
Affiliates (as defined in Rule 405 of the Rules and Regulations), have
taken or will take, directly or indirectly, prior to the termination of
the offering contemplated by this Agreement, any action designed to
stabilize or manipulate the price of any security of the Company, or which
has caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price
of any security of the Company, to facilitate the sale or resale of any of
the Shares.
(r) The Company has not incurred, directly or indirectly, any liability for a
fee, commission or other compensation on account of the employment of a
broker or finder in connection with the offering of the Shares
contemplated by this Agreement, except as contemplated by this Agreement
or as disclosed in the Registration Statement.
(s) The Company is not, and does not intend to conduct its business in a
manner in which it would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act.
(t) The Company has obtained, or prior to the Closing Date will obtain a
Lock-up Letter, from each of its officers and directors who owns shares of
Common Stock.
(u) No person or entity has the right to require registration of shares of
Common Stock or other securities of the Company because of the filing or
effectiveness of the Registration Statement.
(v) The Company has adequately insured its properties against loss or damage
by fire, maintain adequate insurance against liability for negligence and
maintain such other insurance as is usually maintained by companies
engaged in the same or similar businesses, including product liability
insurance.
(w) The Company has filed all federal, state and local tax returns required to
be filed (or have obtained extensions therefor) and have paid all taxes
shown on such returns and all assessments received by it to the extent
that payment has become due. The Company and its subsidiaries have made
adequate accruals for all taxes which may be owed by it but has not been
paid.
(y) Amper, Politziner & Xxxxxx P.A. who have certified certain financial
statements of the Company are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder.
6. Indemnification and Contribution:
(a) The Company agrees to indemnify and hold harmless you, your officers,
directors, partners, employees, agents and counsel, and each person, if any, who
controls you 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 (which shall include, for all purposes of this Section 6, but not be
limited to, attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation) as and when incurred arising out of, based upon, or
in connection with (i) any untrue statement or alleged untrue statement of a
material fact contained (1) in any Preliminary Prospectus, the Rule 430A
Prospectus, the Registration Statement, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, or (2) in any
application or other document or communication (in this Section 6 collectively
called an "application") executed by or on behalf of the
16
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Shares under the Blue
Sky or securities laws thereof (or the rules and regulations promulgated
thereunder) or filed with the Commission or any securities exchange or automated
quotation system; or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company as stated in
Section 6(b) by you for inclusion in any Preliminary Prospectus, the Rule 430A
Prospectus, the Registration Statement, of the Prospectus, or any amendment or
supplement thereto, or in any application, as the case may be, or (ii) any
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement. The foregoing agreement to indemnify shall be in
addition to any liability the Company may otherwise have, including liabilities
arising under this Agreement.
If any action is brought against you or any of your officers, directors,
partners, employees, agents or counsel, or any of your controlling persons
(each, an "indemnified party") in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified party
or parties shall promptly notify the Company in writing of the institution of
such action (but the failure so to notify shall not relieve the Company from any
liability it may have pursuant to this Section 6(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties 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 such indemnified party or parties, unless the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly employed
counsel satisfactory to such indemnified party or parties to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available to
it or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events such fees
and expenses shall be borne by the Company and the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties. Anything in this paragraph to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its written consent. The Company agrees promptly to notify you of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of the Shares, any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or any application.
(b) You agree to indemnify and hold harmless the Company, each director of
the Company, each officer of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and the
Company, to the same extent as the foregoing indemnity from the Company to you
in Section 6(a), but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Rule 430A Prospectus, the Registration
Statement, or the Prospectus (as from time to time amended and supplemented), or
any amendment or supplement thereto, or in any application, in reliance upon and
in conformity with written information furnished to the Company by you expressly
for inclusion in any Preliminary Prospectus, the Rule 430A Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be. For all purposes of this
Agreement, the public offering price, the amounts of the selling concession and
reallowance set forth in the Prospectus and the information in the third
paragraph under "Underwriting" constitute the only information furnished in
writing by or on your behalf expressly for inclusion in any Preliminary
Prospectus, the Rule 430A Prospectus, the Registra tion Statement or the
Prospectus (as from time to time amended or supplemented), or any amendment or
17
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based
upon any Preliminary Prospectus, the Rule 430A Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or any
application, and in respect of which indemnity may be sought against you
pursuant to this Section 6(c), you 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 indemnified parties, by the provisions of Section
6(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 6(a), 6(b) or 6(c)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act, or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed the Registration
Statement, and any controlling person of the Company), as one entity, and you,
as a second entity, shall contribute to the losses, liabilities, claims, damages
and expenses whatsoever to which any of them may be subject, so that you are
responsible for the proportion thereof equal to the percentage which the
aggregate underwriting discount set forth on the cover page of the Prospectus
represents of the initial public offering price of the Shares set forth on the
cover page of the Prospectus and the Company are responsible for the remaining
portion, in proportion to the net proceeds from the offering received by them;
provided, however, that if applicable law does not permit such allocation, then
other relevant equitable considerations such as the relative fault of the
Company, and you in the aggregate in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses shall also be considered.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company, or by you, and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement, alleged statement, omission or alleged omission. The
Company and you agree that it would be unjust and inequitable if the respective
obligations of the Company and you for contribution were determined by pro rata
or per capita allocation of the aggregate losses, liabilities, claims, damages
and expenses or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 6(d). No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this Section 6(d), each person, if
any, who controls you within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company, shall have the same
rights to contribution as the Company, subject in each case to the provisions of
this Section 6(d). Anything in this Section 6(d) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 6(d) is intended to supersede any right to contribution under the Act,
the Exchange Act, or otherwise.
7. Conditions of Your Obligations: Your obligations hereunder are subject
to the continuing accuracy of the representations and warranties of the Company
contained herein and in each certificate and document contemplated under this
Agreement to be delivered to you, as of the date hereof, as of the Closing Date,
and each Optional Closing Date, as the case may be, to the performance by the
Company of their respective obligations hereunder, and to the following
additional conditions:
18
(a) Notification that the Registration Statement has become effective shall be
received by you not later than 6:30 p.m., New York City time, on the date
of this Agreement or at such later date and time as shall be consented to
in writing by you. If the Company has elected to rely upon Rule 430A of
the Rules and Regulations, the price of the Shares and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the Rules and Regulations within the
pre scribed time period, and prior to the Closing Date the Company shall
have provided evidence satis factory to you of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements
of Rule 430A of the Rules and Regulations.
(b) The Commission shall not have issued a Stop Order and no Blue Sky or
securities authority of any jurisdiction shall have issued an order
suspending the registration or qualification of the Securities, and no
proceedings for such purpose shall have been instituted or shall be
pending, or to the knowledge of the Company, be threatened or contemplated
by the Commission or the Blue Sky or securities authorities of any such
jurisdiction.
(c) You shall have received an opinion, dated the Closing Date and
satisfactory in form and substance to your counsel from Xxxxxxxx, Xxxxxxxx
& Cresla, P.C., counsel to the Company, to the effect that:
(1) The Company is a corporation duly incorporated and validly existing
in good standing under the laws of Delaware, its jurisdiction of
incorporation, with full corporate power and authority to own its
property and conduct its business in the manner described in the
Prospectus. To the knowledge of such counsel, the Company has
obtained all necessary consents, authorizations, approvals, orders,
licenses, certificates, declarations and permits of and from, and
has made all required filings with, all federal, state, local and
other governmental authorities and all courts and other tribunals,
to own, lease, license and use its properties and assets and to
carry on its business in the manner described in the Prospec tus.
The Company is duly registered or qualified to do business as a
foreign corporation and is in good standing in each other
jurisdiction in which the ownership, leasing, licensing, or use of
its property and assets or the conduct of its business require such
registration or qualification.
(2) The authorized capital stock of the Company consists of 10,000,000
shares of Common Stock, of which 5,631,600 shares are outstanding.
Each outstanding share of Common Stock is validly authorized,
validly issued, fully paid, and nonassessable, with no personal
liability attaching to the ownership thereof, has not been issued
and is not owned or held in violation of any preemptive right of
shareholders. There is no commitment, plan or arrange ment to issue,
and no outstanding option, warrant or other right calling for the
issuance of, any share of capital stock of the Company or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of the Company,
except as disclosed in the Prospectus. There is outstanding no
security or other instrument which by its terms is convertible into
or exchangeable for capital stock of the Company.
(3) To the knowledge of such counsel, there is no litigation,
arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending or threatened, with respect to
the Company or any of its operations, business, property or assets,
except as disclosed in the Prospectus or such as individually or in
the aggregate do not now have and are not
19
expected to have a material adverse effect on the operations,
business, property, assets or condition (financial or otherwise) of
the Company. The Company is not in violation of, or in default with
respect to, any law, rule or regulation, or to the knowledge of such
counsel, after reasonable investigation, any order, judgment or
decree, except as disclosed in the Prospectus or such as
individually or in the aggregate do not now have and are not
expected to have a material adverse effect on the operations,
businesses, property, assets or condition (financial or otherwise)
of the Company; nor is the Company required to take any action in
order to avoid any such violation or default.
(4) Except as disclosed in the Prospectus, the Company is not now in
violation or breach of, or in default with respect to complying
with, any material provision of any indenture, mortgage, deed of
trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or license, or arrangement or
understanding which is material to the Company, and each such
indenture, mortgage, deed of trust, debenture, note or other
evidence of indebtedness, contract, agreement, instrument, lease or
license is in full and force and is the legal, valid and binding
obligation of the Company.
(5) The Company is not in violation or breach of, or in default with
respect to, any term of its Certificate of Incorporation or By-laws.
(6) The Company has all requisite corporate power and authority to
execute, deliver and perform this Agreement and the Underwriters'
Warrant. All necessary corporate proceedings of the Company have
been taken to authorize the execution, delivery, and performance by
the Company of this Agreement and the Underwriters' Warrant. This
Agreement and the Underwriters' Warrant have been duly authorized,
executed and delivered by the Company, constitute legal, valid, and
binding agreements of the Company, and (subject to applicable
bankruptcy, insolvency, reorganization and other laws affecting the
enforceability of creditors' rights generally, and the application
of equitable principles affecting the enforceability of remedies in
the nature of specific enforcement, and except as the enforceability
of the indemnification and contribution provisions of this Agreement
and the Underwriters' Warrant may be limited under applicable
securities laws) is enforce able as to the Company in accordance
with its terms. The Underwriters' Warrant has been duly authorized
by the Company and, when executed, issued and delivered by the
Company and paid for by you in accordance with the provisions of
this Agreement, will be a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with their
respective terms, except as may be limited by applicable bankruptcy,
insolvency, registration and other laws affecting the enforceability
of creditors' rights generally and the application of equitable
principles affecting the availability of remedies in the nature of
specific enforcement.
(7) All legally required proceedings in connection with the
authorization, issue and sale of the Shares by the Company in
accordance with the provisions of this Agreement have been taken,
and no consent, authorization, approval, order, license,
certificate, declaration or permit of or from, or filing with, any
governmental or regulatory authority, agency, board, bureau or other
body or is required for the execution, delivery or performance by
the Company of this Agreement and the Underwriters' Warrant (except
filings with and orders of the Commission pursuant to the Act which
have been made or received and matters under
20
Blue Sky or state securities laws, rules or regulations, as to which
such counsel need not express an opinion).
(8) No consent of any party to any material contract, agreement,
instrument, lease or license, or arrangement or understanding known
to such counsel, to which the Company is a party, or to which any of
the property or assets of the Company is subject, is required for
the execution, delivery or performance of this Agreement or the
Underwriters' Warrant; and the execution, delivery and performance
of this Agreement and the Underwriters' Warrant will not violate,
result in a breach of, conflict with, or (with or without the giving
of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement or understanding, result in
the creation or imposition of any lien, security interest, pledge,
charge or other encumbrance upon any of the property or assets of
the Company pursuant to the terms of any indenture, mortgage, deed
of trust, loan or credit agreement, lease or other agreement or
instrument to which the Company is a party or by which the Company
is bound or to which any of the property or assets of the Company is
subject, known to such counsel, or violate or result in a breach of
any term of the Certificate of Incorporation or By-laws of the
Company, or violate, result in a breach of, or conflict with any
law, rule, regulation, order, judgment or decree binding on the
Company or to which the operations, business, property or assets of
the Company are subject to.
(9) The Shares are validly authorized. Upon payment of the purchase
price thereunder in accordance with the provisions of this
Agreement, the Underwriters' Warrant will be duly delivered. The
Shares, when issued, paid for and delivered in accordance with the
provi sions of this Agreement, will be validly issued, fully paid
and nonassessable, without any personal liability attaching to the
ownership thereof, and will not be issued in violation of any
preemptive rights of shareholders. Upon payment of the purchase
price therefor in accordance with the provisions of this Agreement,
you will receive good title to the Shares and the Underwriters'
Warrant purchased by it from the Company, free and clear of all
Liens.
(10) The Underwriters' Warrant Shares are validly authorized and have
been duly and validly reserved for issuance, and when issued, paid
for and delivered upon exercise of the Underwriters' Warrant in
accordance with the provisions of the Underwriters' Warrant will be
validly authorized, validly issued, fully paid, and nonassessable,
with no personal liability attaching to the ownership thereof, and
will not have been issued in violation of any preemptive rights of
shareholders, and the holders of the Underwriters' Warrant Shares
will receive good title to them, free and clear of all Encumbrances.
(11) The Shares and the Underwriters' Warrant Shares conform to all
statements relating thereto contained in the Registration Statement
and the Prospectus.
(12) To the knowledge of such counsel, any contract, agreement,
instrument, lease or license required to be described in the
Registration Statement or the Prospectus has been properly described
therein. To the knowledge of such counsel, any contract, agreement,
instrument, lease, or license required to be filed as an exhibit to
the Registration Statement has been filed with the Commission as an
exhibit to or has been incorporated as an exhibit by reference into
the Registration Statement.
21
(13) The Shares are duly authorized for quotation on the SmallCap
National Market, subject to notice of issuance.
(14) To the knowledge of such counsel, no person or entity has the right
to require registration of shares of Common Stock or other
securities of the Company because of the filing or effectiveness of
the Registration Statement who has not waived such right.
(15) The Company is not an "investment company" by reason of its assets
and operations as defined in Section 3(a) of the Investment Company
Act.
(16) None of the shares of Common Stock issued by the Company prior to
the date hereof have been offered and sold by the Company in
violation of the Act or applicable Blue Sky or state securities laws
or rules or regulations. All shares of Common Stock outstanding as
of the date hereof have been duly authorized and validly issued, and
are fully paid and non-assessable, with no personal liability
attaching to the ownership thereof, and have not been issued in
violation of any preemptive rights of shareholders.
(17) The statements in the Prospectus under captions "Business", "Risk
Factors", "Use of Proceeds", "Management" and "Description of
Capital Stock" have been reviewed by such counsel and insofar as
such statements refer to descriptions of agreements, instruments or
leases, summarize the status of litigation or other proceedings, or
the provisions of orders, judgments or decrees, or constitute
statements of law, descriptions of statutes, rules or regulations,
or conclusions of law, such statements fairly present the
information called for and are accurate and complete in all material
respects.
(18) (except for liabilities and obligations incurred in the ordinary
course of business, to the knowledge of such counsel, after due
inquiry, there are no claims (absolute, accrued, contingent or
otherwise), except as disclosed in the Prospectus or such as
individually or in the aggregate do not have and are not expected to
have a material adverse effect upon the operations, businesses,
property, assets or condition (financial or otherwise) of the
Company; and
(19) The Registration Statement has become effective under the Act, and
to the knowledge of such counsel, no Stop Order has been issued and
no proceedings for that purpose have been instituted or threatened.
(20) The Registration Statement, any Rule 430A Prospectus, and the
Prospectus, and any amendment or supplement thereto (except for the
financial statements and the notes and schedules related thereto,
and other financial information and statistical data contained
therein or omitted therefrom, as to which such counsel need express
no opinion), comply as to form in all material respects with the
applicable requirements of the Act.
(21) Such counsel has participated in the preparation of the Registration
Statement and the Prospectus and any amendments or supplements
thereto, and in the course thereof participated in conferences with
officers and other representatives of the Company, representatives
of the independent certified public accountants for the Company and
your representatives at which the contents of the Registration
Statement and Prospectus and relat ed matters were discussed and,
although such counsel is not passing upon and does not
22
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement and
Prospectus, or any amendment or supplement thereto, on the basis of
the foregoing, no facts have come to the attention of such counsel
which lead them to believe that either the Registration Statement or
any amendment thereto at the time such Registration Statement or
such amendment became effective or the Prospectus as of its date or
any amendment or supplement thereto as of its date contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such
counsel need express no comment with respect to the financial
statements, and the notes and schedules related thereto, and other
financial information and statistical data included in the
Registration Statement or Prospectus).
(22) To the knowledge of such counsel, since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been set forth in such an
amendment or supplement.
In rendering such opinion, counsel for the Company may rely (i) as to
matters involving the application of laws other than the laws of the United
States, to the extent counsel for the Company deems proper and to the extent
specified in such opinion, upon an opinion or opinions of local counsel (in form
and substance satisfactory to your counsel) acceptable to your counsel, familiar
with the applicable laws, in which case the opinion of counsel for the Company
shall state that the opinion or opinions of such other counsel are satisfactory
in scope, form and substance to counsel for the Company and that reliance
thereon by counsel for the Company is reasonable; (ii) as to matters of fact, to
the extent they deem proper, on certif icates of responsible officers of the
Company; and (iii) to the extent they deem proper, upon written state ments or
certificates 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 state ments or certificates shall be delivered
to your counsel.
(d) You shall have received letters addressed to you and dated the date hereof
and the Closing Date from Amper, Politzner & Xxxxxx, LLP., independent
certified public accountants for the Company, addressed to you, and in
form and substance satisfactory to you, to the effect that:
(1) Such accountants are independent public accountants as required by
the Act and the rules and regulations of the Commission thereunder
and no information need be supplied with re spect to them in answer
to Item 13 of Form SB-2.
(2) In their opinion, the financial statements and related notes of the
Company examined by them, at all dates and for all periods referred
to in their report therein, and included in the Registration
Statement and the Prospectus on their authority as experts comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations of the
Commission promulgated thereunder.
(3) On the basis of limited procedures not constituting an audit,
including a reading of the latest available unaudited interim
financial statements of the Company and the financial data and
accounting records of the Company, inquiries of officials of the
Company and others re sponsible for financial and accounting
matters, a reading of the minute books of the Compa ny, including
without limitation the minutes (if any) of meetings or consents in
lieu of meetings
23
of the shareholders and of the Board of Directors (and any
committees thereof) of the Company, and other specified procedures
and inquiries requested by you, if any, nothing has come to their
attention which causes them to believe that:
(i) except as disclosed in or contemplated by the Registration
Statement and the Prospectus, during the period from the date
of the last audited balance sheet of the Company included in
the Registration Statement and Prospectus to a specified date
not more than five (5) days prior to the date of such letter,
there were any decreases, as compared with the corresponding
period of the preceding year, in net sales, cost of goods
sold, operating, selling, general and administrative expenses,
earnings from operations, the total or per share amounts of
net earnings, or the weighted average number of shares
outstanding;
(ii) except as disclosed in or contemplated by the Registration
Statement and the Prospectus, during the period from the date
of the last audited balance sheet of the Company included in
the Registration Statement and Prospectus to a specified date
not more than five (5) days prior to the date of such letter,
there has been any change in the capital stock or other
securities of the Company or any payment or declaration of any
dividend or other distribution in respect thereof or in
exchange therefor, or any increase in the long-term debt of
the Company or any decrease in the net current assets or net
assets of the Company as compared with the amounts shown on
the last audited balance sheet of the Company, included in the
Registra tion Statement and the Prospectus (other than in the
ordinary course of business); and
(iii) On the basis of their examinations referred to in their report
and consent included in the Registration Statement and
Prospectus and the indicated procedures and inquiries referred
to above, nothing has come to their attention which, in their
judg ment, would cause them to believe or indicate that the
financial statements and related notes and schedules of the
Company included in the Registration Statement and Prospectus
do not present fairly the financial position and results of
operations of the Company, as at the dates and for the periods
indicated, in conformity with generally accepted accounting
principles applied on a consistent basis, and are not in all
material respects a fair presentation of the information
purported to be shown.
(4) In addition to their examination referred to in their report
included in the Registration Statement and the Prospectus and the
inquiries and limited procedures referred to in clause (ii) of this
Section 7(d), they have performed other procedures, not constituting
an audit, with respect to certain numerical data, percentages,
dollar amounts and other financial information appearing in the
Registration Statement and the Prospectus, which are derived from
the general accounting records of the Company, and have compared
certain of such data and information with the accounting records of
the Company and found them to be in agreement.
(5) Such other matters as you may have reasonably requested.
(e) The representations and warranties of the Company in this Agreement shall
be true and correct with the same effect as if made on and as of the
Closing Date and the Company shall have complied with
24
all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Date.
(f) The Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be
stated therein in accordance with the Act and the Rules and Regulations,
and shall in all material respects conform to the requirements thereof,
and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(g) There shall have been, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, no material
adverse change in the business, property, condition (financial or
otherwise), results of operations, capital stock, long-term or short-term
debt or general affairs of the Company, except changes which the
Registration Statement and the Prospectus indicate might occur after the
effective date of the Registration Statement, and the Company shall not
have incurred any material liabilities or entered into any agreements not
in the ordinary course of business, except as disclosed in the
Registration Statement and the Prospectus.
(h) No action, suit or proceeding, at law or in equity, shall be pending or
threatened against the Company which would be required to be set forth in
the Registration Statement, and no proceedings shall be pending or
threatened against the Company before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an
unfavorable decision, ruling or finding would have a materially adverse
affect on the business, property, condition (financial or otherwise),
results of operations or general affairs of the Company.
(i) The Company shall have furnished to you or caused to be furnished to you
at the Closing Date, certificates of the President and chief financial
officer of the Company, in form and substance satisfactory to you, as to
the accuracy of the representations and warranties of the Company, herein
at and as of the Closing Date and as to the performance by the Company of
all its obligations hereunder to be performed at or prior to the Closing
Date and the Company shall have furnished to you a certificate of the
President and chief financial officer of the Company satisfactory to you
as to the matters set forth in Sections 7(a) and (b) above.
(j) The NASD, upon review of the terms of the public offering of the Shares,
shall have indicated that it has no objections to the underwriting
arrangements pertaining to the sale of the Shares and the participation by
you in the sale of the Shares.
(k) Prior to or on the Closing Date, the Company shall have executed and
delivered the Underwriters' Warrant to you.
(l) Prior to or on the Closing Date, the Company shall have delivered to you
executed copies of the Lock-up Letters.
(m) Subsequent to the date hereof, there shall not have occurred any change,
or any development involving a prospective change, in or affecting
particularly the business or financial affairs of the Company which would
materially and adversely affect the market for the Shares.
25
(n) Subsequent to the date hereof, no executive officer of the Company listed
as such in the Prospectus shall have died, become physically or mentally
disabled, resigned or have been removed or discharged.
(o) The Company shall furnish you with such further certificates and documents
as you or your counsel shall have reasonably requested.
All opinions, certificates, letters and other documents required by this
Section 7 to be delivered to you by the Company will be in compliance with the
provisions hereof only if they are satisfactory in form and substance to you and
your counsel. The Company will furnish you with such conformed copies of such
opinions, certificates, letters and other documents as you shall reasonably
request.
(p) Upon the exercise, in whole or in part, by you of the option to purchase
the Additional Shares, referred to in Section 2 hereof, your obligations
to purchase and pay for the Additional Shares will be subject to the
continuing accuracy of the representations and warranties of the Company
contained herein and in each certificate and document contemplated under
this Agreement to be delivered to you, as of the date hereof and as of
each Optional Closing Date, to the performance by the Company of its
obligations hereunder, and the following additional conditions:
(1) The Registration Statement shall remain effective at the Optional
Closing Date, and no Stop Order shall have been issued by the
Commission and no proceedings for that purpose shall have been
instituted or shall be pending, or to your knowledge or the
knowledge of the Company, shall be contemplated by the Commission,
and any reasonable request on the part of the Commission for
additional information shall have been complied with to the satis
faction of Xxxxxx & Xxxxx, your counsel.
(2) You shall have received an opinion, dated the Optional Closing Date
and satisfactory in form and substance to counsel to you, from
Xxxxxxxx, Xxxxxxxx Cresla, P.C., counsel to the Company, which
opinion shall be substantially the same in scope and substance as
the opinion furnished to you on the Closing Date pursuant to Section
7(c) hereof, except that such opinion, where appropriate, shall
cover the Additional Shares.
(3) You shall have received a letter in form and substance satisfactory
to you from Deloitte & Touche LLP, independent certified public
accountants for the Company, dated the Optional Closing Date and
addressed to you confirming the information in their letter referred
to in Section 7(d) hereof and stating that nothing has come to their
attention during the period from the ending date of their review
referred to in said letter to a date not more than five (5) days
prior to the Optional Closing Date, which would require any change
in said letter if it were required to be dated the Optional Closing
Date.
(4) You shall have received a certificate of the President and chief
financial officer of the Company, dated the Optional Closing Date,
in form and substance satisfactory to you, substantially the same in
scope and substance as the certificate furnished to you on the
Closing Date pursuant to Section 7(i) hereof.
8. Effective Date of Agreement; Termination.
26
(a) This Agreement shall become effective at 9:30 A.M., New York City
time, on the first full busi ness day following the day on which the
Registration Statement becomes effective or at the time of the initial public
offering by you of the Shares, whichever is earlier. The time of the initial
public offering 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 Shares or the
time, after the Registration Statement becomes effective, when the Shares are
first released by you for offering by you or dealers by letter or telegram,
whichever shall first occur. You, or the Company may prevent this Agreement from
becoming effective without liability of any party to any other party, except as
noted below in this Section 8, by giving the notice indicated in Section 8(c)
before the time this Agreement becomes effective.
(b) In addition to the right to terminate this Agreement pursuant to
Section 7 hereof by reason of the Company's failure, refusal or inability to
perform all obligations and satisfy all conditions on their part to be performed
or satisfied hereunder prior to the Closing Date or Optional Closing Date, as
the case may be, you shall have the right to terminate this Agreement at any
time prior to the Closing Date or any Optional Closing Date, as the case may be,
by giving notice to the Company, if the Company shall have sustained a material
loss or material adverse interference with its business or properties from fire,
flood, accident, hurricane, earthquake, theft, sabotage, or other calamity or
malicious act, including the death or disability of Xxxxxx X. Xxxxxxx, whether
or not covered by insurance, or from any labor dispute or any court or
governmental action, order or decree, of such a character as to have a material
adverse effect with the conduct of the business and operations of the Company;
or if there shall have been a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange, the American
Stock Exchange or in the over-the-counter market; or if a banking moratorium has
been declared by a state or federal authority; or if there shall have been an
outbreak of major hostilities between the United States and any foreign power,
or any other insurrection, armed conflict or national calamity, which in the
judgment of a majority-in-interest of the underwriters, makes it impracticable
or inadvisable to proceed with the offering, sale or delivery of the Firm Shares
or the Additional Shares, as the case may be.
(c) If you elect to prevent this Agreement from becoming effective as
provided in this Section 8, or to terminate this Agreement pursuant to Section 7
or this Section 8, you shall notify the Company promptly by telephone,
telecopier, telex, or telegram, confirmed by letter. If, as so provided in this
Section 8, the Company elects to prevent this Agreement from becoming effective,
the Company shall notify you promptly by telephone, telecopier, telex, or
telegram, confirmed by letter.
(d) Anything in this Agreement to the contrary notwithstanding other than
Section 8(e), if this Agreement shall not become effective by reason of an
election pursuant to this Section 8 or if this Agreement shall terminate or
shall otherwise not be carried out within the time specified herein by reason of
any failure on the part of the Company to perform any covenant or agreement or
satisfy any condition of this Agreement by it to be performed or satisfied, the
sole liability of the Company to you, in addition to the obligations the Company
assumed pursuant to Section 4(g), will be to reimburse you for such
out-of-pocket expenses (including the fees and disbursements of their counsel)
as shall have been incurred by them in connection with this Agreement or the
proposed offer, sale, and delivery of the Shares, and upon demand the Company
agrees to pay promptly the full amount thereof to you. pay promptly the full
amount thereof to you.
(e) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 4(b), 4(g), 6, 10(b) and 10(c) shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
27
9. Substitution of Underwriters.
If any one or more of the Underwriters shall fail or refuse to purchase
any of Shares which it or they have agreed to purchase hereunder, and the number
of Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate number of
Shares, the other Underwriters shall be obligated, severally, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase, in the proportions which the number of Shares which they
have respectively agreed to purchase pursuant to Section 2 hereof bears to the
aggregate number of Shares which all such non-defaulting Underwriters have so
agreed to purchase or in such other proportions as you may specify, provided
that in no event shall the maximum number of Shares which any Underwriter has
become obligated to purchase pursuant to Section 2 hereof be increased pursuant
to this Section 9 by more than one-ninth of such number of Shares, without the
written consent of such Underwriter. If any Underwriter or Underwriters shall
fail or refuse to purchase any Shares and the aggregate number of Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase exceeds one-tenth of the aggregate number of Shares and arrangements
satisfactory to you and the Company for the purchase of such Shares are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company for the
purchase or sale of any Shares under this Agreement. In any such case either you
or the Company shall have the right to postpone the Closing Date, but in no
event for longer than five business days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. Miscellaneous: (a) Notices required to be in writing shall be mailed
or delivered (i) to the Company at the Company's office at 000 Xxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000 Attention: Xxxxxx Xxxxxxx, with copies to Xxxxxxxx,
Xxxxxxxx & Cresla, P.C., 000 Xxxx Xxxx Xxxx, X.X. Xxx 000, Xxxxxxxxxx, Xxx
Xxxxxx 00000, Attention: Xxxx X. Xxxxxx, Esq. or (ii) to you, at the office of
Hornblower & Weeks, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxx Xxxxxxxxx and Xxxxxx & Xxxxx, 00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxxx, Esq., and shall be
deemed given when received. Any notice not required to be in writing, including
but not limited to notices under Section 7(a) or 8 hereof, may be made by telex,
telecopier or telephone and shall be deemed given at the time the telex, or
telecopied communication is received or the telephone call is made, but if so
made shall be subsequently confirmed in writing.
(b) The representations, warranties, covenants and agreements of the
Company, and the indemnity and contribution agreements, contained in Sections 4,
5 and 6 of this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of you, the Company or any of its
officers or directors or any controlling persons of you, or the Company and will
survive acceptance of and payment for any of the Shares and the termination of
this Agreement.
(c) This Agreement has been and is made solely for the benefit of you and
the Company and the controlling persons, directors and officers referred to in
Section 6 hereof and their respective successors and assigns, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" as used in this Agreement shall not include a
purchaser, as such purchaser, of Shares from you.
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(d) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, applicable to contracts made and to be
performed entirely with such State, without regard to conflict of laws
provisions thereof.
Please confirm that the foregoing correctly sets forth the agreement among
the Company and you.
Very truly yours,
STRATUS SERVICES GROUP INC.
By:
--------------------------------
Xxxxxx X. Xxxxxxx
Confirmed, as of the date first above mentioned.
HORNBLOWER & WEEKS, INC.
By:
------------------------
Xxxx Xxxxxxxxx, CEO
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SCHEDULE I
Underwriting Agreement, dated _____________, 1999
Underwriter Number of Firm Shares
----------- ---------------------
Hornblower & Weeks, Inc................................
Total.................................................. 1,500,000 shares
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