EXHIBIT 1.1
TRANS ENERGY, INC.
UNDERWRITING AGREEMENT
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New York, New York
____________, 1996
X. X. Xxxx, Inc.
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, Trans Energy, Inc., a Nevada corporation (the
"Company"), hereby confirms its agreement with X. X. Xxxx, Inc. (being referred
to herein variously as "you" or the "Underwriter"), regarding the Company's sale
of shares ("Shares")of the Company's Common Stock, par value $.001 per share
("Common Stock") and redeemable common stock purchase warrants ("Redeemable
Warrants") as follows:
1. INTRODUCTION. The Company proposes to issue and sell to you _______
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Shares and _______Redeemable Warrants. The Shares and the Redeemable Warrants
are being offered separately and are separately transferable and are hereinafter
sometimes referred to collectively as the "Firm Securities." Each Redeemable
Warrant is exercisable from , 1997 until , 2001 at an
initial exercise price of $_____ for one (1) share of Common Stock. Upon your
request, as provided in Section 4 of this Agreement, the Company shall also
issue and sell to you up to an additional _______ Shares and ______ Redeemable
Warrants for the purpose of covering over-allotments in the sale of the Firm
Securities. Such _______ Shares and ______ Redeemable Warrants are hereinafter
referred to as the "Option Securities." The Option Securities and the Firm
Securities are hereinafter referred to as the "Securities."
The Company also proposes to issue and sell to you, pursuant to the terms
of the Underwriter's Warrant Agreement, warrants (the "Underwriter's Warrants")
for the purchase of an additional ______ Shares and ______ Redeemable Warrants
equal to ten (10%) percent of the Firm Securities. The Redeemable Warrants
issuable on the exercise of the Underwriter's Warrants shall be exercisable at a
price equal to 165% above the offering price of the Shares and Redeemable
Warrants sold in the public offering. The Securities issuable upon exercise of
the
Underwriter's Warrants are hereinafter sometimes referred to as the
"Underwriter's Securities." The shares of Common Stock issuable upon exercise
of the Redeemable Warrants are hereinafter sometimes referred to as the
"Redeemable Warrant Shares" and the shares issuable upon exercise of the
Underwriter's Warrants are hereinafter sometimes referred to as the "Warrant
Shares." The Shares, the Redeemable Warrants, the Underwriter's Warrants, the
Underwriter's Securities the Redeemable Warrant Shares and the Warrant Shares
are more fully described in the Registration Statement and the Prospectus
referred to below.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
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and warrants to the Underwriter with respect to itself and its subsidiaries
(collectively, with respect to these representations, the "Company") that:
a. The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, and an amendment or amendments thereto,
including any related preliminary prospectus (the "Preliminary Prospectus"), for
the registration of the Shares, the Redeemable Warrants, and the Redeemable
Warrant Shares under the Securities Act of 1933 as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations (the "Regulations") of the Commission under the Act. The Company
will promptly file a further amendment to said registration statement, which has
been similarly prepared, in the form heretofore delivered to you and will not,
before the registration becomes effective, file any other amendment thereto to
which you shall have reasonably objected after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement," and the form of prospectus, in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." Simultaneously with this
Offering, the Company has filed the Registration Statement with respect to
1,757,500 Redeemable Warrants and 1,757,500 shares of Common Stock underlying
such Redeemable Warrants for future sale by certain current security holders of
878,750 warrants ("Bridge Warrants") issued in connection with the Company's
December 1995 and March 1996 bridge financings, each of which Bridge Warrants
automatically will be converted into two Redeemable Warrants upon the
effectiveness of the Registration Statement without any further action by, or
cost to, the holders thereof.
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b. The Company agrees to allow the Underwriter certain demand registration
rights and piggyback registration rights with respect to the securities
underlying the Underwriters' Warrant if the Company should file a registration
statement under the Securities Act at any time within the three (3) year period
beginning one (1) year and ending four (4) years from the effective date of the
Registration Statement filed hereunder.
c. When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date, if any (as such term is defined in
subsection 3(d) hereof), the Registration Statement and the Prospectus will
contain all material statements which are required to be stated therein in
accordance with the Act and the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the registration statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will comply in all
material respects with the applicable provisions of the Act and the Regulations
and did not and will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The representation and warranty made in this
subsection (b) does not apply to statements made or statements omitted in
reliance upon and in conformity with written information furnished to the
Company with respect to the Underwriter by the Underwriter expressly for use in
the Registration Statement or prospectus or any amendment thereof or supplement
thereto.
d. This Agreement, the Underwriter's Warrant Agreement and the Consulting
Agreement (as defined in Section 2(ff) hereof) have been duly and validly
authorized by the Company, and this Agreement constitutes and the Underwriter's
Warrant Agreement and Consulting Agreement, when executed and delivered pursuant
to this Agreement, will (assuming due execution by the Underwriter) each
constitute a valid and binding agreement of the Company, enforceable against the
Company in accordance with its respective terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification
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provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. The Shares,
the Redeemable Warrants and the Underwriter's Warrants to be issued and sold by
the Company pursuant to this Agreement, and the Underwriter's Securities
issuable upon exercise of the Redeemable Warrants and payment therefor, have
been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Shares, the
Underwriter's Warrants, the Redeemable Warrants the Warrant Shares and the
Underwriter's Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Shares, the Redeemable Warrants,
the Warrant Shares, the Underwriter's Warrants and the Underwriter's Securities
has been duly and validly taken. The Underwriter's Warrants and the Redeemable
Warrants constitute valid and binding obligations of the Company, enforceable in
accordance with their respective terms, to issue and sell, upon exercise in
accordance with the terms thereof, the number and type of the Company's
securities called for thereby; except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and (ii) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to the equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought.
e. All issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of
any security of the Company or similar contractual rights granted by the
Company.
f. The Company has good and marketable title to, or valid and enforceable
leasehold estate in, all items of real and personal property stated in the
Prospectus to be owned or leased by it, free and clear of all liens,
encumbrances, claims, security interests, defects and restrictions of any
material nature whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable.
g. There is no action, suit, proceeding, inquiry, investigation,
litigation or governmental proceeding pending or threatened against, or
involving the properties or business of
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the Company which might materially and adversely affect the financial position,
or prospectus, or value or the operation of the properties or the business of
the Company or any of the Subsidiaries, except as referred to in the Prospectus.
h. All contracts and other documents required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement have been described in the Registration Statement or the
Prospectus or filed with the Commission as Exhibits to the Registration
Statement, as required.
i. The financial statements of the Company, together with the related
notes, included in the Registration Statement and Prospectus fairly present the
financial position and the results of operations of the Company at the dates and
for the periods to which they apply; and such financial statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods involved. There has been no
material adverse change in financial condition or results of operations of the
Company since the date of the financial statements included in any Preliminary
Prospectus or the Prospectus.
x. Xxxxx, Xxxxxx & Company, whose report is filed with the Commission as a
part of the Registration Statement, are independent accountants as required by
the Act and the Regulations.
k. The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Nevada. Except as
otherwise set forth in the Prospectus, the Company does not own an interest in
any corporation, partnership, joint venture, trust or other business entity.
The Company is duly qualified and licensed and in good standing as a foreign
corporation in each jurisdiction in which operations require such qualification
or licensing. The Company has all requisite corporate power and authority, and
has all necessary authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and bodies to own or
lease its properties and conduct its business as described in the Prospectus,
and the Company is and has been doing business in compliance with all such
material authorizations, approvals, orders, licenses, certificates and permits
and all federal, state and local laws, rules and regulations. The disclosures
in the Registration Statement concerning the effects of federal, state and local
regulations on the Company's business as currently conducted and as contemplated
are correct in all material respects and do not omit to state a material fact.
The Company has all corporate power and authority to enter into this Agreement
and to carry out the provisions and conditions hereof, and all consents,
authorizations, approvals
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and orders required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the issuance of the Shares, the Redeemable Warrants,
the Underwriter's Securities, pursuant to this Agreement, the Warrant
Agreement (as defined in Section 2(y) hereof) and the Underwriter's Warrant
Agreement, and as contemplated by the Prospectus, except with respect to
applicable federal and state securities laws.
l. There has been no material adverse change or any development involving
a prospective change in the condition or prospects of the Company, financial or
otherwise, from that on the latest dates as of which such conditions or
prospects are set forth in the Prospectus; and the outstanding debt, the
property and the business of the Company conforms in all material respects to
the descriptions thereof contained in the Registration Statement and Prospectus.
m. The Shares, the Redeemable Warrants, the Underwriter's Warrants, the
Warrant Shares, the Underwriter's Securities and other securities issued or
issuable by the Company conform in all respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus.
n. No default exists in the due performance and observance of any term,
covenant or condition of any license, contract, indenture, mortgage, deed of
trust, note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be bound
or to which any of the property or assets of the Company is subject.
o. The Company is not in violation of any term or provision of its
respective Certificate of Incorporation or By-Laws. Neither the execution and
delivery of this Agreement, nor the issue and sale of the Shares, the Redeemable
Warrants, the Underwriter's Warrants, the Underwriter's Securities or the
Warrant Shares, nor the consummation of any of the transactions contemplated
herein, nor the compliance by the Company with the terms and provisions hereof
has conflicted with or will conflict with, or has resulted in or will result in
a breach of, any of the terms and provisions of, or has constituted or will
constitute a default under, or has resulted in or will result in the creation or
imposition of any lien, charge or encumbrance upon the property or assets of the
Company, pursuant to the terms of any indenture, mortgage, deed of trust, note,
loan or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
property or assets of
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the Company is subject; nor will such action result in any violation of the
provisions of the respective Certificate of Incorporation or the By-Laws of the
Company or any contract or agreement, or any statute or any order, rule or
regulation applicable to the Company or any other regulatory authority or other
governmental body having jurisdiction over the Company.
p. All taxes which are due from the Company have been paid in full, and
the Company has no tax deficiency or claim outstanding, proposed or assessed
against it.
q. Subsequent to the respective dates as of which information is given in
the most recently circulated Preliminary Prospectus included as a part of the
Registration Statement, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; (ii) entered
into any transaction other than in the ordinary course of business; or (iii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.
r. The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus or part thereof.
s. On the effective date of the Registration Statement, (i) the
authorization of capital stock of the Company is as set forth in the
Registration Statement, and (ii) not more than an aggregate 4,167,427 shares of
Common Stock shall be issued and outstanding including warrants, options,
securities convertible directly or indirectly into shares of Common Stock or
such equivalent securities.
t. On or before the effective date of the Registration Statement, the
Company shall have caused to be duly executed and shall have in its possession
and make available to you for review, legally binding and enforceable agreements
pursuant to which each officer and director and principal shareholder of the
Company has agreed that for (a) a period of six (6) months following such
effective date no such person will sell, any such shares or other dispose of any
beneficial interest therein, whether pursuant to Rule 144 of the Act or
otherwise, except with the prior written consent of the Underwriter and every
three (3) months thereafter for an additional eighteen (18) months Messrs
Bagley, Woodburn, and Xxxxxxx, and Black & Company may sell in the aggregate a
number of shares equal to 1% of the public float or (b) such other agreement
with respect to the sale of such capital stock as may be required by state "blue
sky" laws in order to qualify the Offering of the securities in any such state.
The Company will
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cause the Transfer Agent to xxxx an appropriate legend on the face of stock
certificates representing all of such securities.
u. Except for the Underwriter's Warrants, no holders of any securities of
the Company or of any options, warrants or convertible or exchangeable
securities of the Company exercisable for or convertible or exchangeable for
securities of the Company have the right to include any securities issued by the
Company in the Registration Statement or any registration statement to be filed
by the Company within thirteen (13) months of the date hereof or to require that
the Company file a registration statement under the Act during such thirteen
(13) month period.
v. Except as described in the Prospectus, there are no claims, payments,
issuances, arrangements or understandings for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments or
issuance with respect to the Company that may affect the Underwriter's
compensation, as determined by the National Association of Securities Dealers,
Inc. ("NASD").
w. The Common Stock and the Redeemable Warrants are eligible for quotation
on the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ").
x. The Company has entered into a warrant agreement substantially in the
form filed as Exhibit 1.3 to the Registration Statement with Interstate Transfer
Co. in form and substance satisfactory to the Underwriter, with respect to the
Redeemable Warrants providing for the payment of commissions contemplated
therein. The Warrant Agreement has been duly and validly authorized by the
Company and, assuming due execution by the parties thereto other than the
Company, constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
8
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
y. Neither the Company nor any of its respective officers or directors,
nor to the knowledge of the Company, any of its respective employees, agents or
any other person acting on behalf of any of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit (other
than legal price concessions to customers in the ordinary course of business) to
any customer, supplier, employee or agent of a customer, supplier, or official
or governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or foreign) or
other person who was, is, or may be in a position to help or hinder the business
of the Company (or assist it in connection with any actual or proposed
transaction) which (i) might subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, might have had a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
z. The Company owns or possesses the requisite licenses or rights to use
all trademarks, service marks, service names, trade names, patents and patent
applications, copyrights and other rights (collectively the "Intangibles")
described as owned by the Company in the Registration Statement. There is no
claim or action by any person pertaining to, or proceeding pending or threatened
which challenges the exclusive right of the Company with respect to any
Intangibles used in the conduct of the Company's business except as described in
the Prospectus. To the Company's knowledge, the Company's current products,
services and processes do not infringe on any Intangibles held by any third
party.
aa. Except as set forth in the Registration Statement, the Company is not
under any obligation to pay royalties or fees of any kind whatsoever to any
third party with respect to technology it has developed, uses, employs or
intends to use or employ.
bb. The Company has generally enjoyed a satisfactory employer/employee
relationship with its employees and is in compliance in all material respects
with all federal, state and local laws and regulations respecting the employment
of its employees and employment practices, terms and conditions of employment
and wages and hours relating thereto. There are no
9
pending investigations involving the Company by the U.S. Department of Labor, or
any other governmental agency responsible for the enforcement of such federal,
state or local laws and regulations. To the Company's knowledge, there is no
unfair labor practice charge or complaint against the Company pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company, or
any predecessor entity, and none has occurred. No representation question
exists respecting the employees of the Company and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company.
No grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company.
cc. The Company, nor, to its knowledge, any of their employees, directors
or stockholders has taken or will take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected to
cause or result in, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities.
dd. The Company does not maintain, sponsor or contribute to any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan" or a "multiemployer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37), respectively of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does not
presently or at any time, maintains or contributes to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406a of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), which could subject the Company to any tax penalty on
prohibited transactions and which has not adequately been corrected. Each ERISA
Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan which is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multiemployer
plan."
ee. Any certificate signed by any duly authorized officer of the Company
and delivered to you or to your counsel shall be deemed a representation and
warranty by the Company to the Underwriter as to the matters covered thereby.
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ff. The Company and the Underwriter have entered into a financial advisory
and consulting agreement ("Consulting Agreement"), in form and substance
satisfactory to the Underwriter, substantially in the form filed as Exhibit
_____ to the Registration Statement, pursuant to which the Company shall engage
the Underwriter as management and financial consultants to the Company for a two
(2) year period commencing as of the closing of the Offering at a fee equal to
$5,000 per month. The fee for the first year of $60,000 shall be payable at the
closing with a monthly fee of $5,000 payable monthly commencing one month after
the year anniversary of the closing. The Consulting Agreement further provides
for the payment to the Underwriter of certain other fees if the Company were to
undertake certain transactions.
gg. Except as set forth in the Prospectus, no officer, director or
stockholder of the Company or any "affiliate" or "associate" (as these terms are
defined in Rule 405 promulgated under the Regulations) of any such person or
entity or the Company, has or has had, either directly or indirectly, (i) an
interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company any
goods or services, or (ii) a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected. Except as
set forth in the Prospectus under "Certain Transactions," there are no existing
material agreements, arrangements, understandings or transactions, or proposed
material agreements, arrangements, understandings or transactions, between the
Company, and any officer, director, or Principal Stockholder of the Company, or
any affiliate or associate of any such person or entity.
hh. The minute books of the Company have been made available to counsel to
the Underwriter and contain a complete summary of all meetings and actions by
unanimous consent of directors and stockholders since the time of incorporation
and reflect all transactions referred to in such minutes accurately in all
material respects.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND UNDERWRITER'S
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WARRANTS.
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a. On the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, the Company agrees to
sell to the Underwriter _______ Shares and _______ Redeemable Warrants and the
Underwriter agrees to purchase from the Company such _______ Shares and _______
Redeemable Warrants at a purchase price of $____ per share and $___ per
Redeemable Warrant. The Underwriter is entitled to a selling commission or
discount of a maximum of
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ten (10%) of the offering price of the Securities offered to the public.
b. On the Closing Date the Company shall issue and sell to the
Underwriter, a Warrant at a total purchase price of $10.00, which warrants shall
entitle the holders thereof to purchase an amount equal to ten percent (10%) of
the number of Firm Securities sold to the public. The Underwriter's Warrants
shall be exercisable for a period of five (5) years commencing one (1) year from
the effective date of the Registration Statement at an initial exercise price
equal to 165% above the offering price of the securities sold in the public
offering. The Underwriter's Warrant and underlying securities may not be
transferred by the Underwriter during the life of the Underwriter's Warrant
except to officers and directors of the Underwriter and to members of the
selling group of underwriters and such members' respective principals. The
Underwriter's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 4.3 to the Registration Statement.
c. In addition, upon not less than two (2) days' notice from the
Underwriter to the Company for a period of forty-five business days from the
effective date of the Registration Statement, the Company agrees to sell to the
Underwriter all or any part of the Option Securities to be issued and sold by
the Underwriter hereunder each at a purchase price of $5.00 per Share and $.10
per Redeemable Warrant. Delivery of the Option Securities shall be made
concurrently with the tender of payment therefor on a Closing Date, if any.
Option Securities may be purchased by the Underwriter only for the purpose of
covering over-allotments in the sale of the Firm Securities, and the Underwriter
shall have no obligation to make any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
d. Payment for the Underwriter's Warrants and the Securities shall be made
on the Closing Date. Payment for the Securities shall be made on the Closing
Date by certified or bank cashier's check in New York Clearing House funds,
payable to the order of the Company at the offices of the Underwriter or at such
other place as shall be agreed upon by the Underwriter and the Company or by
wire transfer, upon delivery of certificates (in form and substance satisfactory
to the Underwriter) representing the Securities to the Underwriter for the
account of the Underwriter. Delivery and payment for the Securities shall be
made at 10:00 A.M. New York time, on or before the third business day following
the closing of the public offering or at such earlier time as the Underwriter
shall determine, or at such other time as shall be agreed upon by the
Underwriter and the Company. The hour and date of delivery and payment for the
Securities are referred to herein as the "Closing Date". The Securities shall be
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registered in such name or names and in such authorized denominations as the
Underwriter may request in writing at least two (2) full business days prior to
the Closing Date. The Company will permit the Underwriter to examine and
package the Securities for delivery, at least one (1) full business day prior to
the Closing Date.
d. The Company shall not be obligated to sell or deliver the
Securities except upon tender of payment by the Underwriter for all the Firm
Securities.
4. PUBLIC OFFERING. The Underwriter is to make a public offering of
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the Securities as it may determine. The Securities are to be initially offered
to the public at the offering price set forth on the cover page of the
Prospectus (such price being hereinafter called the "public offering price").
The Underwriter may from time to time increase or decrease the public offering
price after the distribution of the Securities has been completed to such extent
as the Underwriter, in its sole discretion deems advisable. The Underwriter may,
at its own expense, enter into one or more agreements as the Underwriter, in its
sole discretion, deems advisable, with one or more broker-dealers who shall act
as dealers in connection with such public offering.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees that
------------------------
it will:
a. Use its best efforts to cause the Registration Statement to
become effective and will notify the Underwriter immediately and confirm the
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto becomes effective, (ii) of the issuance by the Commission of
any stop order or of the initiation, or the threatening, of any proceeding for
that purpose, (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Shares, the
Redeemable Warrants, the Warrant Shares or the Underwriter's Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose, and (iv) of the receipt of any comments from
the Commission. If the Commission or any state securities commission shall enter
a stop order or suspend such qualification at anytime, the Company will make
every reasonable effort to obtain promptly the lifting of such order.
b. The Company will file the Prospectus (in form and substance
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and consented to by you, pursuant to Rule
424(b)(4)) not later than the Commission's close of business on the earlier of
(i) the
13
second business day following the execution and delivery of this Agreement, and
(ii) the fifth business day after the effective date of the Registration
Statement.
c. During the time when a prospectus is required to be delivered
under the Act, use all reasonable efforts to comply with all requirements
imposed upon it by the Act and the Exchange Act, as now and hereafter amended
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Shares, the Redeemable
Warrants, the Warrant Shares and the Underwriter's Securities in accordance with
the provisions hereof and the Prospectus. If at any time when a prospectus
relating to the Shares, the Redeemable Warrants, the Underwriter's Securities or
the Warrant Shares is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
counsel for the Underwriter the Prospectus, as then amended or supplemented,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated in light of the circumstances under which they were
made, not misleading or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will notify the Underwriter promptly and
prepare and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act.
d. Deliver to the Underwriter, without charge, such number of
copies of each Preliminary Prospectus and the Prospectus as the Underwriter may
reasonably request and, as soon as the Registration Statement or any amendment
or supplement thereto becomes effective, deliver to the Underwriter two signed
copies of the Registration Statement, including exhibits, and all post-effective
amendments thereto and copies of all exhibits filed therewith or incorporated
therein by reference and signed copies of all consents of certified experts.
e. Endeavor in good faith, in cooperation with the Underwriter,
at or prior to the time the Registration Statement becomes effective, to qualify
the Shares, the Redeemable Warrants, and the Redeemable Warrant Shares for
offering and sale under the securities laws of such jurisdictions as the
Underwriter may reasonably designate, provided that no such qualification shall
be required in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or to taxation as a foreign corporation
doing business in such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Underwriter agrees
that such action is not at the time necessary or advisable, use all reasonable
efforts to file and make such statements or reports at such times as are or may
reasonably be required by the laws of such jurisdiction.
14
f. Make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth full calendar
month following the effective date of the Registration Statement, an earnings
statement (which need not be certified by independent public or independent
certified public accountants unless required by the Act or the Regulations, but
which shall satisfy the provisions of Section 11(a) of the Act) covering a
period of at least twelve consecutive months beginning after the effective date
of the Registration Statement.
g. For a period of five years from the effective date of the
Registration Statement, furnish to the Underwriter copies of such financial
statements and other periodic and special reports as the company from time to
time furnishes generally to holders of any class of its securities, and promptly
furnish to the Underwriter (i) a copy of each periodic report the company shall
be required to file with the Commission, (ii) a copy of every press release and
every news item and article with respect to the Company or its affairs which was
released by the Company, and (iii) such additional documents and information
with respect to the Company and its affairs of any future subsidiaries of the
Company as the Underwriter may from time to time reasonably request.
h. Apply the net proceeds from the Offering received by it in a
manner consistent with the caption "USE OF PROCEEDS" in the Prospectus.
i. Furnish to the Underwriter as early as practicable prior to
the date hereof and the Closing Date, but not later than two (2) full business
days prior thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more than
thirty days prior to the effective date of the Registration Statement), which
have been read by the Company's independent accountants as stated in their
letter to be furnished to the Underwriter pursuant to Section 7(g) hereof.
j. Deliver to the Underwriter, prior to filing, any amendment or
supplement to the Registration Statement or Prospectus proposed to be filed
after the effective date of the Registration Statement and not file any such
amendment or supplement to which the Underwriter shall reasonably object, after
being furnished such copy, in writing with reasonable specificity as to the
nature and extent of any objection.
k. On or before the effective date of the Registration
Statement, cause to be duly executed legally binding and enforceable agreements
pursuant to which the Company's officers and directors have agreed not to sell,
any such securities (either pursuant to Rule 144 of the Regulations or
otherwise) or otherwise dispose of a beneficial
15
interest therein without the prior written consent of the Underwriter and the
Company for a period of six (6) months following such effective date and every
three months thereafter for an additional eighteen (18) months the four current
directors who own the largest number of shares may sell in the aggregate a
number of shares equal to 1% of the public float.
l. For a period of three (3) years from the Closing Date,
furnish to the Underwriter at the Company's sole expense, daily consolidated
financial transfer sheets relating to the Common Stock and the Redeemable
Warrants and designate Interstate Transfer Co. as transfer agent for the
Company's securities or such other transfer agent mutually agreeable by the
Company and the Underwriter.
m. For a period of three (3) years after the effective date of
the Registration Statement, engage an advisor (the "Advisor") designated by the
Underwriter to the Board of Directors of the Company (the "Board"), if requested
by the Underwriter. In the event the Underwriter shall not have designated such
individual at the time of any meeting of the Board or such person has not been
elected or is unavailable to serve, the Company shall notify the Underwriter of
each meeting of the Board. An individual selected by the Underwriter shall
receive all notices and other correspondence and communications sent by the
Company to members of the Board. In addition, such Advisor shall be entitled to
receive reimbursement for all costs incurred in attending such meetings
including, but not limited to, food, lodging, and transportation. The Company
further agrees that, during said three (3) year period, it shall schedule no
less than four (4) formal and "in person" meetings of its Board of Directors in
each such year at which meetings such Advisor shall be permitted to attend as
set forth herein; said meetings shall be held quarterly each year and thirty
(30) days advance notice of such meetings shall be given to the Advisor.
Further, during such three (3) year period, the company and its principal
shareholders shall give notice to the Underwriter with respect to any proposed
acquisitions, mergers, reorganizations or other similar transactions. In lieu of
the Underwriter's right to designate an Advisor, the Underwriter shall have the
right during such three-year period, in its sole discretion, to designate one
person for election as a Director of the Company and the Company will utilize
its best efforts to obtain the election of such person who shall be entitled to
receive the same compensation, expense reimbursements and other benefits set
forth above.
The Company agrees to indemnify and hold the Underwriter and
such Advisor harmless against any and all claims, actions, damages, costs and
expenses, and judgments arising solely out of the attendance and participation
of the Advisor at any such meeting described herein. In the event the Company
maintains a liability insurance policy affording coverage for the
16
acts of its officers and directors, it agrees, if possible to include the
Advisor as an insured under such policy.
n. For a period equal to the lesser of (i) seven years from the
date hereof, and (ii) the sale to the public of the Underwriter's Securities,
the Company will not take any action or actions which may prevent or disqualify
the Company's use of Form S-1 (or other appropriate form) for the registration
under the Act of the Underwriter's Securities.
o. For a period of five years from the date hereof, use its best
efforts to maintain the quotation by NASDAQ of the Common Stock and the
Redeemable Warrants.
p. As soon as practicable, but in no event more than three
months from the date hereof, (i) file a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Common Stock and the
Redeemable Warrants, and (ii) take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions and Xxxxx'x OTC Manual.
x. Xxxxx to the Underwriter a preferential right on the terms
and subject to the conditions set forth in this paragraph, for a period of three
(3) years from the effective date of the Registration Statement, to purchase for
its account, or to sell for the account of any of the Company's stockholders
listed in the Prospectus under the caption "PRINCIPAL STOCKHOLDERS" (the
"Principal Stockholders"), any securities of the Principal Stockholders, with
respect to which the Principal Stockholders consult with the Underwriter and to
offer to the Underwriter the opportunity, on terms not more favorable to the
Principal Stockholders than they can secure elsewhere, to purchase or sell any
such securities. If the Underwriter fails to accept in writing such proposal
made by the Principal Stockholders within ten (10) days after receipt of a
notice containing such proposal, then the Underwriter shall have no further
claim or right with respect to the proposal contained in such notice. If,
thereafter, such proposal is materially modified, the Principal Stockholders
shall again consult with the Underwriter in connection with such modification
and shall in all respects have the same obligations and adopt the same
procedures with respect to such proposal as are provided hereinabove with
respect to the original proposal.
r. As provided in the Warrant Agreement, the Company will pay
the Underwriter a fee of five percent of the aggregate exercise price of each
Redeemable Warrant exercised commencing one year after the Effective Date, of
which three percent may be allocated to the dealer who solicited the exercise of
the Warrant (who may also be the Underwriter), provided: (1) the market price of
the Company's common stock on the date of
17
exercise was greater than the Redeemable Warrant exercise price on that date,
(2) exercise of the Redeemable Warrant was solicited by the Underwriter, (3) the
Redeemable Warrant was neither held in a discretionary account nor issued to the
Underwriter, (4) disclosure of compensation was made both at the time of the
Offering and at the time of exercise of the Redeemable Warrant and (5) the
solicitation and the exercise of the Redeemable Warrant was not in violation of
Rule 10b-6 of the 1934 Act. The Company will not solicit the exercise of the
Redeemable Warrants other than through the Underwriter.
s. Supply the Underwriter and XxXxxxxxxx & Xxxxx, LLP counsel to
the Underwriter, with an aggregate of three (3) bound volumes each of the
underwriting materials within a reasonable time after the latest Closing Date.
t. For a period of one (1) year from the Effective Date, the
Company shall not issue any shares of Common Stock or Preferred Stock or any
warrants, options or other rights to purchase Common Stock or Preferred Stock
without the consent of the Underwriter, except for options to be granted solely
to employees and directors pursuant to the Company's stock option plan as set
forth in the Prospectus.
u. As set forth in the Underwriter's Warrant Agreement, upon
written request of the then holder(s) of at least a majority of the
Underwriter's Warrants and the Underwriter's Securities underlying the Warrants
which were originally issued to the Underwriter or to its designees, made at any
time within the period commencing one year and ending four (4) years after the
effective date of the Company's Registration Statement, the Company will file,
at its sole expense, no more than once, a Registration or Offering Statement on
Form S-1 under the Securities Act registering the Warrant Securities. The
Company agrees to use its best efforts to cause the Registration Statement or
Offering Statement on Form S-1 to become effective. The holders of the
Underwriter's Warrants may demand registration without exercising the
Underwriter's Warrants and, in fact, are never required to exercise same.
If, at any time within the period commencing one year and
ending four (4) years after the effective date of the Company's Registration
Statement, it should file a Registration Statement with the Commission pursuant
to the Securities Act, regardless of whether some of the holders of the
Underwriter's Warrants and Underwriter's Securities shall have therefore availed
themselves of any of the right above, provided, however, that the Company, at
its own expense, will offer to said holders the opportunity to register or
qualify the shares of Underwriter's Securities, limited, in the case of a
Regulation A offering, to the amount of the available exemption. This paragraph
is not applicable to a Registration Statement filed by
18
the Company with the Commission on Form S-8 or any other inappropriate form.
The objection of a subsequent underwriter to the above piggy-back rights would
preclude such inclusion. However, in such event the Company will, within six
months of the completion of such subsequent underwriting, file at its sole
expense a Registration Statement relating to such excluded securities.
The Company will cooperate with the then holders of the
Underwriter's Warrants and Underwriter's Securities in the preparing and signing
of any Registration Statement, in addition to the Registration Statements and
Offering Statements discussed above, required in order to sell or transfer the
aforesaid shares of Underwriter's Securities and will supply all information
required therefore, but such additional Registration Statement or Offering
Statement shall be at the then holders' cost and expense unless the Company
elects to register or qualify additional shares of the Company's Common Stock or
Redeemable Warrants in which case the cost and expense of such Registration
Statement or Offering Statement will be prorated between the Company and the
holders of the Underwriter's Warrants and Underwriter's Securities according to
the aggregate sales price of the securities being issued.
v. So long as the Shares or Redeemable Warrants are registered
under the Exchange Act, the Company will hold an annual meeting of shareholders
for the election of directors within 270 days after the end of each of the
Company's fiscal years and, within 150 days after the end of each of the
Company's fiscal years will provide the Company's shareholders with the audited
financial statements of the Company as of the end of the fiscal year just
completed prior thereto. Such financial statements shall be those required by
Rule 14a-3 under the Exchange Act and shall be included in an annual report
pursuant to the requirements of such Rule.
6. PAYMENT OF EXPENSES.
-------------------
a. The Company hereby agrees to pay on the Closing Date, all
expenses (other than fees of counsel to the Underwriter, except as provided in
(iii) below) in connection with the Offering, including but not limited to, (i)
the preparation, printing, filing and mailing (including the payment of postage
with respect to such mailing) of the Registration Statement and the Prospectus
and the printing and mailing of this Agreement and related documents, including
the cost of all copies thereof and of the Preliminary Prospectus and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
19
Underwriter in quantities as hereinabove stated, (ii) the printing, engraving,
issuance and delivery of the Shares, the Redeemable Warrants and the
Underwriter's Warrants, including any transfer or other taxes payable thereon,
(iii) the qualification of the Shares, the Redeemable Warrants, and the
Redeemable Warrant Shares under state or foreign securities or "Blue Sky" laws
and determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," and "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and fees of counsel for the Underwriter (which fees shall be
payable by the Company in the sum of up to $20,000, $10,000 of which has been
paid and disbursements of counsel for the Underwriter, (iv) advertising costs
and expenses including but not limited to the costs and expenses in connection
with the "road show", information meetings and presentations, bound volumes,
tombstones, and prospectus memorabilia, (v) costs and expenses in connection
with due diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, and all reasonable travel and
lodging expenses incurred by us and/or counsel to the Underwriter in connection
with visits to, and examination of, the Company's premises, (vi) fees and
expenses of the transfer agent and warrant agent, (vii) applications for
assignments of a rating of the Securities by qualified rating agencies, and
(viii) the fees payable to NASD and NASDAQ. The $20,000 payment to counsel for
the Underwriter shall not include fees of special counsel if same is required to
be incurred in a merit review state which may require local counsel.
b. NON-ACCOUNTABLE EXPENSE ALLOWANCE. The Company has paid to
---------------------------------
the Underwriter an advance towards its non-accountable expense allowance of
Thirty Thousand Dollars ($30,000), which amount shall be used to reimburse the
Underwriter for those costs, fees and expenses as are customarily incurred by an
Underwriter during the registration process.
The Company shall pay to the Underwriter an aggregate non-
accountable expense allowance, in addition to the expenses payable, pursuant to
subsection (a) of this Section 6, equal to three percent (3%) of the gross
proceeds received by the Company from the sale of Securities and, on its part,
the Underwriter agrees to deduct from the said three percent (3%) allowance any
sums previously paid by the Company to the Underwriter pursuant to the
provisions of subsection (b).
7. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
---------------------------------------
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing
20
Dates, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
a. The Registration Statement shall have become effective not
later than 5:00 p.m., New York time, on the date of this Agreement or such later
date and time as shall be consented to in writing by you, and, at each of the
Closing Dates, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of XxXxxxxxxx & Xxxxx LLP, counsel
to the Underwriter.
b. At the Closing Date, the Underwriter shall have received the
favorable opinion of Kaufmann, Feiner, Yamin, Xxxxxx & Xxxxxxx, LLP counsel to
the Company dated the Closing Date, addressed to the Underwriter and in form and
substance satisfactory to XxXxxxxxxx & Xxxxx, LLP, counsel to the Underwriter,
to the effect that:
(1) the Company and each of its subsidiaries (A) has been
duly organized and is validly existing as a corporation in good
standing under the laws of the state of its incorporation, (B) is duly
qualified and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or
the character of its operations requires such qualification, and (C)
has all requisite corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus;
(2) the Shares, the Underwriter's Warrants, the Redeemable
Warrants, the Warrant Shares, and the Underwriter's Securities have
been duly authorized and are, or in the case of the Warrant Shares and
the Underwriter's Securities, will be, upon exercise and payment
therefor, validly issued, fully paid and non-assessable securities of
the Company, and the holders thereof are not and will not be subject
to personal liability by reason of being such holders; none of the
Shares, the Redeemable Warrants, the Underwriter's Warrants, the
Warrant Shares or the preemptive or similar contractual rights of any
stockholder of the Company, and all corporate action required to be
taken for the authorization, issue and sale of such securities has
been duly and validly taken; The Redeemable Warrants and the
Underwriter's Warrants constitute, and, if issued, the Underwriter's
Warrants
21
constitute, and, if issued, the Underwriter's Securities shall
constitute, valid and binding obligations of the Company to issue and
sell, upon exercise thereof and payment therefor, the number and type
of securities of the Company called for thereby; the certificates
representing the Shares, the Redeemable Warrants and the Underwriter's
Warrants are in due and proper form;
(3) except as described in the Prospectus, to the best of
such counsel's knowledge, the Company and each of its subsidiaries
does not own an interest in any corporation, partnership, joint
venture, trust or other business entity;
(4) this Agreement, the Consulting Agreement, the Warrant
Agreement and the Underwriter's Warrant Agreement have each been duly
and validly authorized, executed and delivered by the Company,
assuming due execution by the parties thereto other than the Company,
and are valid and binding agreements of the Company, enforceable
against the Company in accordance with their respective terms, except
(A) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally,
(B) as enforceability of any indemnification provision may be limited
under the federal and state securities laws, and (C) that the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought;
(5) to the best of such counsel's knowledge, there are no
contracts or other documents required to be filed as exhibits to the
Registration Statement other than those filed as exhibits thereto, and
to the best of such counsel's knowledge, there are no statutes, rules
or regulations or legal or governmental proceedings pending or
threatened which could materially adversely affect the business or
financial conditions of the Company or its subsidiaries which have not
been disclosed in the Prospectus;
(6) the Registration Statement is effective under the Act,
and, to the best of such counsel's knowledge, no proceedings for a
stop order are pending or threatened under the Act;
(7) all consents, approvals, authorizations or orders of
any court or governmental agency or body (other than such as may be
required under Blue Sky
22
laws, as to which no opinion need be rendered) required in connection
with the consummation of the transactions contemplated by this
Agreement have been obtained and are in effect;
(8) to the best of such counsel's knowledge, neither the
execution and delivery of this Agreement, the Underwriter's Warrant
Agreement, the Warrant Agreement or the Consulting Agreement, nor the
issue and sale of the Shares, the Underwriter's Warrants, the
Redeemable Warrants, the Warrant Shares, or the Underwriter's
Securities, nor the consummation of the transactions contemplated
hereby, nor the compliance by the Company with the terms and
provisions hereof, will conflict with, or result in a breach of, any
of the terms and provisions hereof, will conflict with, or result in a
breach of, any of the terms and provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries may be bound or to which any of the property or assets of
the Company is subject; nor will such action result in any violation
of the provisions of the Certificate of Incorporation or the By-Laws
of the Company or any of its subsidiaries is subject; nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Company, or any material agreement
to which the Company or any of its subsidiaries is a party or any
statute or any order, rule or regulation applicable to the Company or
any of its subsidiaries of any court or of any federal, state or other
regulatory authority or other governmental body having jurisdiction
over the Company;
(9) the Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements
thereto (other than the financial statements included therein, as to
which no opinion need be rendered) comply as to form in all material
respects with the requirements of the Act and Regulations. Such
counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company,
representatives of the independent public accountants for the Company
and representatives of the Underwriter at which the contents of the
Registration Statement, the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in
23
the Registration Statement and Prospectus, 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 amendment
became effective or the Prospectus as of the date of such opinion
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such
counsel need express no opinion with respect to the financial
statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus);
(10) the terms and provisions of the Common Stock, the
Redeemable Warrants, the Underwriter's Warrants, the Warrant Shares,
the Underwriter's Securities and all other securities issued or
issuable by the Company conform in all material respects to the
description thereof contained in the Registration Statement and the
Prospectus;
(11) to the best of such counsel's knowledge, the Company
and each of its subsidiaries has good and marketable title to, or
valid and enforceable leasehold estates in, the items of real and
personal property stated in the Prospectus to be owned or leased by it
as lessee, free and clear of all liens, encumbrances, claims, security
interests, defects and restrictions of any material nature whatsoever,
other than those referred to in the Prospectus and liens for taxes not
yet due and payable;
(12) to the best of such counsel's knowledge, the Company
and each of its subsidiaries is not in breach of, or in default under,
any term or provision of any indenture, mortgage, deed of trust,
lease, note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company and each of its
subsidiaries is a party or by which the Company and each of its
subsidiaries or any of its properties may be bound or affected; and
the Company is not in violation of any term or provision of its
Certificate of Incorporation or By-laws or in violation of any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation;
(13) the statements in the Prospectus under "Risk Factors,"
"Business," "Management," "Certain
24
Transactions," and "Description of Securities" have been reviewed by
such counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or legal
conclusions are correct in all material aspects;
(14) the Common Stock and Redeemable Warrants are eligible
for quotation on NASDAQ;
(15) the authorized and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the
Prospectus; all of the issued and outstanding capital stock, options
and warrants of the Company have been duly authorized and validly
issued and all of the issued and outstanding shares of capital stock
of the Company are fully paid and non-assessable; the holders thereof
have no rights of rescission with respect thereto, and are not subject
to personal liability by reason of being holders; and none of such
securities or interests were issued in violation of the preemptive
rights or similar rights of any holder of any security or interest of
the Company;
(16) to the best of such counsel's knowledge, no person,
corporation, trust, partnership, association or other entity has the
right to include or register any securities of the Company in the
Registration Statement or require the Company to file any
registration statement or, if filed, to include any security in such
registration statement for a period of 13 months from the date hereof;
(17) no statute or regulation or legal or governmental
proceeding required to be described in the Prospectus is not described
as required, nor, to the best of such counsel's knowledge, are any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as Exhibits
to the Registration Statement not described and filed as required;
(18) the Company and each of its subsidiaries owns or
possesses, free and clear of all liens or encumbrances and rights
thereto or therein by third parties, other than as described in the
Prospectus, the requisite licenses or other rights to use all
trademarks, service marks, service names, trade names (including,
without limitation, any such licenses or rights described in the
Prospectus as being owned or possessed by the Company and each of its
subsidiaries), and there is no claim or action by any person
pertaining to, proceeding, pending, or threatened,
25
which challenges the exclusive rights of the Company or any of its
subsidiaries with respect to any trademarks, service marks, service
names, trade names, patents and licenses used in the conduct of the
Company's or any of its subsidiaries' business (including without
limitations any such licenses or rights described in the Prospectus as
being owned or possessed by the Company or any of its subsidiaries);
the Company's and each of its subsidiaries' current products, services
and processes do not infringe on the patents held by third parties;
(19) except as and to the extent set forth in the
Prospectus, to such counsel's knowledge, the Company and each of its
subsidiaries are not under any obligation to pay to any third-party
royalties or fees of any kind whatsoever with respect to any
technology or intellectual properties developed, employed or used;
(20) assuming due execution by the parties thereto other
than the Company, the agreements referred to in Section 2(d) hereof
are valid and binding agreements of the parties thereto enforceable
against the parties thereto in accordance with the terms thereof and
against any subsequent bona fide purchasers of the Company's
securities held thereby except (A) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, and (B) that the remedy of
specific performance, and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought;
(21) to the best of such counsel's knowledge, there are no
claims, payments, issuances, arrangements or understandings for
services in the nature of a finder's or origination fee with respect
to the sale of the Securities hereunder or financial consulting
arrangement or any other arrangements, agreements, understandings,
payments or issuances that may affect the Underwriter's compensation,
as determined by the NASD;
(22) to the best of such counsel's knowledge, the Company
and each of its subsidiaries, any of its officers, employees or
agents, nor any other person acting on its behalf has, directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee, or agent of a
customer or supplier, or
26
official or employee of any governmental agency or instrumentality of
any government (domestic or foreign) or other person who is or may be
in a position to help or hinder the business of the Company and each
of its subsidiaries (or assist it in connection with any actual or
proposed transaction) which (A) might subject the Company and each of
its subsidiaries to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (B) if not given in the past,
might have had a materially adverse affect on the assets, business or
operations of the Company and each of its subsidiaries as reflected in
the financial statements contained in the Registration Statement, or
(C) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company or any of its
subsidiaries;
(23) to such counsel's knowledge, persons listed under the
caption "Principal Stockholders" in the Prospectus are the respective
"beneficial owners" (as such phrase is defined in Regulation 13d-3
under the Exchange Act) of the shares of Common Stock set forth
opposite their respective names thereunder as and to the extent set
forth therein;
(24) except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under
the Regulations) of any such person or entity or the Company or any of
its subsidiaries, has or has had, either directly or indirectly, (i)
an interest in any person or entity which (A) furnishes or sells
services or products which are furnished or sold or are proposed to be
furnished or sold by the Company or any of its subsidiaries, or (B)
purchases from or sells or furnishes to the Company or any of its
subsidiaries any goods or services, or (ii) a beneficial interest in
any contract or agreement to which the Company is a party or by which
it may be bound or affected. Except as set forth in the Prospectus
under "Certain Transactions," there are no existing material
agreements, arrangements, understandings or transactions, or proposed
material agreements, arrangements, understandings or transactions,
between the Company or any of its subsidiaries, and any officer,
director, or Principal Stockholder of the Company, or any affiliate or
associate of any such person or entity and;
(25) the minute books of the Company have been made
available to counsel to the Underwriter and contain a complete summary
of all meetings and actions
27
by unanimous consent of directors and stockholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to Underwriter's
counsel) of other counsel reasonably acceptable to Underwriter's counsel,
familiar with the applicable laws; (B) as to matters of fact, to the extent they
deem proper, on certificates and written statements of responsible officers of
the Company and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any
such statements or certificates shall be delivered to Underwriter's counsel if
requested. The opinion of such counsel for the Company shall state that the
opinion of any such other counsel is in form satisfactory to such counsel and,
in their opinion, the Underwriter and they are justified in relying thereon.
c. On or prior to the Closing Date, counsel for the Underwriter
shall have been furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in subsection (b) of this Section 7, or in order to evidence
the accuracy, completeness or satisfaction of any of the representation,
warranties or conditions herein contained.
d. Prior to the Closing Date, (i) there shall have been no
material adverse change nor development involving a prospective change in the
condition or prospects of the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and Prospectus which is materially adverse
to the Company; (iii) the Company shall not be in default under any provision of
any instrument relating to any outstanding indebtedness which default would have
a material adverse effect on the Company; (iv) no material amount of the assets
of the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (v) no action, suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company wherein
any unfavorable result or decision could materially, adversely affect any of its
respective
28
properties or business before or by any court or federal or state commission,
board or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus; (vi) no stop order shall have been issued
under the Act and no proceedings thereof shall have been initiated or threatened
by the Commission; and (vii) the market for securities in general or for the
Company's Shares and Redeemable Warrants in particular, or political, financial
or economic conditions shall have materially changed from those reasonably
foreseeable as of the date hereof as to render it impracticable in the
Underwriter's judgment to make a public offering of the shares, or there has
been a material adverse change in market levels for securities in general (or
those of the Company in particular) or financial or economic conditions which
render it inadvisable to proceed.
e. At the Closing Date, the Underwriter shall have received a
certificate of the Company signed by the Chairman of the Board or the President
and Secretary of the Company, dated the date of Closing, to the effect that the
conditions set forth in subsection (d) above have been satisfied and that, as of
the Closing Date, the representations and warranties of the Company set forth in
Section 2 hereof are true and correct.
f. By the Closing Date, the Underwriter shall have received
clearance from NASD as to the amount of compensation allowable or payable to the
Underwriter, as described in the Registration Statement.
g. At the time this Agreement is executed, and at the Closing
Date, the Underwriter shall have received a letter, addressed to the Underwriter
and in form and substance satisfactory in all respects (including the non-
material nature of the changes or decreases, if any, referred to in clause 3
below) to the Underwriter and to XxXxxxxxxx & Xxxxx, LLP, counsel for the
Underwriter, from Xxxxx Xxxxxx & Company dated respectively, as of the date of
this Agreement and as of the Closing Date:
(1) confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the
applicable Regulations;
(2) stating that in their opinion the financial statements
of the Company included in the Registration Statement and Prospectus
comply as to form in all material respects with the applicable
accounting requirements of the Act and the published Regulations
thereunder;
29
(3) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim
consolidated financial statements of the Company (with an indication
of the date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the
stockholders and board of directors and the various committees of the
board of directors of the Company, consultations with officers and
other employees of the Company responsible for financial and
accounting matters and other specified procedures and inquiries,
nothing has come to their attention which would lead them to believe
that (A) either the unaudited financial statements for the six month
periods ended June 30, 1995 and June 30, 1996 of the Company in
the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act, and
the Regulations or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated
financial statements of the Company included in the Registration
Statement, (B) at a date not later than five (5) days prior to the
effective date of the Registration Statement, there was any change in
the capital stock or long-term debt of the Company, or any decrease in
the stockholders' equity of the Company as compared with amounts shown
in the _______________ balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any decrease, setting forth
the amount of such decrease, and (C) during the period from _______
_________to a specified date not more than five (5) days prior to the
effective date of the Registration Statement there was any decrease in
net revenues, net earnings or increase in net earnings per common
share of the Company, in each case as compared with the corresponding
period beginning _________________ other than as set forth in or
contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(4) setting forth, at a date not later than five (5) days
prior to the effective date of the Registration Statement the amount
of liabilities of the Company (including a break-down of commercial
paper and notes payable to banks);
(5) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial
30
information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting
records, including worksheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(6) stating that they have not during the immediately
preceding five (5) year period brought to the attention of the
Company's management any "weakness," as defined in Statement on
Auditing Standards No. 60 -- "Communication of Internal Control
Structure Related Matters Noted in an Audit," in the Company's
internal controls; and
(7) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonably
request.
h. All proceedings taken in connection with the authorization,
issuance or sale of the Shares, the Redeemable Warrants, the Underwriter's
Warrants, the Warrant Shares and the Underwriter's Securities as herein
contemplated shall be satisfactory in form and substance to the Underwriter and
to XxXxxxxxxx & Xxxxx, LLP, counsel to the Underwriter, and the Underwriter
shall have received from such counsel a favorable opinion, dated the Closing
Date, with respect to such of these proceedings as the Underwriter may
reasonably require.
i. On the date of the Closing, there shall have been duly
tendered to you for your account the appropriate number of Securities and
individually for your own account the appropriate number of Underwriter's
Warrants.
j. No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to subsection (d) of Section 5 hereof
shall have been issued on the Closing Date, and no proceedings for that purpose
shall have been instituted or to its knowledge or that of the Company shall be
contemplated.
Any certificate signed by any officer of the Company and delivered to
the Underwriter or to counsel to the Underwriter shall be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein. If any condition to the Underwriter's obligations
hereunder to be fulfilled prior to or at the Closing is not so fulfilled, the
31
Underwriter may terminate this Agreement or, if the Underwriter so elects, waive
any such conditions which have not been fulfilled or they may extend the time
for their fulfillment.
8. INDEMNIFICATION.
---------------
a. The Company shall indemnify and hold the Underwriter harmless
against any and all liabilities, claims, lawsuits, including any and all awards
and/or judgments to which it may become subject under the Securities Act of
1933, as amended,the Securities Exchange Act of 1934, as amended or any other
federal or state statute, at common law or otherwise, insofar as said
liabilities, claims and lawsuits (including awards and/or judgments) arise out
of or are in connection with the Registration Statement, Prospectus and related
Exhibits filed under the Act, except for any liabilities, claims and lawsuits
(including awards and/or judgments), arising out of acts or omissions of the
Underwriter. The foregoing shall be set forth as conditions within the
Underwriting Agreement. In addition, the Company shall also indemnify and hold
the Underwriter harmless against any and all costs and expenses, including
reasonable counsel fees, incurred or relating to the foregoing.
The Underwriter shall give the Company prompt notice of any such
liability, claim or lawsuit which the Underwriter contends is the subject matter
of the Company's indemnification and the Company thereupon shall be granted the
right to take any and all necessary and proper action, at its sole cost and
expense, with respect to such liability, claim and lawsuit, including the right
to settle, compromise and dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
The Underwriter shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any
other federal or state statute, at common law or otherwise, insofar as said
liabilities, claims and lawsuits (including awards and/or judgments) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact required to be stated or necessary to make the statement therein,
not misleading, which statement or omission was made in reliance upon
information furnished in writing to the Company by or on behalf of the
Underwriter for inclusion in the Registration Statement or Prospectus or any
amendment or supplement thereto. In addition, the Underwriter shall also
indemnify and hold the Company harmless against any and all costs and expenses,
including reasonable counsel fees, incurred or relating to the foregoing.
32
The Company shall give to the Underwriter prompt notice of any
such liability, claim or lawsuit which the Company contends is the subject
matter of the Underwriter's indemnification and the Underwriter thereupon shall
be granted the right to a take any and all necessary and proper action, at its
sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
b. In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Section 8 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 8, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportion taking
into consideration the relative benefits received by each party from the
Offering covered by the Prospectus (taking into account the portion of the
proceeds of the Offering realized by each), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
assessed, the opportunity to correct and prevent any statement or omission and
other equitable considerations appropriate under the circumstances; provided,
however, that notwithstanding the above in no event shall the Underwriter be
required to contribute any amount in excess of 10% of the initial public
offering price of the Securities; and provided, that, in any such case, no
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Within fifteen (15) days after receipt of any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing party"), notify
the contributing party of the commencement thereof, but the omission so to
notify the contributing party will not relieve it from any liability which it
may have to any other party other than for contribution hereunder. In case any
such action, suit or proceeding is brought against any party, and such party
notifies
33
a contributing party or his or its representative of the commencement thereof
within the aforesaid fifteen (15) days, the contributing party will be entitled
to participate therein with the notifying party and any other contributing party
similarly notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The indemnification provisions contained in
this Section 8 are in addition to any other rights or remedies which either
party hereto may have with respect to the other or hereunder.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
--------------------------------------------------
context otherwise required, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing and such representations, warranties and
agreements of the Underwriter, the Company, including the indemnity agreements
contained in Section 8 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any of the
Underwriter, the Company or any controlling person, and shall survive
termination of this Agreement or the issuance and delivery of the Securities to
the Underwriter until the earlier of the expiration of any applicable statute of
limitations and the seventh anniversary of the Closing Date, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
-------------------------------------------------------
a. This Agreement shall become effective at 9:30 a.m., New York
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by the
Underwriter of the Securities, whichever is earlier. The time of the initial
public offering, for the purpose of this Section 10, shall mean the time, after
the Registration Statement becomes effective, of the release by the Underwriter
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities or the time, after the Registration
Statement becomes effective, when the Securities are first released by the
Underwriter for offering by the Underwriter or dealers by letter or telegram,
whichever shall first occur. The Underwriter may prevent this Agreement from
becoming effective without liability to any other party, except as noted below,
by giving the notice indicated below in this Section 10 before the time this
Agreement becomes effective. The Underwriter agrees to give the undersigned
notice of the commencement of the Offering described herein.
34
b. The Underwriter shall have the right to terminate this
Agreement at any time prior to the Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in its
opinion will in the immediate future materially disrupt, general securities
markets in the United States; or (ii) if trading on the New York Stock Exchange,
the American Stock Exchange, or in the over-the-counter market by the NASD or by
order of the Commission or any other governmental authority having jurisdiction;
or (iii) if the United States shall have become involved in a war or major
hostilities; or (iv) if a banking moratorium has been declared by a New York
State or federal securities market; or (v) if a moratorium on foreign exchange
trading has been declared which adversely impacts the United States securities
market; or (vi) if the Company shall have sustained a loss material or
substantial to the Company by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in the Underwriter's opinion, make it
inadvisable to proceed with the delivery of the Securities; or (vii) if there
shall have occurred after the date hereof of such a material adverse change in
general market conditions as in the Underwriter's judgment would make it
impracticable to proceed with the Offering, sale and/or delivery of the
Securities or to enforce contracts made by the Underwriter for the sale of the
Securities.
c. If the Underwriter elects to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
10, the Company shall be notified on the same day as such election is made by
the Underwriter by telephone or telegram, confirmed by letter, and the
Underwriter shall be entitled to retain the advances referred to in Paragraph
6(b) for actual accountable out-of-pocket expenses including, Underwriter's
counsel Blue Sky Fees and expenses referred to in Paragraph 6(a) herein.
Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or termination of this Agreement, and whether
or not this Agreement is otherwise carried out, the provisions of Section 8
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.
11. NOTICES. All communications hereunder, except as herein
-------
otherwise specifically provided, shall be in writing and, if sent to the
Underwriter, shall be mailed, delivered or telegraphed and confirmed to X. X.
Xxxx, Inc., 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx
Xxxxx, with a copy to XxXxxxxxxx & Xxxxx, LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxxx, Esq., and if to the Company, to
Trans Energy, Inc., 000 Xxxxxx Xxxxxx, P. X. Xxx 000, Xx. Xxxxx, Xxxx Xxxxxxxx
00000, Attention: Xxxxx X. Xxxxxx, with a
35
copy to Xxxxxxx Xxxxxxxxx, Esq., Kaufmann, Feiner, Yamin, Xxxxxx & Xxxxxxx LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
12. FUTURE OFFERINGS. The Company shall grant to the Underwriter a
----------------
right of first refusal for a period of five (5) years from the effective date
for any public or private offering of securities to raise capital and sale of
securities to be made by the Company, its affiliates or any of its present or
future subsidiaries.
13. PARTIES. This Agreement shall inure solely to the benefit of and
-------
shall be binding upon, the Underwriter, the Company and the controlling persons,
directors and officers referred to in Section 8 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained.
14. CONSTRUCTION. This Agreement shall be governed by and construed
------------
and enforced in accordance with the laws of the State of New York, without
giving effect to conflict of laws.
15. ENTIRE AGREEMENT. This Agreement, the Underwriter's Warrant
----------------
Agreement, the Consulting Agreement and the Warrant Agreement contain the entire
agreement between the parties hereto in connection with the subject matter
hereof. The parties agree to submit themselves to the jurisdiction of the courts
of the State of New York which shall be the sole tribunal in which any parties
may institute and maintain a legal proceeding against the other party arising
from any dispute in this Agreement. In the event either party initiates a legal
proceeding in a jurisdiction other than in the courts of the State of New York,
the other party may assert as a complete defense and as a basis for dismissal of
such legal proceeding that the legal proceeding was not initiated and maintained
in the courts of the State of New York in accordance with the provisions of this
paragraph.
16. ATTORNEY'S FEES. In the event of litigation between the parties
---------------
arising hereunder, the prevailing party shall be entitled to costs and
reasonable attorney's fees.
36
If the foregoing correctly sets for the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
TRANS ENERGY, INC.
By:________________________________
Xxxxx X. Xxxxxx, President
Accepted as of the date
first above written.
New York, New York
X. X. XXXX, INC.
By:___________________________
_____________, President
37
trans\underwr.agr\103
