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MERCFUEL, INC.
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UNDERWRITING AGREEMENT
____ __, 2001
VMR Capital Markets, U.S.
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As Representative of the Several Underwriters
Named in Schedule I hereto
1901 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
MERCFUEL, INC. (the "Company"), proposes to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") pursuant to this
Underwriting Agreement (the "Agreement"), an aggregate of 1,200,000 shares of
Common Stock, $0.01 par value per share (the "Common Stock"). In addition, the
Company proposes to grant to the Underwriters the option referred to in Section
2(b) to purchase all or any part of an aggregate of 180,000 additional shares of
Common Stock. The aggregate of 1,200,000 shares of Common Stock, together with
all or any part of the 180,000 shares of Common Stock which the Underwriters
have the option to purchase are herein called the "Shares." The Shares and the
Representative's Warrant (as that term is defined in Section 12 herein) and the
shares of Common Stock issuable pursuant to the exercise of the Representative's
Warrant are herein collectively called the "Securities."
You have advised the Company that you desire to purchase the Shares, and
that you have been authorized to execute this Agreement as Representatives of
the Underwriters (the "Representatives"). The Company confirms the agreements
made by it with respect to the purchase of the Shares by you, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each
Underwriter that:
(a) A registration statement (File No. 333-60992) on Form S-1
relating to the public offering of the Shares, including a preliminary form of
prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act") and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act. "Preliminary
Prospectus" shall mean each prospectus filed pursuant to Rule 430 of the Rules
and Regulations. The registration statement (including all financial schedules
and exhibits) as amended at the time it
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becomes effective and the final prospectus included therein are respectively
referred to as the "Registration Statement" and the "Prospectus," except that
(i) if the prospectus first filed by the Company pursuant to Rule 424(b) or Rule
430A of the Rules and Regulations or otherwise utilized and not required to be
so filed shall differ from said prospectus as then amended, the term
"Prospectus" shall mean the prospectus first filed pursuant to Rule 424(b) or
Rule 430A or so utilized from and after the date on which it shall have been
filed or utilized, and (ii) if such registration statement or prospectus is
amended or such prospectus is supplemented, after the effective date of such
registration statement (the "Effective Date")and prior to the Option Closing
Date (as defined in Section 2(b)), the term "Registration Statement" shall
include such registration statement as so amended, and the term "Prospectus"
shall include the prospectus as so amended or supplemented, or both, as the case
may be.
(b) At the time the Registration Statement becomes effective and at
all times subsequent thereto up to the Option Closing Date (hereinafter
defined), (i) the Registration Statement and Prospectus will in all material
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which they were made; provided, however,
that the Company does not make representations, warranties or agreements as to
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by you or on behalf of any Underwriter through you
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to the selling commission
set forth on the cover page of the Prospectus, the material set forth under the
heading "Underwriting" and the identity of counsel to the Underwriters under the
heading "Legal Matters" constitute the only information furnished in writing by
you, or by any Underwriter through you, for inclusion in the Registration
Statement and Prospectus, as the case may be.
(c) Each of the Company and each of its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its respective state of incorporation, with full corporate power and
authority to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify is not reasonably likely to materially
adversely affect the Company's and its subsidiaries' business, properties or
financial condition.
(d) The authorized capital stock of the Company as of the Effective
Date was as set forth under "Capitalization" in the Prospectus. The shares of
issued and outstanding capital stock of the Company set forth thereunder have
been duly authorized, validly issued and are fully paid and non-assessable, have
been issued in compliance with all federal and state securities laws and were
not issued in violation of any preemptive rights or other rights to subscribe
for or purchase securities; except as set forth in the Prospectus, no options,
warrants or other rights to purchase, agreements or other obligations to issue,
or agreements or other rights to convert any obligation into, any shares of
capital stock of the Company have been granted or
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entered into by the Company. The Securities conform in all material respects to
all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) All the issued and outstanding capital stock of each of the
Company's subsidiaries has been duly authorized and validly issued and is fully
paid and non-assessable, and was not issued in violation of or subject to any
preemptive right, or other rights to subscribe for or purchase any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations, and is owned of record and beneficially, as of the date hereof,
and, to the extent owned by the Company, will be owned of record and
beneficially at or prior to the closing of the issuance of the Shares, by the
Company free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest; and no preemptive right, co-sale right,
registration right, right of first refusal or other similar right of
stockholders exists with respect to any shares of the Company's subsidiaries.
There are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in any of the Company's subsidiaries. Except as described in the
Registration Statement and the Prospectus or as may be restricted by the terms
and provisions of any credit or loan facility to which the Company or any of its
subsidiaries is a party and which is described in the Registration Statement and
the Prospectus, or by relevant state law with respect to the need for sufficient
surplus, none of the Company's subsidiaries is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on its capital stock, or from transferring any of the property or
assets of any such subsidiary to the Company.
(f) The Shares are duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable and free of preemptive rights of any security
holder of the Company. The certificates evidencing the Shares are in valid and
proper legal form. The Representative's Warrant will be exercisable for shares
of Common Stock of the Company in accordance with the terms of the
Representative's Warrant and at the price therein provided for. The shares of
Common Stock have been duly authorized and reserved for issuance upon such
exercise, and such shares, when issued upon such exercise in accordance with the
terms of the Representative's Warrant and when the exercise price is paid, shall
be fully paid and non-assessable. Neither the filing of the Registration
Statement nor the offering or sale of the Securities as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any securities of the Company,
except as described in the Registration Statement.
(g) This Agreement and the Representative's Warrant have been duly
and validly authorized, executed and delivered by the Company, as applicable,
and assuming due execution by the other party or parties hereto and thereto,
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as rights to indemnity
and contribution hereunder may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally or by general equitable principles. The
Company has full power and lawful authority to authorize, issue and sell the
Securities to be sold by it hereunder on the
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terms and conditions set forth herein, and no consent, approval, authorization
or other order of any governmental authority is required in connection with such
authorization, execution and delivery or with the authorization, issue and sale
of the Securities, except such as may be required under the Act or state
securities laws.
(h) Except as described in the Prospectus, neither the Company nor
any of its subsidiaries is in material violation, breach or default of or under,
and consummation of the transactions herein contemplated and the fulfillment of
the terms of this Agreement and the Representative's Warrant will not conflict
with, or result in a breach of, any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien, charge or
encumbrance pursuant to the terms of, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which either 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 or any of its subsidiaries are subject, which would result in a material
change in the condition (financial or otherwise), business prospects, net worth
or properties of the Company or any of its subsidiaries, 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, or any statute or any
order, rule or regulation applicable to the Company or any of its subsidiaries
of any court or of any regulatory authority or other governmental body having
jurisdiction over the Company or any of its subsidiaries, which would have a
material adverse effect on the condition (financial or otherwise), business
prospects, net worth or properties of the Company or any of its subsidiaries.
(i) The Company and each of its subsidiaries has good and marketable
title in fee simple to all real property and has good and marketable title to
all personal properties and assets described in the Prospectus as owned by them,
free and clear of all liens, charges, encumbrances or restrictions, except such
as are not materially significant or important in relation to its business; all
of the leases and subleases under which the Company or any of its subsidiaries
is the lessor or sublessor of properties or assets or under which the Company or
any of its subsidiaries holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and, except as
described in the Prospectus, neither the Company nor any of its subsidiaries is
in default in any respect with respect to any of the terms or provisions of any
of such leases or subleases which would have a material adverse effect on the
condition (financial or otherwise), business prospects, net worth or properties
of the Company or any of its subsidiaries, and no claim has been asserted by
anyone adverse to rights of the Company or any of its subsidiaries as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or any of its
subsidiaries to continued possession of the leased or subleased premises or
assets under any such lease or sublease except as described or referred to in
the Prospectus, which would have a material adverse effect on the condition
(financial or otherwise), business prospects, net worth or properties of the
Company or any of its subsidiaries; and each of the Company and its subsidiaries
owns or leases all such properties described in the Prospectus as are necessary
to its operations as now conducted and, except as otherwise stated in the
Prospectus, as proposed to be conducted as set forth in the Prospectus.
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(j) Deloitte & Touche, LLP, who have given their report on certain
financial statements filed and to be filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
public accountants as required by the Act and the Rules and Regulations.
(k) The financial statements and schedules, together with related
notes, set forth in the Prospectus or the Registration Statement present fairly
the financial position and results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Said statements and schedules and related notes have been
prepared in accordance with generally accepted accounting principles applied on
a basis which is consistent during the periods involved.
(l) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, neither the Company nor any
of its subsidiaries has incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material to the
business of the Company and its subsidiaries, and there has not been any
material change in the capital stock of, or any incurrence of long-term debt by,
the Company and any of its subsidiaries or any issuance of options, warrants or
other rights to purchase the capital stock of the Company and any of its
subsidiaries or any adverse change or any development involving, so far as the
Company and any of its subsidiaries can now reasonably foresee, a prospective
adverse change in the condition (financial or otherwise), net worth, results of
operations, business, key personnel or properties of it which would be material
to the business or financial condition of the Company and any of its
subsidiaries, and neither the Company nor any of its subsidiaries has become
party to, and neither the business nor the property of the Company and any of
its subsidiaries has become the subject of, any material litigation whether or
not in the ordinary course of business.
(m) Except as set forth in the Prospectus, there is not now pending
nor, to the knowledge of the Company, threatened, any action, suit or proceeding
(including those related to environmental matters or discrimination on the basis
of age, sex, religion or race) to which the Company or any of its subsidiaries
is a party before or by any court or governmental agency or body, which, if
adversely determined, would have a material adverse effect on the condition
(financial or otherwise), business prospects, net worth or properties of the
Company and its subsidiaries; and, except as set forth in the Prospectus, no
labor disputes involving the employees of the Company or any of its subsidiaries
exist which, if adversely determined, would have a material adverse effect on
the condition (financial or otherwise), business prospects, net worth or
property of the Company and its subsidiaries.
(n) Except as disclosed in the Prospectus, each of the Company and
its subsidiaries has filed all necessary federal, state and foreign income and
franchise tax returns and has paid all taxes shown as due thereon other than
those being contested in good faith; and there is no tax deficiency which has
been or to the knowledge of the Company might be asserted against the Company or
any of its subsidiaries which has not been adequately reserved for on the
Company's consolidated balance sheet.
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(o) Each of the Company and its subsidiaries has sufficient licenses,
permits and other governmental authorizations currently required for the conduct
of its business or the ownership of its property as described in the Prospectus
and is in all material respects complying therewith and owns or possesses
adequate rights to use all material patents, patent applications, trademarks,
xxxx registrations, copyrights and licenses necessary for the conduct of such
business and has not received any notice of conflict with the asserted rights of
others in respect thereof. To the best knowledge of the Company, none of the
activities or business of the Company or any of its subsidiaries is in violation
of, or causes the Company or any of its subsidiaries to violate, any law, rule,
regulation or order of the United States, any state, county or locality, or of
any agency or locality, the violation of which would have a material adverse
effect on the condition (financial or otherwise), business prospects, net worth
or properties of the Company and its subsidiaries.
(p) Neither the Company nor any of its subsidiaries has directly or
indirectly, at any time (i) made any contributions to any candidate for foreign
political office, or if made, failed to disclose fully any such contribution
made in violation of law, or (ii) made any payment to any state, federal or
foreign governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments or contributions required or
allowed by applicable law. The Company's and its subsidiaries' internal
accounting controls and procedures are sufficient to cause the Company and its
subsidiaries to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.
(q) On the Closing Dates (as defined in Section 2(c)), all transfer
or other taxes (including franchise, capital stock or other tax, other than
income taxes imposed by any jurisdiction), if any, which are required to be paid
in connection with the sale and transfer of the Shares to the Underwriters
hereunder will have been fully paid or provided for by the Company, and all laws
imposing such taxes will have been fully complied with.
(r) All contracts and other documents of the Company and its
subsidiaries which are, under the Rules and Regulations, required to be filed as
exhibits to the Registration Statement have been so filed.
(s) Neither the Company nor any of its subsidiaries has taken or will
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Shares or to facilitate the
sale or resale of the Shares.
(t) Except for this Agreement and other agreements with the
Representatives, the Company has not entered into any agreement pursuant to
which any person is entitled either directly or indirectly to compensation from
the Company for services as a finder in connection with the proposed public
offering.
(u) The Shares have been approved for quotation on the American Stock
Exchange under the symbol "MQ".
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(v) Except for such rights which have been waived or satisfied, no
holder of securities of the Company has any rights to the registration of
securities of the Company because of the filing of the Registration Statement or
otherwise in connection with the sale of the Shares contemplated hereby.
(w) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940.
(x) Each of the Company and its subsidiaries (i) is in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), except where such noncompliance will not in
the aggregate have a material adverse effect on the condition (financial or
otherwise), business prospects, net worth or properties of the Company and its
subsidiaries, and (ii) has received all necessary permits, licenses or other
approvals required of it under applicable Environmental Laws to conduct its
respective business and is in compliance with all terms and conditions of any
such permit, license or approval, except where such noncompliance, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals will not in the
aggregate have a material adverse effect on the condition (financial or
otherwise), business prospects, net worth or properties of the Company and its
subsidiaries.
(y) Each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that
is maintained, administered or contributed to by the Company or any of its
subsidiaries for employees or former employees of the Company or any of its
subsidiaries has been maintained in material compliance with its respective
terms and the requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Internal Revenue Code of
1986, as amended (the "Code"). No prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to
any such plan, excluding transactions effected pursuant to a statutory or
administrative exemption. For each such plan that is subject to the funding
rules of Section 412 of the Code or Section 302 of ERISA, no "accumulated
funding deficiency," as defined in Section 412 of the Code, has been incurred,
whether or not waived, and the fair market value of the assets of each such plan
(excluding for these purposes accrued but unpaid contributions) exceeded the
present value of all benefits accrued under such plan determined using
reasonable actuarial assumptions.
(z) Each of the Company and its subsidiaries maintains a system of
internal accounting controls that, taken as a whole, are sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability;
and (iii) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
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(aa) Each of the Company and its subsidiaries maintains insurance of
the types and in the amounts generally deemed adequate for its respective
business, including, without limitation, insurance covering real and personal
property owned or leased by it against theft, damage, destruction, acts of
vandalism and all other material risks customarily insured against, all of which
insurance is in full force and effect.
(bb) Each of the Company and its subsidiaries has, owns or possesses
exclusive rights to use all material patents, patent applications, trademarks,
xxxx registrations, copyrights and material licenses necessary for the conduct
of its business and has not received any notice of conflict with the asserted
rights of others in respect thereof.
(cc) To the Company's knowledge, there are no affiliations or
associations between any member of the National Association of Securities
Dealers, Inc. ("NASD") and any of the Company's officers, directors or
securityholders, except as set forth in the Registration Statement.
2. Purchase, Delivery and Sale of the Shares.
(a) Subject to the terms and conditions of this Agreement, and upon
the basis of the representations, warranties and agreements herein contained,
the Company agrees to issue and sell to the Underwriters, and the Underwriters
agree, severally and not jointly, to buy from the Company at $____ per Share at
the place and time hereinafter specified, the number of Shares set forth
opposite each Underwriter's name in Schedule I hereto (the "Firm Shares").
Delivery of the Firm Shares against payment therefor shall take place
at the offices of VMR Capital Markets, U.S., 1901 Avenue of the Stars, Xxxxx
000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (or at such other place as may be designated
by agreement between you and the Company) at 10:00 a.m. New York time on
___________, 2001, or at such other time and date, not later than three business
days thereafter, as you may designate, such time and date of payment and
delivery for the Firm Shares being herein called the "First Closing Date." Time
shall be of the essence and delivery at the time and place specified in this
subsection (a) is a further condition to the obligations of the Underwriters
hereunder.
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants the Underwriters an option to
purchase all or any part of an aggregate of 180,000 additional Shares at the
same price per Share as the Underwriters pay for the Firm Shares being sold
pursuant to the provisions of subsection (a) of this Section 2 (such additional
Shares being referred to herein as the "Option Shares"). This option may be
exercised on one occasion within 45 days after the Effective Date upon notice by
you to the Company advising the Company as to the amount of Option Shares as to
which the option is being exercised, the names and denominations in which the
certificates for such Option Shares are to be registered and the time and date
when such certificates are to be delivered. Such time and date shall be
determined by you but shall not be earlier than four and not later than five
full business days after the exercise of said option, nor in any event prior to
the First Closing Date, and such time and date is referred to herein as the
"Option Closing Date." Delivery of the Option Shares against payment therefor
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shall take place at the offices of VMR Capital Markets, U.S., 0000 Xxxxxx xx xxx
Xxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000. Time shall be of the essence
and delivery at the time and place specified in this subsection (b) is a further
condition to the obligations of the Underwriters hereunder.
The Option granted hereunder may be exercised only to cover
over-allotments in the sale by the Underwriters of Firm Shares referred to in
subsection (a) above.
(c) The Company will make the certificates for the Shares to be
purchased by the Underwriters hereunder available to you for checking at least
two full business days prior to the First Closing Date or the Option Closing
Date (which are collectively referred to herein as the "Closing Dates" and
individually as a "Closing Date"), as the case may be. The certificates shall be
in such names and denominations as you may request, at least two full business
days prior to the relevant Closing Dates. Time shall be of the essence and the
availability of the certificates at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriters.
Definitive certificates in negotiable form for the Shares to be
purchased by the Underwriters hereunder will be delivered by the Company to you
for the several accounts of the Underwriters against payment of the purchase
price by you, at your option, by certified or bank cashier's checks in New York
Clearing House funds or by wire transfer, payable to the order of the Company.
In addition, in the event the Underwriters exercise the option to
purchase from the Company all or any portion of the Option Shares pursuant to
the provisions of subsection (b) above, payment for such Option Shares shall be
made to or upon the order of the Company by you, for the several accounts of the
Underwriters at your option, by certified or bank cashier's checks payable in
New York Clearing House funds or by wire transfer, at the offices of VMR Capital
Markets, U.S., 1901 Avenue of the Stars, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx
00000 at the time and date of delivery of such Option Shares as required by the
provisions of subsection (b) above, against receipt of the certificates for such
Option Shares by you, for the several accounts of the Underwriters registered in
such names and in such denominations as you may request.
It is understood that the Underwriters propose to offer the Shares to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
3. Covenants of the Company.
The Company covenants and agrees with the Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective and, upon notification from the Commission that
the Registration Statement has become effective, will so advise you and will not
at any time, whether before or after the Effective Date, file any amendment to
the Registration Statement or supplement to the Prospectus of which you shall
not previously have been advised and furnished with a copy or to
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which you or your counsel shall have reasonably objected in writing or which is
not in compliance with the Act and the Rules and Regulations. At any time prior
to the later of (A) the completion by you of the distribution of the Shares
contemplated hereby (but in no event more than nine months after the Effective
Date) and (B) 25 days after the Effective Date, the Company will prepare and
file with the Commission, promptly upon your request, any amendments or
supplements to the Registration Statement or Prospectus which, in your
reasonable opinion, may be necessary or advisable in connection with the
distribution of the Shares.
Promptly after either you or the Company is advised thereof, you will
advise the Company or the Company will advise you, as the case may be, and
confirm the advice in writing, of the receipt of any comments of the Commission,
of the effectiveness of any post-effective amendment to the Registration
Statement, of the filing of any supplement to the Prospectus or any amended
Prospectus, of any request made by the Commission for amendment of the
Registration Statement or for supplementing of the Prospectus or for additional
information with respect thereto, of the issuance by the Commission or any state
or regulatory body of any stop orders or other order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus or the Prospectus, or of the
suspension of the qualification of the Shares for offering in any jurisdiction,
or the institution of any proceedings for any of such purposes, and will use its
best efforts to prevent the issuance of any such order and, if issued, to obtain
as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriters and selected dealers to use the Prospectus in connection with
the sale of the Shares for such period not to exceed nine months from the
Effective Date as in the reasonable opinion of counsel for you the use thereof
is required to comply with the applicable provisions of the Act and the Rules
and Regulations. In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with sales by
an underwriter or dealer, of any event of which the Company has knowledge and
which materially affects the Company or the Securities, or which in the opinion
of counsel for the Company or counsel for the Underwriters should be set forth
in an amendment to the Registration Statement or a supplement to the Prospectus
in order to make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be delivered to
a purchaser of the Shares, or in case it shall be necessary to amend or
supplement the Prospectus to comply with the Act or with the Rules and
Regulations, the Company will notify you promptly and forthwith prepare and
furnish to you copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably request, in
order that the Prospectus, as so amended or supplemented, will not contain any
untrue statement of a material fact or omit to state any material facts
necessary in order to make the statements in the Prospectus, in the light of the
circumstances under which they are made, not misleading. The preparation and
furnishing of any such amendment or supplement to the Registration Statement or
amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriters, except that in case the Underwriters are
required, in connection with the sale of the Shares, to deliver a Prospectus
nine months or more after the Effective Date, the Company will upon request of
and at your expense, amend or supplement the Registration Statement and
Prospectus and furnish the
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Underwriters with reasonable quantities of prospectuses complying with Section
10(a)(3) of the Act.
(b) The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations thereunder in connection with the offering and issuance of
the Shares.
The Company will use its best efforts to qualify or register the
Securities for sale under the securities or "blue sky" laws of such
jurisdictions as you may have designated in writing prior to the execution
hereof and will make such applications and furnish such information to counsel
for the Underwriters as may be required for that purpose and to comply with such
laws, provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent to service
of process in any jurisdiction. The Company will, from time to time, prepare and
file such statements and reports as are or may be required to continue such
qualification in effect for so long a period as you may reasonably request.
Legal fees for such qualifications shall be itemized based on the time expended
and costs incurred, shall be reasonable and shall not in any event exceed
$5,000.00, exclusive of filing fees.
(c) The Company will instruct its transfer agent to provide you with
copies of the Depository Trust Company ("DTC") stock transfer sheets on a weekly
basis for a period of six months from the First Closing Date and on a monthly
basis thereafter for six additional months.
(d) The Company will use its best efforts to cause a Registration
Statement under the Exchange Act to be declared effective on the Effective Date.
(e) For so long as the Company is a reporting company under either
Section 12(g), 13 or 15(d) of the Exchange Act, the Company, at its expense,
will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail and
at its expense, will furnish to you during the period ending five years from the
date hereof, (i) as soon as practicable after the end of each fiscal year, a
balance sheet of the Company and any subsidiaries as at the end of such fiscal
year, together with statements of income, stockholders' equity and cash flows of
the Company and any subsidiaries as at the end of such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of independent accountants; (ii) as soon as they are available, a copy of all
reports (financial or other) mailed to security holders; (iii) as soon as they
are available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission; and (iv) such other information of a
public nature as you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will deliver to you at or before the First Closing
Date one signed copy of the Registration Statement including all financial
statements and exhibits filed therewith, and of all amendments thereto. The
Company will deliver to or upon your order, from time to
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time until the Effective Date as many copies of any Preliminary Prospectus filed
with the Commission prior to the Effective Date as the Underwriters may
reasonably request. The Company will deliver to you on the Effective Date and
thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as the Underwriters may from time to time
reasonably request.
(h) The Company will make generally available to its security holders
and deliver to you as soon as it is practicable to do so, but in no event later
than 90 days after the end of 12 months after its current fiscal quarter, an
earnings statement (which need not be audited) covering a period of at least 12
consecutive months beginning after the Effective Date which shall satisfy the
requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Shares substantially for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Shares and the application of the proceeds therefrom as may be
required pursuant to Rule 463 of the Rules and Regulations.
(j) The Company will, promptly upon your request, prepare and file
with the Commission any amendments or supplements to the Registration Statement,
preliminary Prospectus or Prospectus and take any other action, which in the
opinion of Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to you, may be reasonably
necessary or advisable in connection with the distribution of the Shares and
will use its best efforts to cause the same to become effective as promptly as
possible.
(k) Prior to the Effective Date, the Company will cause all of the
Company's stockholders, option holders, convertible security holders, warrant
holders, directors and executive officers to enter into a written agreement with
the Representatives, which, among other things, shall provide that for a period
of one hundred eighty (180) days following the Effective Date such persons will
not sell, assign, hypothecate or pledge (except for any existing pledges) any of
the shares of Common Stock of the Company owned by them on the Effective Date,
or subsequently acquired by the exercise of any options or warrants or
conversion of any convertible security of the Company held by them on the
Effective Date directly or indirectly, except for intra-family transfers or
transfers for estate planning purposes, without prior written consent of VMR
Capital Markets, U.S., which consent may be withheld in your sole discretion and
such stockholders will permit all certificates evidencing those shares to be
stamped with an appropriate restrictive legend, and will cause the transfer
agent for the Company to note such restrictions on the transfer books and
records of the Company.
(l) The Company shall, upon the initial filing of the Registration
Statement, make all filings required to obtain approval for the inclusion of the
Shares for quotation on the American Stock Exchange and will use its best
efforts to effect concurrently with the effectiveness of the Registration
Statement and maintain the aforesaid approval for at least five (5) years from
the date of this Agreement.
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(m) The Company represents that it has not taken, and agrees that it
will not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Shares or to facilitate the
sale or resale of the Securities.
(n) The Company shall retain a public relations firm acceptable to
you, and shall continue to retain such firm, or any alternate firm acceptable to
you, for a minimum period of twelve (12) months.
(o) The Company will reserve and keep available that maximum number of
its authorized but unissued securities which are issuable upon exercise of the
Representative's Warrant outstanding from time to time.
(p) The Company shall deliver to you, at the Company's expense, three
(3) bound volumes in form and content acceptable to you, containing the
Registration Statement and all exhibits filed therewith, and all amendments
thereto, and all other material correspondence, filings, certificates and other
documents filed and/or delivered in connection with this offering. The Company
shall use its best efforts to deliver such volumes with six (6) months of the
First Closing Date.
4. Conditions of Obligations of Representatives
The obligations of the Underwriters to purchase and pay for the Shares
which they have agreed to purchase hereunder are subject to the accuracy (as of
the date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and you
shall have received notice thereof not later than 5:00 p.m., New York time, on
the date of this Agreement, or at such later time or on such later date as to
which you may agree in writing; on the Closing Dates, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that or any similar purpose shall have been instituted or shall
be pending or, to the knowledge of any Underwriter or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to you; and no
stop order shall be in effect denying or suspending effectiveness of the
Registration Statement nor shall any stop order proceedings with respect thereto
be instituted or pending or threatened under the Act.
(b) At the First Closing Date, you shall have received the opinion,
dated as of the First Closing Date, of XxXxxxx & Xxxxx, counsel for the Company,
in form and substance reasonably satisfactory to counsel for you, to the effect
that:
(i) each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the
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jurisdiction of its incorporation or organization and is duly qualified or
licensed to do business as a foreign corporation in good standing in each other
jurisdiction in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where failure to so qualify
will not have a material adverse effect on the condition (financial or
otherwise), business prospects, net worth o properties of the Company and its
subsidiaries. The Company has the corporate power to own, lease and operate its
properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under this Agreement, and the
Representative's Warrant; each of the Company's subsidiaries has the corporate
power to own, lease and operate its properties and to conduct its business as
described in the Prospectus.
(ii) the authorized capitalization of the Company as of the date
of the Prospectus was as set forth in the Prospectus; all of the shares of the
Company's outstanding stock requiring authorization for issuance by the
Company's Board of Directors have been duly authorized and validly issued, are
fully paid and non-assessable and conform in all material respects to the
description thereof contained in the Prospectus; to our knowledge the
outstanding shares of Common Stock of the Company have not been issued in
violation of the preemptive rights of any stockholder and the stockholders of
the Company do not have any preemptive rights; there are no restrictions upon
the voting or transfer of, any of the Shares; the Common Stock, and the
Representative's Warrant conform in all material respects to the respective
descriptions thereof contained in the Prospectus; the Shares to be issued as
contemplated in the Registration Statement and this Agreement have been duly
authorized and, when paid, will be validly issued, fully paid and non-assessable
and free of preemptive rights contained in the Company's certificate of
incorporation or by-laws, or any other document, instrument or agreement known
to counsel; a sufficient number of shares of Common Stock has been reserved for
issuance upon exercise of the Representative's Warrant; neither the filing of
the Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any registration rights or other
rights, other than those contemplated by the Representative's Warrant or which
have been waived or satisfied, for or relating to the registration of the
Securities; except as set forth in the Registration Statement all the issued and
outstanding shares of capital stock of each of the Company's subsidiaries are
owned of record and beneficially by the Company, free and clear of any security
interests, liens, encumbrances, equities or other claims and to our knowledge
there are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in any of the Company's subsidiaries.
(iii) this Agreement and the Representative's Warrant have been
duly and validly authorized, executed and delivered by the Company, and assuming
due execution and delivery by you of this Agreement and the Representative's
Warrant, all of such agreements are, or when duly executed will be, the valid
and legally binding obligations of the Company except as enforceability may be
limited by bankruptcy, insolvency, moratorium or other laws affecting the rights
of creditors, or by general equitable principles; provided that no opinion need
be expressed as to the enforceability of the indemnity provisions contained in
Section 6 or the contribution provisions contained in Section 7 of this
Agreement;
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(iv) the certificates evidencing the Shares are in valid and
proper legal form; the Representative's Warrant will be exercisable for shares
of Common Stock of the Company in accordance with the terms of the
Representative's Warrant and at the price therein provided for; the shares of
Common Stock of the Company issuable upon exercise of the Representative's
Warrant have been duly authorized and reserved for issuance upon such exercise,
and such shares, when issued upon such exercise in accordance with the terms of
the Representative's Warrant and when the price is paid shall be fully paid and
non-assessable;
(v) Such counsel knows of no pending or threatened legal or
governmental proceedings to which the Company or any of its subsidiaries is a
party which are required to be described or referred to in the Registration
Statement which are not so described or referred to;
(vi) The execution and delivery of this Agreement and the
Representative's Warrant and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions herein or therein
contemplated will not result in a violation of, or constitute a default under,
the certificate of incorporation or by-laws of the Company or any of its
subsidiaries, or in a violation of or default under any material obligation,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any of the contracts, indentures, mortgages, loan
agreements, leases, joint ventures or other agreements or instruments to which
the Company or any of its subsidiaries is a party that are filed as Exhibits to
the Registration Statement or otherwise known to counsel;
(vii) The Registration Statement has become effective under the
Act, and to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement is in effect, no proceedings for that purpose have
been instituted or are pending before, or threatened by, the Commission and the
Registration Statement and the Prospectus (except, in the case of both the
Registration Statement and any Amendment thereto, and the Prospectus and any
supplement thereto for the financial statements and notes and schedules thereto,
and other financial information or statistical data contained therein, or
omitted therefrom, as to which such counsel need express no opinion) comply as
to form in all material respects with the applicable requirements of the Act and
the Rules and Regulations;
(viii) All descriptions in the Registration Statement and the
Prospectus, and any amendment or supplement thereto, of contracts, plans,
options and other documents are accurate in all material respects and fairly
present the information required to be shown, and such counsel does not know of
any contracts or documents of a character required to be summarized or described
therein or to be filed as exhibits thereto which are not so summarized,
described or filed;
(ix) No authorization, approval, consent or license of any
governmental or regulatory authority or agency is necessary in connection with
the authorization, issuance, transfer, sale or delivery of the Securities by the
Company, in connection with the execution, delivery and performance of this
Agreement or the Representative's Warrant by the Company or in connection with
the taking of any action contemplated herein or therein, or the issuance of the
Representative's Warrant or the shares of Common Stock underlying the
Representative's
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Warrant, other than registration or qualification of the Securities under
applicable state or foreign securities or blue sky laws (as to which such
counsel need express no opinion) and registration under the Act; and
(x) The statements in the Registration Statement under the
captions "Incentive Plans" and "Description of Capital Stock," to the extent
that such statements constitute a matter of law or legal conclusion have been
reviewed by such counsel and are correct in all material respects; and
(xi) To such counsel's knowledge, neither the Company nor any of
its subsidiaries is presently in violation of its respective charter or by-laws,
or in breach or default under any lease, instrument, license, permit or any
other agreement to which the Company or any of its subsidiaries is bound or to
which any property or assets of the Company or any of its subsidiaries is the
subject, where the consequences of such violation, breach or default would have
a material adverse effect on the condition (financial or otherwise), business
prospects, net worth or properties of the Company and its subsidiaries;
(xii) The Common Stock has been approved for listing on the
American Stock Exchange.
(xiii) Neither the Company nor any of its subsidiaries is, nor
will they be after receipt of payment for the Shares be an "investment company"
within the meaning of Investment Company Act.
(xiv) Except as disclosed in the Prospectus under the caption
"Shares Eligible for Future Use," to the best knowledge of such counsel, there
are no persons with registration rights to have any equity or debt securities
registered for sale under the Registration Statement or included in the offering
contemplated by this Agreement.
(xv) To the best knowledge of such counsel, neither the Company
nor any of its subsidiaries is not in violation of its charter or by-laws or any
law, administrative regulation or administrative or court decree applicable to
the Company or any of its subsidiaries or is in default in the performance and
observance of any obligation, agreement, covenant or condition contained in any
material existing instrument, except in each such case for such violations or
defaults as would not, individually or in the aggregate, have a material adverse
effect on the financial condition of the Company and its subsidiaries.
Such counsel has participated in the preparation of the
Registration Statement and the Prospectus and although such counsel has not
reviewed the accuracy or completeness of the statements contained in the
Registration Statement or Prospectus nothing has come to the attention of such
counsel that caused such counsel to believe that the Registration Statement or
any amendment thereto at the time it became effective contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that the Prospectus or any supplement thereto contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
statements therein in light of the circumstances under which they were made not
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misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes and schedules thereto and other financial
information and statistical data contained therein, as to which such counsel
need express no opinion);
In rendering such opinion, such counsel may rely upon certificates of any
officer of the Company or public officials as to matters of fact; and in
rendering such opinion may rely as to all matters of law other than the law of
the United States or of the State of California upon opinions of counsel
satisfactory to you, in which case the opinion shall state that they have no
reason to believe that you and they are not entitled to so rely.
(c) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus, and other related matters
shall be reasonably satisfactory to or approved by Xxxxxxxxxxx & Xxxxxxxx LLP,
counsel to the Underwriters, and you shall have received from such counsel a
signed opinion, dated as of the First Closing Date, with respect to the validity
of the issuance of the Shares, the form of the Registration Statement and
Prospectus (other than the financial statements and other financial data
contained therein), the execution of this Agreement and other related matters as
you may reasonably require. The Company shall have furnished to counsel for the
Underwriters such documents as they may reasonably request for the purpose of
enabling them to render such opinion.
(d) You shall have received a letter on and as of the Effective Date
and again on and as of the First Closing Date, in each instance describing
procedures carried out to a date within five (5) days of the date of the letter,
from Deloitte & Touche, LLP, independent public accountants for the Company,
substantially in the form approved by you.
(e) At each of the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and correct
with the same effect as if made on and as of such Closing Date, and the Company
shall have performed all of its obligations hereunder and satisfied all the
conditions on its part to be satisfied at or prior to such Closing Date; (ii)
the Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all material
respects conform to the requirements thereof, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statements of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made; (iii)
there shall have been, since the respective dates as of which information is
given, no material adverse change in the business, properties, condition
(financial or otherwise), results of operations, capital stock, long-term or
short-term debt or general affairs of the Company from that set forth in the
Registration Statement and the Prospectus, except changes which the Registration
Statement and Prospectus indicate might occur after the Effective Date and the
Company shall not have incurred any material liabilities nor entered into any
agreement not in the ordinary course of business other than as referred to in
the Registration Statement and Prospectus; and (iv) except as set forth in the
Prospectus, no action, suit or proceeding at law shall be pending or threatened
against the
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Company which would be required to be disclosed in the Registration Statement,
and no proceedings shall be pending or threatened against the Company before or
by any commission, board or administrative agency in the United States or
elsewhere, wherein an unfavorable decision, ruling or finding would materially
and adversely affect the business, property, condition (financial or otherwise),
results of operations or general affairs of the Company. In addition, you shall
have received, at the First Closing Date, a certificate signed by the President
and the principal financial or accounting officer of the Company, dated as of
the First Closing Date, evidencing compliance with the provisions of this
subsection (e).
(f) Upon exercise of the option provided for in Section 2(b) hereof,
the obligations of the several Underwriters to purchase and pay for the Option
Shares referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the
Option Closing Date, no stop order suspending the effectiveness thereof shall
have been issued, and no proceedings for that purpose shall have been instituted
or shall be pending, or, to your knowledge or the knowledge of the Company,
shall be contemplated by the Commission, and any reasonable request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to the
Underwriters.
(ii) At the Option Closing Date there shall have been delivered
to you the signed opinion of XxXxxxx & Xxxxx, counsel for the Company dated as
of the Option Closing Date, in form and substance reasonably satisfactory to
Xxxxxxxxxxx & Xxxxxxxx, LLP, counsel to the Underwriters, which opinion shall be
substantially the same in scope and substance as the opinion furnished to you at
the First Closing Date pursuant to Section 4(b) hereof, except that such
opinion, where appropriate, shall cover the Option Shares rather than the Firm
Shares. If the First Closing Date is the same as the Option Closing Date, such
opinions may be combined.
(iii) At the Option Closing Date, there shall have been delivered
to you a certificate of the President and the principal financial or accounting
officer of the Company dated the Option Closing Date, in form and substance
reasonably satisfactory to Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to the
Underwriters, substantially the same in scope and substance as the certificates
furnished to you at the First Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been delivered
to you a letter in form and substance satisfactory to you from Deloitte &
Touche, LLP, dated the Option Closing Date and addressed to you, confirming the
information in their letter referred to in Section 4(d) hereof as of the date
thereof and stating that, without any additional investigation required, nothing
has come to their attention during the period from the ending date of their
review referred to in said letter to a date not more than five (5) days prior to
the Option Closing Date which would require any change in said letter if it were
required to be dated the Option Closing Date.
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(v) All proceedings taken at or prior to the Option Closing Date
in connection with the sale and issuance of the Option Shares shall be
reasonably satisfactory in form and substance to you, and you and Xxxxxxxxxxx &
Xxxxxxxx LLP, counsel to the Underwriters, shall have been furnished with all
such documents and certificates as you may request in connection with this
transaction in order to evidence the accuracy and completeness of any of the
representations, warranties or statements of the Company and its compliance with
any of the covenants or conditions contained therein.
(g) If any of the conditions herein provided for in this Section shall
not have been completely fulfilled as of the date indicated, this Agreement and
all obligations of the Underwriters under this Agreement may be canceled at, or
at any time prior to, each Closing Date by your notifying the Company of such
cancellation in writing or by telegram at or prior to the applicable Closing
Date. Any such cancellation shall be without liability of any Underwriter to the
Company except as otherwise provided herein.
5. Conditions of the Obligations of the Company.
The obligation of the Company to sell and deliver the Shares is
subject 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 on such
later date or time as you and the Company may agree in writing.
(b) On the Closing Dates, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the Act
or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company, provided for in this
Section have been fulfilled on the First Closing Date but are not fulfilled
after the First Closing Date and prior to the Option Closing Date, then only the
obligation of the Company to sell and deliver the Option Shares on exercise of
the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage, liability
or expense, as incurred, to which such Underwriter or such controlling person
may become subject, under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, or at common law or otherwise (including
in settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment thereto,
including any information deemed to be a part thereof pursuant to Rule 430A or
Rule 434 under
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the Securities Act, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading; or (ii) upon any untrue statements or alleged untrue statement
of a material fact contained in any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading; or
(iii) in whole or in part upon any inaccuracy in the representations and
warranties of the Company contained herein, or (iv) in whole or in part upon any
failure of the Company to perform its obligations hereunder or under law, or (v)
any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Shares or the
offering contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon any
matter covered by clause (i) or (ii) above, provided that the Company shall not
be liable under this clause (v) to the extent that a court of competent
jurisdiction shall have determined by a final judgment that such loss, claim,
damage, liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by such Underwriter through its bad faith
or willful misconduct; and to reimburse each Underwriter and each such
controlling person for any and all expenses as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the foregoing
indemnity agreement shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Representatives expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to the provision hereunder and a copy of the Prospectus (as
then amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Shares to such person, and
if the Prospectus (as so amended or supplemented) would have cured the defect
giving rise to such loss, claim, damage, liability or expense. The indemnity
agreement set forth in this Section 6(a) shall be in addition to any liabilities
that the Company may otherwise have.
(b) Indemnification of the Company and Its Directors and Officers.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred to which the Company or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions
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in respect thereof as contemplated below) arises out of or is based upon any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto, or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company by the Representatives expressly for use therein; and
to reimburse the Company, or any such director, officer or controlling person
for any legal and other expense reasonably incurred by the Company, or any such
director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. The Company hereby acknowledges that the only
information that the Underwriters have furnished to the Company expressly for
use in the Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) are the statements set forth with
respect to the selling commission set forth on the cover page of this
Prospectus, the material set forth under the heading "Underwriting" in the
Prospectus and the identity of counsel to the Underwriters under the heading
"Legal Matters"; and the Underwriters confirm that such statements are correct.
The indemnity agreement set forth in this Section 6(b) shall be in addition to
any liabilities that each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 6 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 6, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 6 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses
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subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the provisions to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (together with local counsel),
approved by the indemnifying party representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) Settlements. The indemnifying party under this Section 6 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
6(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
7. Contribution.
If the indemnification provided for in Section 6 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party of any losses, claims, damages, liabilities or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount paid or payable by such indemnified party, as incurred, as a
result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, from the offering of the Shares pursuant to this Agreement or (ii)
if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company, on the one hand, and the Underwriters, on the other hand, in connection
with the statements or omissions or inaccuracies in the representations and
warranties herein which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other hand, in connection with the offering of the Shares pursuant to this
Agreement shall be deemed to be in the same respective proportions as
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the total net proceeds from the offering of the Shares pursuant to this
Agreement (before deducting expenses) received by the Company, and the total
underwriting discount received by the Underwriters, in each case as set forth on
the front cover page of the Prospectus bear to the aggregate initial public
offering price of the Shares as set forth on such cover. The relative fault of
the Company, on the one hand, and the Underwriters, on the other hand, shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company, on
the one hand, or the Underwriters, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 6(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 7; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 6(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 7.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Shares underwritten by it
and distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule I. For
purposes of this Section 7, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange Act shall have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company with the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the sale of
the Shares to the Underwriters is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company,
including but not limited to the fees and expenses of counsel to the Company and
of the Company's accountants; the costs and expenses
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incident to the preparation, printing, filing and distribution under the Act of
the Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus and the
Prospectus, as amended or supplemented, the fee of the NASD in connection with
the filing required by the NASD relating to the offering of the Shares
contemplated hereby; all expenses, including reasonable fees (but not in excess
of the amount set forth in Section 3(b)) and disbursements of counsel to the
Underwriters, in connection with the qualification of the Shares under the State
Securities or Blue Sky Laws which you shall designate; the cost of printing and
furnishing to you copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, this Agreement, and the Blue Sky Memorandum; the
cost of printing the certificates representing the Securities, costs of any
luncheons, functions, special expenses and all road show costs and expenses, the
expenses of Company due diligence meetings and presentations, (but not of any
Underwriter or Underwriter's counsel in connection therewith); DTC Trading
Service; and the cost of preparing bound volumes as set forth in Section 3(q)
hereof; the expense of placing one or more "tombstone" advertisements in the
national edition of the Wall Street Journal as directed by you and such other
expenses for advertising undertaken at the Company's request, including graphic
slide costs. In addition, the Company shall also pay for a background search of
its officers and management, and if so requested by you, the expense of the
preparation of an Internet-based road show. The Company shall pay any and all
taxes (including any transfer, franchise, capital stock or other tax imposed by
any jurisdiction) on sales to the Underwriters hereunder. The Company will also
pay all costs and expenses incident to the furnishing of any amended Prospectus
or of any supplement to be attached to the Prospectus as called for in Section
3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall at the
First Closing Date pay to you the balance of a non-accountable expense allowance
3.0% of the gross proceeds of the offering less $50,000, all of which has been
paid. In the event the over-allotment option is exercised in part or in full,
the Company shall pay to you at the Option Closing Date an additional amount
equal to 3.0% of the gross proceeds received upon exercise of the over allotment
option. In the event the transactions contemplated hereby are not consummated
for any reason, the Company shall be liable for your actual accountable
out-of-pocket expenses (with credit given to the amount heretofore paid),
including legal fees. If the contemplated transactions are not consummated by
reason of breach by the Company of this Agreement or of any representation,
warranty, covenant or condition contained herein, the Company shall be liable
for your accountable out-of-pocket expenses. Any unaccounted for portion of the
$50,000 previously advanced to VMR Capital Markets U.S. for non-accountable
expenses will be returned to the Company in the event the offering is not
consummated.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from any Underwriter or from any other person for
services as a finder in connection with the proposed offering, and the Company
agrees to indemnify and hold harmless each Underwriter, and the Underwriters
agree to indemnify and hold harmless, severally and not jointly, the Company
from and against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be limited
to, all reasonable costs of defense and investigation and all reasonable
attorneys' fees), to which the indemnified party may become subject insofar as
such losses, claims, damages or liabilities (or actions in
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respect thereof) arise out of or are based upon the claim of any person (other
than an employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by reason of
such person's or entity's influence or prior contact with the indemnifying
party.
9. Default of One or More of the Several Underwriters.
If, on the First Closing Date or the Option Closing Date, as the case
may be, any one or more of the several Underwriters fail or refuse to purchase
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriters agreed but failed
or refused to purchase does not exceed 10% of the aggregate number of the Shares
to be purchased on such date, the other Underwriters shall be obligated,
severally, in the proportions that the number of Firm Shares set forth opposite
their respective names on Schedule I bears to the aggregate number of Firm
Shares set forth opposite the names of all such non-defaulting Underwriters, or
in such other proportions as may be specified by the Representatives with the
consent of the non-defaulting Underwriters, to purchase the Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date. If, on the First Closing Date or the Option Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares and the aggregate number of Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Shares to be purchased on
such date, and arrangements satisfactory to the Representatives and the Company
for the purchase of such Shares are not made within 48 hours after such default,
this Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 6, Section 7 and Section 8 shall at all
times be effective and shall survive such termination. In any such case either
the Representatives or the Company shall have the right to postpone the First
Closing Date or the Option Closing Date, as the case may be, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other document or arrangements
may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
9. Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
10. Effective Date.
The Agreement shall become effective upon its execution, except that
you may, at your option, delay its effectiveness until the earlier to occur of
10:00 A.M., New York time on the first full business day following the Effective
Date as you in your discretion shall first commence the initial public offering
by you of any of the Shares. The time of the initial public offering shall mean
the time of release by you of the first newspaper advertisement with respect to
the Shares, or the time when the Shares are first generally offered by you to
dealers by letter or telecopier, whichever shall first occur. This Agreement may
be terminated by you at any time before it becomes effective as provided above,
except that Sections 6, 7, 8, 13, 14, 15 and 16 shall remain in effect
notwithstanding such termination.
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11. Termination.
(a) This Agreement, except for Sections 6, 7, 8, 13, 14, 15 and 16,
may be terminated at any time prior to the First Closing Date, and the option
referred to in Section 2(b), if exercised, may be canceled, at any time prior to
the Option Closing Date, by you if in your judgment it is impracticable to offer
for sale or to enforce contracts made by you for the resale of the Shares agreed
to be purchased hereunder, by reason of (i) the Company having sustained a
material loss, whether or not insured, by reason of fire, earthquake, flood,
accident or other calamity, or from any labor dispute or court or government
action, order or decree, (ii) trading in securities on the American Stock
Exchange having been suspended or limited, (iii) material governmental
restrictions having been imposed on trading in securities generally which are
not in force and effect on the date hereof, (iv) a banking moratorium having
been declared by federal of New York State authorities, (v) an outbreak of major
international hostilities or other national or international calamity having
occurred, (vi) the passage by the Congress of the United States or by any state
legislative body of similar impact, of any act or measure, or the adoption of
any orders, rules or regulations by any governmental body or any authoritative
accounting institute or board, or any governmental executive, which is
reasonably believed likely by you to have a material adverse impact on the
business, financial condition or financial statements of the Company, (vii) any
material adverse change in the financial or securities markets beyond normal
fluctuations in the United States having occurred since the date of this
Agreement, or (viii) any material adverse change having occurred, since the
respective dates for which information is given in the Registration Statement
and Prospectus, in the earnings, business, prospects or general condition of the
Company, (financial or otherwise), whether or not arising in the ordinary course
of business.
(b) If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11 or in Section 9, the
Company shall be promptly notified by you, by telephone or facsimile
transmission, confirmed by letter.
12. Representative's Warrant.
On the First Closing Date, the Company will issue to you, for a
consideration of $120.00 and upon the terms and conditions set forth in the form
of Representative's Warrant (the "Representative's Warrant"), annexed as an
exhibit to the Registration Statement, the Representative's Warrant to purchase
120,000 Shares. In the event of conflict in the terms of this Agreement and the
Representative's Warrant, the language of the Representative's Warrant shall
control.
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13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations, warranties
and other statements of the Company and you, set forth in or made pursuant to
this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the Underwriters, the Company or any of
its officers or directors or any controlling persons and will survive delivery
of and payment for the Shares and the termination of this Agreement.
14. Notice.
All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to any Underwriter, will be mailed,
delivered or telecopied and confirmed to it at VMR Capital Markets, U.S., 1901
Avenue of the Stars, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, with a copy sent
to Xxxxxx X. Xxxxxxx, Esq. at Xxxxxxxxxxx & Xxxxxxxx LLP, 00000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, or if sent to the
Company, will be mailed, delivered, or facsimiled and confirmed to MercFuel,
Inc., 0000 XxXxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, with a copy sent to
Xxxxxxxxx X. Xxxxx, Xx., Esq. at XxXxxxx & Xxxxx, 00 Xxxxx Xxxxxx Xxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 00000.
15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit of the
Underwriters, the Company and, to the extent expressed, any person controlling
the Company, or any Underwriter, and directors of the Company, nominees for
directors of the Company (if any) named in the Prospectus, the officers of the
Company who have signed the Registration Statement, and their respective
executors, administrators, successors and assigns, and no other person shall
acquire for have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any Underwriter of the Shares.
16. Applicable Law.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of California applicable to agreements made and to be
entirely performed within California.
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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Underwriting Agreement, whereupon it will become a
binding agreement between the Company and the Underwriters in accordance with
its terms.
Very truly yours,
MERCFUEL, INC.
Dated: ___________, 2001 By:
-------------------------------
President
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The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
Dated: ___________, 2001 VMR CAPITAL MARKETS, INC.
----------------------------
Acting severally on their
behalf and as
representatives of the
several Underwriters named
in Schedule I annexed
hereto.
By: VMR CAPITAL MARKETS, INC.
By:
-----------------------------
Authorized Officer
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SCHEDULE I
Underwriting Agreement dated __________, 2001
------------------------------ -------------------------------------
Underwriter Number of Firm Shares to be Purchased
VMR CAPITAL MARKETS, U.S. 1,200,000
1000805-0505:18152 v1
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