CASULL ARMS CORPORATION
FORM
OF
UNDERWRITING AGREEMENT
Afton, Wyoming
_____________, 1997
National Securities Corporation
As Representative of the Several Underwriters
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Casull Arms Corporation, a Delaware corporation (the "Company"),
hereby agrees with National Securities Corporation ("National") and each of
the underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 11), for whom National is acting as
representative (in such capacity National shall hereinafter be referred to as
"you" or the "Representative") with respect to the sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of
750,000 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), and 750,000 redeemable warrants (the "Warrants"), each
Warrant to purchase one (1) share of Common Stock at an exercise price of
$6.00 and exercisable at any time over a forty-eight (48) month period
commencing upon the first day of the thirteenth calendar month after the date
of the completion of this offering ("xxx Xxxxxxx"), pursuant to a Warrant
Agreement, as defined herein, to be entered into at the Closing, which
aggregate to 750,000 shares of Common Stock and 750,000 Warrants
(collectively, the "Securities"). The Securities are sold as units ("Units")
each consisting of
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one (1) share of Common Stock and one (1) Warrant, although the parties
anticipate that there will be no public market for the Securities as Units.
The Warrants and Common Stock become separately tradeable at such time
as the Underwriter shall determine, provided that such determination shall
not be made prior to the delivery of the Company's audited financial
statements to the Underwriter. The Warrants will be redeemable by the Company
commencing upon the first day of the thirteenth calendar month after the date
of the Closing at $.10 per Warrant on thirty (30) days' prior written notice
if the closing bid price of the Common Stock as reported on the Nasdaq
SmallCap Market averages an amount equal to $8.25 per share for any twenty
(20) trading days within a period of thirty (30) consecutive trading days
ending on the fifth trading day prior to the notice of redemption.
Upon your request, as provided in Section 2(b) of this Agreement, the
Company shall also issue and sell to the Underwriters, acting severally and
not jointly, for the purpose of covering over-allotments, if any additional
aggregate of 112,500 shares of Common Stock and 112,500 Warrants. Such shares
of Common Stock and Warrants, and the shares of Common Stock issuable upon
exercise of such Warrants, are hereinafter referred to as the "Option
Securities." The Company also proposes to issue and sell to you warrants
(the "Representative's Warrants") pursuant to the Representative's Warrant
Agreement (the "Representative's Warrant Agreement") for the purchase of an
additional 75,000 shares of Common Stock and/or 75,000 Warrants. The shares
of Common Stock and the Warrants underlying the Representative's Warrants,
and the shares of Common Stock underlying the Warrants issuable upon exercise
of the Representative's Warrants, are hereinafter referred to as the
"Representative's Securities." The Securities, Option Securities,
Representative's Warrants, and Representative's Securities are more fully
described in the Registration Statement and the Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(A) The Company represents and warrants to, and agrees with,
each of the Underwriters as of the date hereof, and as of the Closing Date
and the Option Closing Date, if any, as follows:
(a) The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration
statement, and an amendment or amendments thereto, on Form SB-2
(No.333-16911) including any related preliminary prospectus ("Preliminary
Prospectus"), for the registration of the Securities, Option Securities,
Representative's Warrants, and the Representative's Securities (collectively,
hereinafter referred to as the "Registered Securities") under the Securities
Act of 1933, as amended (the "Act"), which registration statement and
amendment or amendments have been prepared by the Company in conformity with
the requirements of the Act, and the Regulations (as defined below) of the
Commission under the Act. The Company will not file any other amendment
thereto to which the Underwriters shall have objected in writing after having
been furnished with a copy thereof. Except as the context may otherwise
require, such registration statement,
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as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial statements,
schedules, exhibits and all other documents filed as a part thereof or
incorporated therein and all information deemed to be a part thereof as of
such time pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement," and the form of prospectus
in the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory
authority has issued any order preventing or suspending the use of any
Preliminary Prospectus, the Registration Statement or the Prospectus and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement have been instituted, or, to the Company's knowledge, are
threatened. Each of the Preliminary Prospectus, the Registration Statement
and the Prospectus at the time of filing thereof conformed in all material
respects with the requirements of the Act and Regulations, and none of the
Preliminary Prospectus, the Registration Statement or the Prospectus at the
time of filing thereof contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein and necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that this representation and warranty
does not apply to statements made in reliance upon and in conformity with
written information furnished to the Company with respect to the Underwriters
by or on behalf of the Underwriters expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective
and at all times subsequent thereto up to the Closing Date (as defined in
Section 2(c) hereof) and each Option Closing Date (as defined in Section 2(b)
hereof), if any, and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriters or a
dealer, the Registration Statement and the Prospectus, as amended or
supplemented as required, will contain all statements which are required to
be stated therein in accordance with the Act and the Regulations, and will
conform in all material respects to the requirements of the Act and the
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided, however,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of any Underwriter
expressly for use in the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of Delaware. The
Company does not own or
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control, directly or indirectly, any corporation, partnership, trust, joint
venture or other business entity. The Company is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in which
its ownership or leasing of any properties or the character of its operations
require such qualification or licensing. The Company has all requisite power
and authority (corporate and other), and has obtained any and all necessary
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental
or similar matters), to own or lease its properties and conduct its business
as described in the Prospectus; the Company has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state, local and
foreign laws, rules and regulations; and the Company has not received any
notice of proceedings relating to the revocation or modification of any such
authorization, approval, order, license, certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the business affairs, operations, properties, or
results of operations of the Company. The disclosures in the Registration
Statement concerning the effects of federal, state, local, and foreign laws,
rules and regulations on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not omit to state a
material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
(e) The Company has a duly authorized, issued and
outstanding capitalization as set forth in the Prospectus under the headings
"Capitalization" and "Description of Securities" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option Closing
Date, if any, based upon the assumptions set forth therein, and the Company
is not a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or
other securities, except for this Agreement and as described in the
Prospectus. The Registered Securities and all other securities issued or
issuable by the Company conform or, when issued and paid for, will conform,
in all material respects to all statements with respect thereto contained in
the Registration Statement and the Prospectus. All issued and outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. Except as disclosed in or
contemplated by the Prospectus and the financial statements of the Company
and the related notes thereto included in the Prospectus, the Company has no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to 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. The
description of the Company's stock option and other stock plans or
arrangements and the options or other rights granted and exercised thereunder
as set forth in the Prospectus conforms in all material respects with the
requirements of the Act. All issued and outstanding securities of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable, and the holders thereof have no rights of rescission with
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respect thereto and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company.
(f) The Registered Securities are not and will not be
subject to any preemptive or other similar rights of any stockholder, have
been duly authorized and, when issued, paid for and delivered in accordance
with the terms hereof, will be validly issued, fully paid and non-assessable
and will conform in all material respects to the description thereof
contained in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be taken
for the authorization, issue and sale of the Registered Securities has been
duly and validly taken; and the certificates representing the Registered
Securities will be in due and proper form. Upon the issuance and delivery
pursuant to the terms hereof of the Registered Securities to be sold by the
Company hereunder, the Underwriters or the Representative, as the case may
be, will acquire good and marketable title to such Registered Securities free
and clear of any lien, charge, claim, encumbrance, pledge, security interest,
defect, or other restriction or equity of any kind whatsoever. No
stockholder of the Company has any right which has not been waived in writing
to require the Company to register the sale of any shares owned by such
stockholder under the Act in the public offering contemplated by this
Agreement. No further approval or authority of the stockholders or the Board
of Directors of the Company will be required for the issuance and sale of the
Shares, the Option Shares and the Representative's Warrants to be sold by the
Company as contemplated herein.
(g) The financial statements of the Company, together
with the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present the
financial position, changes in stockholders' equity and the results of
operations of the Company at the respective dates and for the respective
periods to which they apply and such financial statements have been prepared
in conformity with generally accepted accounting principles and the
Regulations, consistently applied throughout the periods involved. There has
been no material adverse change or development involving a material
prospective change in the condition, financial or otherwise, or in the
business, affairs, operations, properties, or results of operation of the
Company whether or not arising in the ordinary course of business since the
date of the financial statements included in the Registration Statement and
the Prospectus and the outstanding debt, the property, both tangible and
intangible, and the business of the Company conforms in all material respects
to the descriptions thereof contained in the Registration Statement and the
Prospec-tus. Financial information set forth in the Prospectus under the
headings "Selected Financial Data," "Capitalization," and "Management's
Discussion and Analysis or Plan of Operation," fairly present, on the basis
stated in the Prospectus, the information set forth therein and have been
derived from or compiled on a basis consistent with that of the audited
financial statements included in the Prospectus.
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(h) Except as otherwise disclosed in the Company's
balance sheet contained in the Prospectus, the Company (i) has paid all
federal, state, local, franchise, and foreign taxes for which it is liable,
including, but not limited to, withholding taxes and amounts payable under
Chapters 21 through 24 of the Internal Revenue Code of 1986, as amended (the
"Code"), and has furnished all information returns it is required to furnish
pursuant to the Code, (ii) has established adequate reserves for such taxes
which are not due and payable, and (iii) does not have any tax deficiency or
claims outstanding, proposed or assessed against it.
(i) No transfer tax, stamp duty or other similar tax
is payable by or on behalf of the Underwriters in connection with (i) the
issuance by the Company of the Registered Securities, (ii) the purchase by
the Underwriters of the Registered Securities from the Company and the
purchase by the Representative of the Representative's Warrants from the
Company, (iii) the consummation by the Company of any of its obligations
under this Agreement, or (iv) resales of the Registered Securities in
connection with the distribution contemplated hereby.
(j) There is no claim, action, suit, proceeding,
inquiry, arbitration, mediation, investigation, litigation, governmental or
other proceeding (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign, pending or
threatened against (or circumstances that may give rise to the same), or
involving the properties or businesses of, the Company which (i) questions
the validity of the capital stock of the Company, this Agreement, the Warrant
Agreement or the Representative's Warrant Agreement, or of any action taken
or to be taken by the Company pursuant to or in connection with this
Agreement, the Warrant Agreement or the Representative's Warrant Agreement,
(ii) is required to be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects), or (iii) might
materially and adversely affect the condition, financial or otherwise, or the
business, affairs, position, stockholders' equity, operation, properties, or
results of operations of the Company.
(k) The Company has the corporate power and authority
to authorize, issue, deliver, and sell the Registered Securities and to enter
into this Agreement, the Warrant Agreement and the Representative's Warrant
Agreement, and to consummate the transactions provided for in such
agreements; and this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement have each been duly and properly
authorized, executed, and delivered by the Company. Each of this Agreement,
the Warrant Agreement and the Representative's Warrant Agreement constitutes
a legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights
to indemnity or contribution may be limited by applicable law), and none
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of the Company's issue and sale of the Registered Securities, execution,
delivery or performance of this Agreement, the Warrant Agreement and the
Representative's Warrant Agreement, its consummation of the transactions
contemplated herein and therein, or the conduct of its businesses as
described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or
will result in any breach or violation of any of the terms or provisions of,
or constitutes or will constitute a default under, or result in the creation
or imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever upon,
any property or assets (tangible or intangible) of the Company pursuant to
the terms of (i) the certificate of incorporation or by-laws of the Company,
as amended, (ii) any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, loan or credit
agreement or any other agreement or instrument to which the Company is a
party or by which it is or may be bound or to which its properties or assets
(tangible or intangible) is or may be subject, or any indebtedness, or (iii)
any statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company of any of its activities or
properties.
(l) No consent, approval, authorization or order of,
and no filing with, any court, regulatory body, government agency or other
body, domestic or foreign, is required for the issuance of the Registered
Securities pursuant to the Prospectus and the Registration Statement, the
performance of this Agreement, the Warrant Agreement, the Representative's
Warrant Agreement, and the transactions contemplated hereby and thereby,
including without limitation, any waiver of any preemptive, first refusal or
other rights that any entity or person may have for the issue and/or sale of
any of the Registered Securities, except such as have been or may be obtained
under the Act or may be required under state securities or Blue Sky laws in
connection with the Underwriters' purchase and distribution of the Registered
Securities to be sold by the Company hereunder.
(m) All executed agreements, contracts or other
documents or copies of executed agreements, contracts or other documents
filed as exhibits to the Registration Statement to which the Company is a
party or by which it may be bound or to which its assets, properties or
businesses may be subject have been duly and validly authorized, executed and
delivered by the Company and constitute the legal, valid and binding
agreements of the Company enforceable against the Company in accordance with
their respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be limited
by applicable law). The descriptions in the Registration Statement of such
agreements, contracts and other documents are accurate in all material
respects and fairly present the information required to be shown with respect
thereto by Form SB-2, and there are no contracts or other documents which are
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required by the Act to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not described or filed as
required, and the exhibits which have been filed are complete and correct
copies of the documents of which they purport to be copies.
(n) Since the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus (i) the Company
has not incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or which could
result in a material reduction in the future earnings of the Company; (ii)
the Company has not sustained any material loss or interference with its
business or properties from fire, flood, windstorm, accident or other
calamity, whether or not covered by insurance; (iii) the Company has not paid
or declared any dividends or other distributions with respect to its capital
stock, and the Company is not in default in the payment of principal or
interest on any outstanding debt obligations; (iv) there has not been any
change in the capital stock (other than upon the sale of the Securities, the
Option Securities and the Representative's Securities hereunder and upon the
exercise of options and warrants described in the Registration Statement) of,
or indebtedness material to, the Company (other than in the ordinary course
of business); (v) the Company has not issued any securities or incurred any
liability or obligation, primary or contingent, for borrowed money; and (vi)
there has not been any material adverse change in the condition (financial or
otherwise), business, properties, results of operations, or prospects of the
Company.
(o) Except as disclosed in or specifically contemplated by
the Prospectus, (i) the Company has sufficient trademarks, trade names,
patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct its business as now conducted or as presently
planned to be conducted; (ii) the expiration of any trademarks, trade names,
patent rights, copyrights, licenses, approvals or governmental authorizations
would not have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the Company;
(iii) the Company has no knowledge of any infringement by it or its
subsidiaries of trademark, trade name rights, patent rights, copyrights,
licenses, trade secret or other similar rights of others; and (iv) there is
no claim being made against the Company regarding trademark, trade name,
patent, copyright, license, trade secret or other infringement which could
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company.
(p) Except as otherwise disclosed in the Prospectus,
no default exists, which would have a material adverse effect on the Company,
in the due performance and observance of any term, covenant or condition of
any license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders agreement, note,
loan or credit agreement, or any other material agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement
or instrument
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to which the Company is a party or by which the Company may be bound or to
which the property or assets (tangible or intangible) of the Company is
subject or affected.
(q) To the Company's knowledge, there are no pending
investigations involving the Company by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or to its knowledge threatened against or involving the
Company. No representation question exists respecting the employees of the
Company. No collective bargaining agreement, or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the
Company exists or to its knowledge is imminent.
(r) Except as described in the Prospectus, the Company
does not maintain, sponsor or contribute to any program or arrangement that
is an "employee pension benefit plan, " an "employee welfare benefit plan,"
or a "multiemployer plan" as such terms are defined in Sections 3(2), 3(1)
and 3(37), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") ("ERISA Plans"). The Company does not maintain or
contribute to a defined benefit plan, as defined in Section 3(35) of ERISA.
No ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of
the Code, which could subject the Company to any tax penalty on prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is
in compliance with all material reporting, disclosure and other requirements
of the Code and ERISA as they relate to any such ERISA Plan. Determination
letters have been received from the Internal Revenue Service with respect to
each ERISA Plan which is intended to comply with Code Section 401(a), stating
that such ERISA Plan and the attendant trust are qualified thereunder. The
Company has never completely or partially withdrawn from a "multiemployer
plan."
(s) Neither the Company nor, to the best of the
Company's knowledge, any of its employees, directors, stockholders, or
affiliates (within the meaning of the Regulations) of any of the foregoing
has taken or will take directly or indirectly, any action designed to or
which has constituted or which might be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Registered Securities.
(t) The Company has good and marketable title to, or
valid and enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, free and clear
of all liens, charges, claims, encumbrances, pledges, security interests, or
other restrictions or equities of any kind whatsoever other than those
referred to in the Prospectus and liens for taxes not yet due and payable.
9
(u) To the best of the Company's knowledge, Price
Waterhouse LLP ("Price Waterhouse"), whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants as required by the Act and the Regulations.
(v) The Company has caused to be duly executed legally
binding and enforceable agreements pursuant to which all persons or entities
that directly or beneficially own Common Stock, as of the effective date of
the Registration Statement, have agreed not to, directly or indirectly,
offer, offer to sell, sell, grant any option for the sale of, transfer,
assign, pledge, hypothecate or otherwise encumber or dispose of any shares of
Common Stock or securities convertible into Common Stock, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any
shares of Common Stock (either pursuant to Rule 144 of the Regulations or
otherwise) or dispose of any interest therein for a period from the date of
the Closing until first day of the thirteenth (13) month following the
date of the Closing without the prior written consent of National (the
"Lock-up Agreements"). The Company will cause the Transfer Agent (as defined
herein) to place "stop transfer" orders on the Company's stock ledgers to
effect the Lock-up Agreements. The Lock-up Agreements shall also provide
that each of the stockholders of the Company shall grant the Representative
an irrevocable preferential right for a period of three (3) years from the
effective date of the Registration Statement to purchase for its account or
to sell for the account of any of the stockholders of the Company any
securities which such stockholders may seek to sell into the open market,
excluding transfers pursuant to gifts, transfers to relatives or family
members, or trusts for the benefit of such relatives or family members,
provided that the transferee agrees to be bound by the terms of the Lock-Up
Agreements. Such stockholders will consult the Representative with regard to
any such proposed sales and will offer the Representative the opportunity to
purchase or sell any such securities on the terms described in the notice in
the next sentence and on terms no less favorable to the seller of such
securities than he can secure elsewhere. If the Representative fails to
accept such offer within fifteen (15) business days after the mailing of a
notice containing such offer by registered mail addressed to the
Representative, then the Representative shall have no further claim or right
with respect to the proposed transfer described. If, however, the terms of
such proposal are subsequently modified, the preferential right referred to
herein shall apply to such modified proposal as if the original proposal had
not been made. The Representative's failure to exercise its preferential
right with respect to any particular proposal shall not affect its
preferential right relative to future proposals.
(w) There are no claims, payments, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Registered
Securities hereunder or any other arrangements, agreements, understandings,
payments or issuance with respect to the Company or any of its officers,
directors, stockholders, employees or affiliates that may affect the
Underwriters' compensation as determined by the Commission and the National
Association of Securities Dealers, Inc. (the "NASD").
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(x) The Registered Securities have been approved for
quotation on the OTC Electronic Bulletin Board.
(y) Neither the Company, nor, to the best of its
knowledge, any of its officers, employees, agents or any other person acting
on behalf of the Company has, directly or indirectly, given or agreed to give
any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
governmental agency (domestic or foreign) or instrumentality of any
government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or other person who was, is, or may be in a
position to help or hinder the business of the Company (or assist the Company
in connection with any actual or proposed transaction) which might subject
the Company or any other such person to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign). The
Company believes that its internal accounting controls are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977,
as amended.
(z) Except as set forth in the Prospectus, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 promulgated under the Regulations) of any
of the foregoing persons or entities has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to be
furnished or sold by the Company, or (B) purchases from or sells or furnishes
to the Company any goods or services, or (ii) a beneficiary interest in any
contract or agreement to which the Company is a party or by which it may be
bound or affected. Except as set forth in the Prospectus there are no
existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions, between or
among the Company, and any officer, director, principal shareholder (as such
term is used in the Prospectus) of the Company, or any affiliate or associate
of any of the foregoing persons or entities.
(aa) The Company is not, and does not intend to
conduct its business in a manner in which it would become an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(bb) Any certificate signed by any officer of the
Company and delivered to the Underwriters or to the Underwriters'
Counsel (as defined in Section 4(d) herein) shall be deemed a
representation and warranty by the Company to the Underwriters as
to the matters covered thereby.
(cc) The minute books of the Company have been
made available to the Underwriters and contain a complete summary
of all meetings and actions of the directors and stockholders of
the Company, since the time of its incorporation, and reflect all
transactions referred to in such minutes accurately in all
material respects.
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(dd) The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Securities in this offering other than the
Prospectus, the Registration Statement and the other materials permitted by
the Act. Except as described in the Prospectus, no holders of any securities
of the Company or of any options, warrants or other convertible or
exchangeable securities of the Company have the right to include any
securities issued by the Company as part of the Registration Statement or to
require the Company to file a registration statement under the Act and no
person or entity holds any anti-dilution rights with respect to any
securities of the Company.
(ee) The Company maintains insurance by insurers of
recognized financial responsibility of the types and in the amounts as are
prudent, customary and adequate for the business in which it is engaged,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect. The Company has no reason to believe
that it will not be able to renew existing insurance coverage with respect to
the Company as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business, in either
case, at a cost that would not have a material adverse effect on the
financial condition, operations, business, assets or properties of the
Company. The Company has not failed to file any claims, has no material
disputes with its insurance company regarding any claims submitted under its
insurance policies, and has complied with all material provisions contained
in its insurance policies.
(ff) The Company has entered into a warrant agreement
(the "Warrant Agreement") substantially in the form filed as Exhibit ___ to
the Registration Statement with Continental Stock Transfer & Trust Company,
and the Representative, in form and substance satisfactory to the
Representative, with respect to the Warrants providing for the payment of
commissions contemplated by Section 4(z), hereof. The Warrant Agreement has
been duly and validly authorized by the Company and, assuming due execution
by the parties thereto other than the Company, constitutes a valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification
provision may be limited under the federal and state securities laws, and
(iii) that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(gg) The Company will purchase "key man" life insurance on the
life of Xxxxxxx X. Casull in the amount of $1,000,000 prior to the Closing
and the Company will be named as the sole beneficiary of such insurance policy.
12
2. PURCHASE, SALE AND DELIVERY OF THE REGISTERED SECURITIES.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each Underwriter,
and each Underwriter, severally and not jointly agrees to purchase from the
Company, at a price equal to $5.50 per Unit [$5.40 per share of Common Stock
and $.10 per Warrant], that number of Shares set forth in Schedule A opposite
the name of such Underwriter, subject to such adjustment as the
Representative in its discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional numbers of Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements, herein contained, but subject to the
terms and conditions herein set forth, the Company hereby grants an option to
the Underwriters, severally and not jointly, to purchase all or any part of
the Option Securities at a price equal to $5.40 per share of Common Stock and
$.10 per Warrant. The option granted hereby will expire 45 days after (i) the
date this Registration Statement becomes effective, if the Company has elected
not to rely on Rule 430A under the Regulations, or (ii) the date of this
Agreement if the Company has elected to rely upon Rule 430A under the
Regulations, and may be exercised in whole or in part from time to time (but
not on more than two (2) occasions) only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment
and delivery for any such Option Securities. Any such time and date of
delivery (an "Option Closing Date") shall be determined by the
Representative, but shall not be later than three full business days after
the exercise of said option, nor in any event prior to the Closing Date, as
hereinafter defined, unless otherwise agreed upon by the Representative and
the Company. Nothing herein contained shall obligate the Underwriters to
exercise the over-allotment option described above. No Option Securities
shall be delivered unless the Securities shall be simultaneously delivered or
shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the offices of National, at
0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx, or at such other place
as shall be agreed upon by the Representative and the Company. Such delivery
and payment shall be made at 9:00 a.m. (New York time) on ______________,
1997 or at such other time and date as shall be agreed upon by the
Representative and the Company, but no more than four (4) business days after
the date hereof (such time and date of payment and delivery being herein
called the "Closing Date"). In addition, in the event that any or all of the
Option Securities are purchased by the Underwriters, payment of the purchase
price for, and delivery of certificates for, such Option Securities shall be
made at the above mentioned office of National or at such other place as
shall be
13
agreed upon by the Representative and the Company on each Option Closing Date
as specified in the notice from the Representative to the Company. Delivery
of the certificates for the Securities and the Option Securities, if any,
shall be made to the Underwriters against payment by the Underwriters, of the
purchase price for the Securities and the Option Securities, if any, to the
order of the Company. In the event such option is exercised, each of the
Underwriters, acting severally and not jointly, shall purchase that
proportion of the total number of Option Securities then being purchased
which the total number of Securities set forth in Schedule A hereto opposite
the name of such Underwriter bears to the total number of Securities, subject
in each case to such adjustments as the Representative in its discretion
shall make to eliminate any sales or purchases of fractional shares.
Certificates for the Securities and the Option Securities, if any, shall be
in definitive, fully registered form, shall bear no restrictive legends and
shall be in such denominations and registered in such names as the
Underwriters may request in writing at least three (3) business days prior to
Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Securities and the Option Securities, if any, shall be
made available to the Representative at such office or such other place as
the Representative may designate for inspection, checking and packaging no
later than 9:30 a.m. on the last business day prior to Closing Date or the
relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to
the Representative Representative's Warrants at a purchase price of $.001 per
Representative's Warrant, which warrants shall entitle the holders thereof to
purchase an aggregate of 75,000 shares of Common Stock and/or 75,000
Warrants. The Representative's Warrants shall expire five (5) years after
the effective date of the Registration Statement and shall be exercisable
commencing one (1) year from the effective date of the Registration Statement
at a price equaling one hundred twenty percent (120%) of the initial public
offering price of the shares of Common Stock and Warrants, respectively. The
Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit ___ to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration
Statement becomes effective as the Representative deems advisable, the
Underwriters shall make a public offering of the Securities (other than to
residents of or in any jurisdiction in which qualification of the Securities
is required and has not become effective) at the price and upon the other
terms set forth in the Prospectus. The Representative may from time to time
increase or decrease the public offering price after distribution of the
Securities has been completed to such extent as the Representative, in its
sole discretion, deems advisable. The Underwriters may enter into one or
more agreements as the Underwriters, in each of their sole discretion, deem
advisable with one or more broker-dealers who shall act as dealers in
connection with such public offering. In addition, the Common Stock and
Warrants shall be separately tradeable immediately upon issuance.
14
4. COVENANTS OF THE COMPANY. The Company covenants and agrees
with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective as
promptly as practicable and will not at any time, whether before or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to the Prospectus or file any document
under the Act or Exchange Act before termination of the offering of the
Securities by the Underwriters of which the Representative shall not
previously have been advised and furnished with a copy, or to which the
Representative shall have objected or which is not in compliance with the
Act, the Exchange Act or the Regulations.
(b) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representative and confirm the notice in
writing, (i) when the Registration Statement, as amended, becomes effective,
if the provisions of Rule 430A promulgated under the Act will be relied upon,
when the Prospectus has been filed in accordance with said Rule 430A and when
any post-effective amendment to the Registration Statement becomes effective,
(ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding, suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of the Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state securities
commission of any proceedings for the suspension of the qualification of any
of the Registered Securities for offering or sale in any jurisdiction or of
the initiation, or the threatening, of any proceeding for that purpose, (iv)
of the receipt of any comments from the Commission; and (v) of any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information. If
the Commission or any state securities commission authority shall enter a
stop order or suspend such qualification at any time, the Company will use
its best efforts to obtain promptly the lifting of such order.
(c) The Company shall file the Prospectus (in form and
substance satisfactory to the Representative) in accordance with the
requirements of the Act.
(d) The Company will give the Representative notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to
the Prospectus (including any revised prospectus which the Company proposes
for use by the Underwriters in connection with the offering of the Registered
Securities which differs from the corresponding prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether
or not such revised prospectus is required to be filed pursuant to Rule
424(b) of the Regulations), and will furnish the Representative with copies
of any such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any
15
such amendment or supplement to which the Representative or X'Xxxxxx & Xxxxxx
("Underwriters' Counsel") shall reasonably object.
(e) The Company shall endeavor in good faith, in cooperation
with the Representative, at or prior to the time the Registration Statement
becomes effective, to qualify the Registered Securities for offering and sale
under the securities laws of such jurisdictions as the Representative may
reasonably designate to permit the continuance of sales and dealings therein
for as long as may be necessary to complete the distribution, and shall make
such applications, file such documents and furnish such information as may be
required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or become subject to service of
process in any such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representative
agree that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times
as are or may reasonably be required by the laws of such jurisdiction to
continue such qualification.
(f) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts to
comply with all requirements imposed upon it by the Act, as now and hereafter
amended, and by the Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Registered
Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus
relating to the Registered Securities is required to be delivered under the
Act, any event shall have occurred as a result of which, in the opinion of
counsel for the Company or Underwriters' Counsel, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend or
supplement the Prospectus to comply with the Act, the Company will notify the
Representative promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the Act,
each such amendment or supplement to be satisfactory to Underwriters'
Counsel, and the Company will furnish to the Underwriters copies of such
amendment or supplement as soon as available and in such quantities as the
Underwriters may request.
(g) As soon as practicable, but in any event not later than
45 days after the end of the 12-month period beginning on the day after the
end of the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of such
fiscal quarter is the end of the Company's fiscal year), the Company shall
make generally available to its security holders, in the manner specified in
Rule 158(b) of the Regulations, and to the Representative, an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the
Regulations, which statement need not be audited unless required by the
16
Act, covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
(h) During a period of five (5) years after the date hereof,
the Company will furnish to its stockholders, as soon as practicable, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of earnings, and will deliver to
the Representative:
(i) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the
Company for each quarter in the form furnished to the
Company's stockholders;
(ii) concurrently with furnishing such annual
reports to its stockholders, a balance sheet of the
Company as at the end of the preceding fiscal year,
together with statements of operations, stockholders'
equity, and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of
independent certified public accountants;
(iii) as soon as they are available, copies of
all reports (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of
all reports and financial statements furnished to or
filed with the Commission, the Nasdaq SmallCap or any
securities exchange;
(v) every press release and every material news
item or article of interest to the financial community in
respect of the Company or its affairs which was released
or prepared by or on behalf of the Company; and
(vi) any additional information of a public
nature concerning the Company (and any future
subsidiaries) or its businesses which the Representative
may reasonably request.
During such five-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a transfer and warrant agent
(the "Transfer Agent") and, if necessary under the jurisdiction of
incorporation of the Company, a registrar (which may be the same entity as
the transfer agent) for the Common Stock, Warrants and the Representative's
Warrants.
17
(j) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto (two of
which copies will be signed and will include all financial statements and
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as
available and in such quantities as the Representative may reasonably request.
(k) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of
duly executed, legally binding and enforceable Lock-up Agreements. On or
before the Closing Date, the Company shall deliver instructions to the
Transfer Agent authorizing it to place appropriate stop transfer orders on
the Company's ledgers.
(l) The Company shall use its best efforts to cause its
officers, directors, stockholders or affiliates (within the meaning of the
Regulations) not to take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of
the Registered Securities substantially in the manner, and subject to the
conditions, set forth under "Use of Proceeds" in the Prospectus.
(n) The Company shall timely file all such reports, forms or
other documents as may be required (including, but not limited to, a Form SR
as may be required pursuant to Rule 463 under the Act) from time to time,
under the Act, the Exchange Act, and the Regulations, and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Regulations.
(o) The Company shall cause the Registered Securities to be
quoted on the OTC Electronic Board or other such exchange and for a period of
two (2) years from the date hereof shall use its best efforts to maintain the
quotation of the Registered Securities to the extent outstanding.
(p) For a period of two (2) years from the Closing Date, the
Company shall furnish to the Representative, at the Company's sole expense,
monthly consolidated transfer sheets relating to the Common Stock.
(q) For a period of five (5) years after the effective date
of the Registration Statement the Company shall use its best efforts, at the
Company's sole expense, to take all necessary and appropriate actions to
further qualify the Company's securities in all jurisdictions of the United
States in order to permit secondary sales of such securities pursuant
18
to the Blue-Sky laws of those jurisdictions which do not require the Company
to qualify as a foreign corporation or to file a general consent to service
of process.
(r) The Company (i) prior to the effective date of the
Registration Statement, has filed a Form 8-A with the Commission providing
for the registration of the Common Stock under the Exchange Act and (ii) as
soon as practicable, will use its best efforts to take all necessary and
appropriate actions to be included in Standard and Poor's Corporation
Descriptions and Xxxxx'x OTC Manual and to continue such inclusion for a
period of not less than five (5) years.
(s) The Company agrees that for a period of eighteen (18)
months following the Closing it will not, without the prior written consent
of National, offer, issue, sell, contract to sell, grant any option for the
sale of or otherwise dispose of any Common Stock, or securities convertible
into Common Stock, except for the issuance of the Option Securities, the
Representative's Warrants, and shares of Common Stock upon the exercise of
currently outstanding warrants or options issued under any stock option plan
in effect on the Closing Date or options to purchase shares of Common Stock
granted pursuant to any stock option plan in effect on the Closing Date.
(t) Until the completion of the distribution of the
Registered Securities, the Company shall not without the prior written
consent of National or Underwriters' Counsel, issue, directly or indirectly
any press release or other communication or hold any press conference with
respect to the Company or its activities or the offering contemplated hereby,
other than trade releases issued in the ordinary course of the Company's
business consistent with past practices with respect to the Company's
operations.
(u) For a period equal to the lesser of (i) five (5) years
from the date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may prevent
or disqualify the Company's use of Form SB-2 (or other appropriate form)
for the registration under the Act of the Representative's Securities.
(v) The Company agrees that upon the request of National it
shall use its best efforts, which shall include, but shall not be limited to,
the solicitation of proxies, to elect one (1) designee of National to the
Company's Board of Directors for a period of five (5) years following the
Closing, provided that such designee is reasonably acceptable to the Company.
In the event National does not exercise its right to designate a member of
the Board of Directors, then it shall have the right to designate one person
to attend all meetings of the Board of Directors of the Company, and all
committees thereof, as an observer. Such observer shall be entitled to
receive notices of all such meetings, and all correspondence and
communications sent by the Company to members of its Board of Directors, and
to attend all such meetings. The Company shall reimburse the designee of
National for his out-of-pocket expenses incurred in connection with his
attendance at such meetings.
19
(w) The Company agrees that within forty-five (45) days after
the Closing it shall retain a public relations firm which is acceptable to
National. The Company shall keep such public relations firm, or any
replacement, for a period of three (3) years from the Closing. Any
replacement public relations firm shall be retained only with the consent of
National.
(x) The Company agrees that any and all future transactions
between the Company and its officers, directors, principal stockholders and
the affiliates of the foregoing persons will be on terms no less favorable to
the Company than could reasonably be obtained in arm's length transactions
with independent third parties, and that any such transactions also be
approved by a majority of the Company's outside independent directors
disinterested in the transaction.
(y) The Company shall prepare and deliver, at the Company's
sole expense, to National within the one hundred and twenty (120) day period
after the later of the effective date of the Registration Statement or the
latest Option Closing Date, as the case may be, ten (10) bound volumes
containing all correspondence with regulatory officials, agreements,
documents and all other materials in connection with the offering as
requested by the Underwriters' Counsel.
(z) The Company shall pay the Representative a commission
equal to five percent (5%) of the exercise price of each Warrant exercised
for the period commencing twelve (12) months after the effective date of the
Registration Statement until the expiration of the term of the Warrants,
payable on the date of such exercise on terms provided for in the Warrant
Agreement. The Company will not solicit the exercise of the Warrants other
than through the Representative. However, no compensation will be paid to
the Representative in connection with the exercise of the Warrants if (i) the
Warrants are held in a discretionary account, or (ii) the Warrants are
exercised in an unsolicited transaction. Further, the Representative must be
designated in writing by the account holder as having solicited the
transaction, otherwise the Representative shall not be paid the fee. In
addition, the Representative will not receive any commission with respect to
the exercise of the Warrants contained in the Units to be received upon the
exercise of the Representative's Warrants, unless held by a person or entity
other than any of the Underwriters.
5. ROAD SHOWS: The Company agrees that road show presentations
will be given by the Underwriters in the following cities: New York, Chicago,
Denver, Atlanta, Boca Raton, Dallas, San Diego, Irvine, Los Angeles, San
Francisco and Portland, as well as any other cities which may be mutually
agreed upon by the Representative and the Company. Travel will be "AirPass"
on Platinum upgrade and on American Airlines when available. The Company
acknowledges that the Representative requires a suite in New York in order to
accommodate meetings.
6. PAYMENT OF EXPENSES.
20
(a) The Company hereby agrees to pay on each of the Closing
Date and each Option Closing Date (to the extent not previously paid) all
expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of the
Company under this Agreement, the Warrant Agreement, and the Representative's
Warrant Agreement, including, without limitation, (i) the fees and expenses
of accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing, filing,
delivery and mailing (including the payment of postage with respect thereto)
of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the duplication, mailing (including the payment of
postage with respect thereto) and delivery of this Agreement, the Agreement
Among Underwriters, the Selected Dealers Agreements, the Powers of Attorney,
and related documents, including the cost of all copies thereof and of the
Preliminary Prospectuses and of the Prospectus and any amendments thereof or
supplements thereto supplied to the Underwriters and such dealers as the
Underwriters may request, in quantities as hereinabove stated, (iii) the
printing, engraving, issuance and delivery of the certificates representing
the Registered Securities, (iv) the qualification of the Registered
Securities under state or foreign securities or "Blue Sky" laws and
determination of the status of such securities under legal investment laws,
including the costs of printing and mailing the "Preliminary Blue Sky
Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments
Survey," if any, and reasonable disbursements and fees of counsel in
connection therewith, (v) postage, mailing, taxes, all costs of marketing
their Registered Securities including all air fares, hotels and road show
presentations, information meetings and presentations, ten (10) bound volumes
of the closing documents and prospectus memorabilia and "tombstone"
advertisement expenses, (vi) costs and expenses in connection with due
diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vii) fees and expenses of the
transfer agent and registrar, (viii) the fees payable to the Commission and
the NASD, (ix) the fees and expenses incurred in connection with the listing
of the Registered Securities on the Nasdaq SmallCap Market, and any other
market or exchange, and (x) applications for assignments of a rating of the
Securities by qualified rating agencies.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of Section 6, Section 10(a) or Section 11, the
Company shall reimburse and indemnify the Representative for all of their
actual out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less any amounts already paid pursuant to Section 5(c)
hereof.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to subsection (a) of this Section 5, it will pay to
the Representative on the Closing Date by certified or bank cashier's check
or, at the election of the Representative, by deduction from the proceeds of
the offering contemplated herein a non-accountable expense allowance equal to
1.8% of the gross proceeds received by the Company from the sale of the
Shares, $25,000 of which has been paid to date, $25,000 of which will be due
upon the printing of preliminary prospectuses, and any unpaid balance of
which will be paid on the
21
Closing Date. In the event the Representative elects to exercise the
over-allotment option described in Section 2(b) hereof, the Company further
agree to pay to the Representative on the Option Closing Date (by certified
or bank cashier's check or, at the Representative's election, by deduction
from the proceeds of the offering) a non-accountable expense allowance equal
to 1.8 percent of the gross proceeds received by the Company from the sale of
the Option Securities.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations
of the Underwriters hereunder shall be subject to the continuing accuracy of
the representations and warranties of the Company herein as of the date
hereof and as of the Closing Date and each Option Closing Date, if any, as if
they had been made on and as of the Closing Date or each Option Closing Date,
as the case may be; the accuracy on and as of the Closing Date or Option
Closing Date, if any, of the statements of officers of the Company made
pursuant to the provisions hereof; and the performance by the Company on and
as of the Closing Date and each Option Closing Date, if any, of its covenants
and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective
not later than 5:00 p.m., New York City time, on the date of this Agreement
or such later date and time as shall be consented to in writing by the
Representative, and, at the Closing Date and each Option Closing Date, if
any, no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or contemplated by the Commission and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of Underwriters' Counsel.
If the Company has elected to rely upon Rule 430A of the Regulations, the
price of the Shares and any price-related information previously omitted from
the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Regulations within the prescribed time period, and prior to Closing Date the
Company shall have provided evidence satisfactory to the Representative of
such timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Regulations.
(b) The Representative shall not have advised the Company
that the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and
is required to be stated therein or is necessary to make the statements
therein not misleading, or that the Prospectus, or any supplement thereto,
contains an untrue statement of fact which, in the Representative's
reasonable opinion, is material, or omits to state a fact which, in the
Representative's reasonable opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
22
(c) On or prior to the Closing Date, the Underwriters shall
have received from Underwriters' Counsel such opinion or opinions with
respect to the organization of the Company, the validity of the Registered
Securities, the Registration Statement, the Prospectus and other related
matters as the Representative may request and Underwriters' Counsel shall
have received from the Company such papers and information as they request to
enable them to pass upon such matters.
(d) At Closing Date, the Underwriters shall have received the
favorable opinion of Camhy, Xxxxxxxxx & Xxxxx, LLP ("CKS"), counsel to the
Company, dated the Closing Date, addressed to the Underwriters and in form
and substance satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and
is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, (B)
is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character
of its operations requires such qualification or
licensing, and (C) to the best of such counsel's
knowledge, has the requisite corporate power and
authority and has obtained the necessary authorizations,
approvals, orders, licenses, certificates, franchises and
permits of and from all governmental or regulatory
officials and bodies including, without limitation, those
having jurisdiction over environmental or similar matters
(the absence of which would have a material adverse
effect on the Company), to own or lease its properties
and conduct its business as described in the Prospectus;
(ii) except as described in the Prospectus,
and to the best of such counsel's knowledge after
reasonable investigation, the Company does not own an
interest in any corporation, limited liability company,
partnership, joint venture, trust or other business
entity;
(iii) the Company has a duly authorized, issued
and outstanding capitalization as set forth in the
Prospectus, and any amendment or supplement thereto,
under "Capitalization" and "Description of Securities,"
and to the best knowledge of such counsel, the Company is
not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities,
except for this Agreement, the Warrant Agreement, the
Representative's Warrant Agreement, and as described in
the Prospectus. The Registered Securities and all other
securities issued or issuable by the Company conform in
all material respects to the statements with respect
thereto contained in the Registration Statement and the
Prospectus. All issued and outstanding securities of the
Company have been duly authorized and validly issued and
are fully paid and non-assessable; and to the best of
such counsel's knowledge, none of such securities were
issued in violation of the preemptive rights of any
23
holders of any security of the Company. The Registered
Securities to be sold by the Company hereunder and under
the Warrant Agreement and Representative's Warrant
Agreement are not and will not, to the best of such
counsel's knowledge, be subject to any preemptive or
other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in
accordance with their terms, will be validly issued,
fully paid and non-assessable and conform in all material
respects to the description thereof contained in the
Prospectus; all corporate action required to be taken for
the authorization, issue and sale of the Registered
Securities has been duly and validly taken; and the
certificates representing the Registered Securities are
in due and proper form. The Representative's Warrants
constitute valid and binding obligations of the Company
to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the
Company called for thereby (except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and except
as rights to indemnity or contribution may be limited by
applicable law). Upon the issuance and delivery pursuant
to this Agreement of the Registered Securities to be sold
by the Company, the Company will convey, against payment
therefor as provided herein, to the Underwriters and the
Representative, respectively, good and marketable title
to the Registered Securities free and clear of all liens
and other encumbrances;
(iv) the Registration Statement is effective
under the Act, and, if applicable, filing of all pricing
information has been timely made in the appropriate form
under Rule 430A, and no stop order suspending the use of
the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the
effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such
counsel's knowledge, threatened or contemplated under the
Act;
(v) each of the Preliminary Prospectus, the
Registration Statement, and the Prospectus and any
amendments or supplements thereto (other than the
financial statements and other financial and statistical
data included therein as to which no opinion need be ren-
dered) comply as to form in all material respects with
the requirements of the Act and the Regulations. Such
counsel shall state that such counsel has participated in
conferences with officers and other representatives of
the Company and the Representative and representatives of
the independent public accountants for the Company, at
which conferences the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus,
and any amendments or supplements thereto were discussed,
and, although such counsel is not passing upon and does
not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in
the Preliminary Prospectus, the Registration
24
Statement and Prospectus, and any amendments or supplements
thereto, on the basis of the foregoing, no facts have
come to the attention of such counsel which lead them to
believe that either the Registration Statement or any
amendment thereto, at the time such Registration State-
ment or amendment became effective or the Preliminary
Prospectus or Prospectus or amendment or supplement
thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary
to make the statements therein not misleading (it being
understood that such counsel need express no opinion with
respect to the financial statements and schedules and
other financial and statistical data included in the
Preliminary Prospectus, the Registration Statement or
Prospectus, and any amendments or supplements thereto);
(vi) to the best of such counsel's knowledge
after reasonable investigation, (A) there are no
agreements, contracts or other documents required by the
Act to be described in the Registration Statement and the
Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration
Statement and the Prospectus and filed as exhibits
thereto; (B) the descriptions in the Registration
Statement and the Prospectus and any supplement or
amendment thereto of contracts and other documents to
which the Company is a party or by which it is bound are
accurate in all material respects and fairly represent
the information required to be shown by Form SB-2; (C)
there is not pending or threatened against the Company
any action, arbitration, suit, proceeding, litigation,
governmental or other proceeding (including, without
limitation, those having jurisdiction over environmental
or similar matters), domestic or foreign, pending or
threatened against the Company which (x) is required to
be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in
the Registration Statement are accurately summarized in
all material respects), (y) questions the validity of the
capital stock of the Company or this Agreement, the
Warrant Agreement or the Representative's Warrant
Agreement, or of any action taken or to be taken by the
Company pursuant to or in connection with any of the
foregoing; and (D) there is no action, suit or proceeding
pending or threatened against the Company before any
court or arbitrator or governmental body, agency or
official in which there is a reasonable possibility of an
adverse decision which may result in a material adverse
change in the financial condition, business, affairs,
stockholders' equity, operations, properties, business or
results of operations of the Company, which could
adversely affect the present or prospective ability of
the Company to perform its obligations under this Agree-
ment, the Warrant Agreement or the Representative's
Warrant Agreement or which in any manner draws into
question the validity or enforceability of this Agree-
ment, the Warrant Agreement or the Representative's
Warrant Agreement;
25
(vii) the Company has the corporate power and
authority to enter into each of this Agreement, the
Warrant Agreement and the Representative's Warrant
Agreement and to consummate the transactions provided for
therein; and each of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement has
been duly authorized, executed and delivered by the
Company. Each of this Agreement, the Warrant Agreement
and the Representative's Warrant Agreement, assuming due
authorization, execution and delivery by each other party
thereto, constitutes a legal, valid and binding agreement
of the Company enforceable against the Company in
accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and except
as rights to indemnity or contribution may be limited by
applicable law), and none of the Company's execution,
delivery or performance of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement, its
consummation of the transactions contemplated herein or
therein, or the conduct of its business as described in
the Registration Statement, the Prospectus, and any
amendments or supplements thereto conflicts with or
results in any breach or violation of any of the terms or
provisions of, or constitutes a default under, or result
in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the
Company pursuant to the terms of (A) the certificate of
incorporation or by-laws of the Company, as amended, (B)
any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement,
note, loan or credit agreement or any other agreement or
instrument known to such counsel to which the Company is
a party or by which it is bound, or (C) any federal,
state or local statute, rule or regulation applicable to
the Company or any judgment, decree or order known to
such counsel of any arbitrator, court, regulatory body or
administrative agency or other governmental agency or
body (including, without limitation, those having
jurisdiction over environmental or similar matters),
domestic or foreign, having jurisdiction over the Company
or any of its activities or properties;
(viii) no consent, approval, authorization or
order, and no filing with, any court, regulatory body,
government agency or other body (other than such as may
be required under federal securities or Blue Sky laws, as
to which no opinion need be rendered) is required in
connection with the issuance of the Registered Securities
pursuant to the Prospectus, and the Registration
Statement, the performance of this Agreement, the Warrant
Agreement and the Representative's Warrant Agreement, and
the transactions contemplated hereby and thereby, except
such as have been obtained under the Securities Act and
the Regulations;
26
(ix) to the best knowledge of such counsel,
and except as disclosed in Registration Statement and the
Prospectus, the Company is not in breach of, or in
default under, any material term or provision of any
license, contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement,
stockholders' agreement, note, loan or credit agreement
or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which
the Company is bound or to which the property or assets
(tangible or intangible) of the Company is subject; and
the Company is not in violation of any term or provision
of its certificate of incorporation or by-laws, as amend-
ed, and to the best of such counsel's knowledge after
reasonable investigation, not in violation of any
franchise, license, permit, judgment, decree, order,
statute, rule or regulation which would have a material
adverse effect on the Company;
(x) the statements in the Prospectus under
"Dividend Policy" and "Description of Securities," have
been reviewed by such counsel, and insofar as they refer
to statements of law, descriptions of statutes, licenses,
rules or regulations or legal conclusions, are accurate
summaries and fairly and correctly present the
information called for therein;
(xi) the Common Stock and Warrants have been
accepted for quotation on the Nasdaq Small Cap;
(xii) except as otherwise described in the
Prospectus, to the best of such counsel's knowledge and
based upon a review of the outstanding securities and the
contracts furnished to such counsel by the Company, no
person, corporation, trust, partnership, association or
other entity has the right to include and/or register any
securities of the Company in the Registration Statement,
require the Company to file any registration statement
or, if filed, to include any security in such regis-
tration statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws, rules and regulations
of the United States and the laws, rules and regulations of the State of New
York, to the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (in form and substance
satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters
of fact, to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of
the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion of
such counsel shall state that know-ledge shall not include the knowledge of a
director or officer of the Company who is affiliated with
27
such firm in his or her capacity as an officer or director of the Company.
The opinion of such counsel for the Company shall state that the opinion of
any such other counsel is in form satisfactory to such counsel.
At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of CKS, counsel to the Company, dated the
Option Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel confirming as of such Option Closing
Date the statements made by CKS in their opinion delivered on the Closing
Date.
(e) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this Section 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company or herein contained.
(f) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement
and Prospectus; (ii) there shall have been no transaction, not in the
ordinary course of business, entered into by the Company, from the latest
date as of which the financial condition of the Company is set forth in the
Registration Statement and Prospectus which is adverse to the Company; (iii)
the Company shall not be in default under any provision of any instrument
relating to any outstanding indebtedness which default has not been waived;
(iv) the Company shall not have issued any securities (other than the
Registered Securities) or declared or paid any dividend or made any
distribution in respect of its capital stock of any class and there has not
been any change in the capital stock, or any material increase in the debt
(long or short term) or liabilities or obligations of the Company (contingent
or otherwise); (v) no material amount of the assets of the Company shall have
been pledged or mortgaged, except as set forth in the Registration Statement
and Prospectus; (vi) no action, suit or proceeding, at law or in equity,
shall have been pending or threatened (or circumstances giving rise to same)
against the Company, or affecting any of its respective properties or
businesses before or by any court or federal, state or foreign commission,
board or other administrative agency wherein an unfavorable decision, ruling
or finding may materially adversely affect the business, operations,
prospects or financial condition or income of the Company, except as set
forth in the Registration Statement and Prospectus; and (vii) no stop order
shall have been issued under the Act and no proceedings therefor shall have
been initiated, threatened or contemplated by the Commission.
28
(g) At each of the Closing Date and each Option Closing Date,
if any, the Underwriters shall have received a certificate of the Company
signed on behalf of the Company by the principal executive officer of the
Company, dated the Closing Date or Option Closing Date, as the case may be,
to the effect that such executive has carefully examined the Registration
Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if
made on and as of the Closing Date or the Option Closing
Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be
performed or satisfied at or prior to such Closing Date
or Option Closing Date, as the case may be;
(ii) No stop order suspending the
effectiveness of the Registration Statement or any part
thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the
best of each of such person's knowledge after due
inquiry, are contemplated or threatened under the Act;
(iii) The Registration Statement and the
Prospectus and, if any, each amendment and each
supplement thereto, contain all statements and
information required by the Act to be included therein,
and none of the Registration Statement, the Prospectus
nor any amendment or supplement thereto includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary
to make the statements therein not misleading and neither
the Preliminary Prospectus or any supplement, as of their
respective dates, thereto included 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, in light of the circumstances under
which they were made, not misleading; and
(iv) Subsequent to the respective dates as of
which information is given in the Registration Statement
and the Prospectus, (a) the Company has not incurred up
to and including the Closing Date or the Option Closing
Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or
obligations, direct or contingent; (b) the Company has
not paid or declared any dividends or other distributions
on its capital stock; (c) the Company has not entered
into any transactions not in the ordinary course of
business; (d) there has not been any change in the
capital stock or material increase in long-term debt or
any increase in the short-term borrowings (other than any
increase in the short-term borrowings in the ordinary
course of business) of the Company, (e) the Company has
not sustained any loss or damage to its property or
assets, whether or not insured, (f) there is no
litigation which is pending or threatened (or
circumstances giving rise to same) against the Company or
any affiliated party of any of the foregoing which is
required to be set forth in an amended or supple-
29
mented Prospectus which has not been set forth, and (g) there
has occurred no event required to be set forth in an
amended or supplemented Prospectus which has not been set
forth.
References to the Registration Statement and the Prospectus in this
subsection (g) are to such documents as amended and supplemented at the date
of such certificate.
(h) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable
to the Underwriters.
(i) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters
in form and substance satisfactory in all respects (including the
non-material nature of the changes or decreases, if any, referred to in
clause (iii) below) to the Underwriters and Underwriters' Counsel, from Price
Waterhouse:
(i) confirming that they are independent
certified public accountants with respect to the Company
within the meaning of the Act and the applicable Rules
and Regulations;
(ii) stating that it is their opinion that the
financial statements and supporting schedules of the
Company included in the Registration Statement comply as
to form in all material respects with the applicable
accounting requirements of the Act and the Regulations
thereunder and that the Underwriters may rely upon the
opinion of Price Waterhouse with respect to the financial
statements and supporting schedules included in the
Registration Statement;
(iii) stating that, on the basis of a limited
review which included a reading of the latest available
unaudited interim financial statements of the Company
(with an indication of the date of the latest available
unaudited interim financial statements), a reading of the
latest available minutes of the stockholders and board of
directors and the various committees of the board of
directors of the Company, consultations with officers and
other employees of the Company responsible for financial
and accounting matters and other specified procedures and
inquiries, nothing has come to their attention which
would lead them to believe that (A) the unaudited
financial statements and supporting schedules of the
Company included in the Registration Statement, if any,
do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the
Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on
a basis substantially consistent with that of the audited
financial statements of the Company included in the
Registration Statement, or (B) at a specified date not
more than five (5) days prior to the effective date of
the Registration Statement, there has been any change in
the capital stock
30
or material increase in long-term debt of the Company, or
any material decrease in the stockholders' equity or net
current assets or net assets of the Company as compared with
amounts shown in the balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or
decrease, setting forth the amount of such change or
decrease;
(iv) stating that they have compared specific
dollar amounts, numbers of shares, percentages of
revenues and earnings, statements and other financial
information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts,
numbers, percentages, statements and information may be
derived from the general accounting records, including
work sheets, of the Company and excluding any questions
requiring an interpretation by legal counsel, with the
results obtained from the application of specified
readings, inquiries and other appropriate procedures
(which procedures do not constitute an examination in
accordance with generally accepted auditing standards)
set forth in the letter and found them to be in
agreement; and
(v) statements as to such other material matters
incident to the transaction contemplated hereby as the
Representative may reasonably request.
(j) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from Price Waterhouse a letter, dated as
of the Closing Date or the Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished
pursuant to Subsection (i) of this Section 6, except that the specified date
referred to shall be a date not more than five (5) days prior to Closing Date
or the Option Closing Date, as the case may be, and, if the Company has
elected to rely on Rule 430A of the Rules and Regulations, to the further
effect that they have carried out procedures as specified in clause (iv) of
Subsection (i) of this Section 6 with respect to certain amounts, percentages
and financial information as specified by the Representative and deemed to be
a part of the Registration Statement pursuant to Rule 430A(b) and have found
such amounts, percentages and financial information to be in agreement with
the records specified in such clause (iv).
(k) On each of Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representative for the several
Underwriters' accounts the appropriate number of Registered Securities.
(l) No order suspending the sale of the Registered Securities
in any jurisdiction designated by the Representative pursuant to subsection
(e) of Section 4 hereof shall have been issued on either the Closing Date or
the Option Closing Date, if any, and no proceedings for that purpose shall
have been instituted or shall be contemplated.
31
(m) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the Representative's
Warrant Agreement, substantially in the form filed as Exhibit ___, to the
Registration Statement, in final form and substance satisfactory to the
Representative, and (ii) the Representative's Warrants in such denominations
and to such designees as shall have been provided to the Company.
(n) On or before Closing Date, the Common Stock and Warrants
shall have been duly approved for quotation on Nasdaq Small Cap.
(o) On or before Closing Date, there shall have been
delivered to the Representative all of the Lock-up Agreements in final form
and substance satisfactory to Underwriters' Counsel.
(p) On or before the Closing Date, the Company shall have
executed the Warrant Agreement, substantially in the form filed as Exhibit
___ to the Registration Statement, in final form and substance satisfactory
to the Representative and their counsel.
If any condition to the Underwriters' obligations hereunder to
be fulfilled prior to or at the Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representative may
terminate this Agreement or, if the Representative so elect, they may waive
any such conditions which have not been fulfilled or extend the time for
their fulfillment.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this Section 7 "Underwriters" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for
an Underwriter as provided in Section 11 hereof), and each person, if any,
who controls the Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, from and against
any and all loss, liability, claim, damage, and expense whatsoever
(including, but not limited to, reasonable attorneys' fees and any and all
reasonable expense whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation provided that the indemnified persons may not agree to any such
settlement without the prior written consent of the Company), as and when
incurred, arising out of, based upon or in connection with (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Preliminary Prospectus, the Registration Statement or the Prospectus (as from
time to time amended and supplemented); or (B) in any application or other
document or communication (in this Section 7 collectively called
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company in any jurisdiction in
order to qualify the Registered Securities under the securities laws thereof
32
or filed with the Commission, any state securities commission or agency, The
Nasdaq Stock Market, Inc. or any securities exchange; or any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made),
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case
may be; or (ii) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement. The indemnity
agreement in this subsection (a) shall be in addition to any liability which
the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the Registration Statement, and each
other person, if any, who controls the Company, within the meaning of the
Act, to the same extent as the foregoing indemnity from the Company to the
Underwriters but only with respect to statements or omissions, if any, made
in any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment thereof or supplement thereto or in any application made in
reliance upon, and in strict conformity with, written information furnished
to the Company with respect to any Underwriter by such Underwriter or the
Representative expressly for use in such Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any such application, provided that such written information or
omissions only pertain to disclosures in the Preliminary Prospectus, the
Registration Statement or Prospectus directly relating to the transactions
effected by the Underwriters in connection with this Offering. The Company
acknowledges that the statements with respect to the public offering of the
Registered Securities set forth under the heading "Underwriting" and the
stabilization legend in the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriters or the
Representative for inclusion in the Prospectus. The indemnity agreement in
this subsection (b) shall be in addition to any liability which the
Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against one or more indemnifying parties under this Section 7, notify each
party against whom indemnification is to be sought in writing of the
commencement thereof (but the failure to so notify an indemnifying party
shall not relieve it from any liability which it may have otherwise or which
it may have under this Section 7, except to the extent that it has been
prejudiced in any material respect by such failure). In case any such action
is brought against any indemnified party, and it notifies an indemnifying
party or parties of the commencement thereof, the indemnifying party or
parties will be entitled to
33
participate therein, and to the extent it may elect 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. Notwithstanding
the foregoing, the indemnified party or parties shall have the right to
employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such indemnified party or parties
unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying
parties shall not have employed counsel reasonably satisfactory to such
indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded, based on the
advise of counsel, that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events the reasonable fees and expenses of
one additional counsel shall be borne by the indemnifying parties. In no
event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable
for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution
in any case in which (i) an indemnified party makes claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the
fact that the express provisions of this Section 7 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of any indemnified party, then each indemnifying party
shall contribute to the amount paid as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) (A) in such
proportion as is appropriate to reflect the relative benefits received by
each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand, from the offering of the Registered Securities
or (B) if the allocation provided by clause (A) 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 each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as
well as any other relevant equitable considerations. In any case where the
Company is a contributing party and the Underwriters are the indemnified
party, the relative benefits received by the Company on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as
the total net
34
proceeds from the offering of the Registered Securities (before deducting
expenses other than underwriting discounts and commissions) bear to the total
underwriting discounts received by the Underwriters hereun-der, in each case
as set forth in the table on the Cover Page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or by the Underwriters, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions in respect thereof) referred to above in this subdivision (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subdivision (d) the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Registered Securities purchased by
the Underwriters hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person, if any, who
controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect to which a claim for contribution
may be made against another party or parties under this subparagraph (d),
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they
may have hereunder or otherwise than under this subparagraph (d), or to the
extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to
any liabilities which any indemnifying party may have at common law or
otherwise.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant
hereto, shall be deemed to be representations, warranties and agreements of
the Company, at the Closing Date and the Option Closing Date, as the case may
be, and such representations, warranties and agreements of the Company, and
the respective indemnity and contribution agreements contained in Section 7
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, the Company, any
controlling person of either the Underwriter or the Company, and shall
survive termination of this Agreement or the issuance and delivery of the
Registered Securities to the Underwriters and the Representative, as the case
may be.
35
10. EFFECTIVE DATE.
(a) This Agreement shall become effective at 5:00 p.m., New
York City time, on the date hereof. For purposes of this Section 9, the
Registered Securities to be purchased hereun-der shall be deemed to have been
so released upon the earlier of dispatch by the Representative of telegrams
to securities dealers releasing such shares for offering or the release by
the Representative for publication of the first newspaper advertisement which
is subsequently published relating to the Registered Securities.
11. TERMINATION.
(a) Subject to subsection (b) of this Section 10, the
Representative shall have the right to terminate this Agreement, (i) if any
domestic or international event or act or occurrence has materially
disrupted, or in the Representative's reasonable opinion will in the
immediate future materially disrupt the financial markets; or (ii) any
material adverse change in the financial markets shall have occurred; or
(iii) if trading on the Boston Stock Exchange, or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; or (iv) if
the United States shall have become involved in a war or major hostilities,
or if there shall have been an escalation in an existing war or major
hostilities or a national emergency shall have been declared in the United
States; or (v) if a banking moratorium has been declared by a state or
federal authority; or (vi) if the Company shall have sustained a loss
material or substantial to the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether
or not such loss shall have been insured, will, in the Represent-ative's
opinion, make it inadvisable to proceed with the delivery of the Registered
Securities; or (viii) if there shall have been such a material adverse change
in the prospects or conditions of the Company, or such material adverse
change in the general market, political or economic conditions, in the United
States or elsewhere as in the Representative's judgment would make it
inadvisable to proceed with the offering, sale and/or delivery of the
Registered Securities.
(b) If this Agreement is terminated by the Representative in
accordance with any of the provisions of Section 6, Section 10(a) or Section
11, the Company shall promptly reimburse and indemnify the Underwriters
pursuant to Section 5(b) hereof. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any termination of
this Agreement (including, without limitation, pursuant to Sections 6, 10, 11
and 12 hereof), and whether or not this Agreement is otherwise carried out,
the provisions of Section 5 and Section 7 shall not be in any way affected by
such election or termination or failure to carry out the terms of this
Agreement or any part hereof.
12. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify
the termination of this Agreement under
36
the provisions of Section 6, Section 10 or Section 12 hereof) to purchase the
Registered Securities which it or they are obligated to purchase on such date
under this Agreement (the "Defaulted Securities"), the Representative shall
have the right, within 24 hours thereafter, to make arrangement for one or
more of the non-defaulting Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth. If,
however, the Representative shall not have completed such arrangements within
such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the total number of Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
total number of Shares, this Agreement shall terminate without liability on
the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representative shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
13. DEFAULT BY THE COMPANY. If the Company shall fail at the
Closing Date or any Option Closing Date, as applicable, to sell and deliver
the number of Registered Securities which it is obligated to sell hereunder
on such date, then this Agreement shall terminate (or, if such default shall
occur with respect to any Option Securities to be purchased on an Option
Closing Date, the Underwriters may at the Representative's option, by notice
from the Representative to the Company, terminate the Underwriters'
obligation to purchase Option Securities from the Company on such date)
without any liability on the part of any non-defaulting party other than
pursuant to Section 5, Section 7 and Section 10 hereof. No action taken
pursuant to this Section shall relieve the Company from liability, if any, in
respect of such default.
14. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication. Notices to the Underwriters shall be directed to the
Representative, c/o National Securities Corporation, 0000 Xxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx Xxxxxxxxx, with a
copy, which shall not constitute notice, to X'Xxxxxx & Xxxxxx, 00 X. XxXxxxx
Xx., Xxxxx
00
2900, Xxxxxxx, Xxxxxxxx 00000, Attention: Arthur Don, Esq. Notices to the
Company shall be directed to the Company at Casull Arms Corporation, 000
Xxxxxxxx Xxxx, X.X. Xxx 0000, Xxxxx, Xxxxxxx 00000, Attention: Xxxxx X.
Xxxxxxx, with a copy, which shall not constitute notice, to Camhy, Xxxxxxxxx
& Xxxxx LLP, 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxx X. Annex, Esq.
15. PARTIES. This Agreement shall inure solely to the benefit of
and shall be binding upon the Underwriters, the Company and the controlling
persons, directors and officers referred to in Section 7 hereof and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any provisions
herein contained. No purchaser of Registered Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
16. CONSTRUCTION. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the choice of law or conflict of laws principles.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be one and the same instrument.
18. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Warrant
Agreement and the Representative's Warrant Agreement constitute the entire
agreement of the parties hereto and supersede all prior written or oral
agreements, understandings and negotiations with respect to the subject
matter hereof. This Agreement may not be amended except in a writing, signed
by the Representative, and the Company.
If the foregoing correctly sets forth the understanding among
the Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
CASULL ARMS CORPORATION
By:_________________________________________
Name: Xxxxx X. Xxxxxxx
Title: Chairman of the Board
CONFIRMED AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
38
NATIONAL SECURITIES CORPORATION
By:__________________________________________________
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman
For itself and as Representative of the Underwriters named in Schedule A
hereto.
39
SCHEDULE A
Total Number of
Name of Units to be
Underwriters Purchased
------------ ---------------
National Securities Corporation. . . . . . . . . . . . . . . _________
__________________________________ . . . . . . . . . . . . . _________
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000
40
