UNDERWRITING AGREEMENT
between
PACIFIC BIOMETRICS, INC.,
and
PARADISE VALLEY SECURITIES, INC.
______________, 1996
UNDERWRITING AGREEMENT
PACIFIC BIOMETRICS, INC.
1,700,000 Shares of Common Stock
1. PARTIES AND INTRODUCTION.
The parties to this agreement (the "Agreement") are Pacific Biometrics,
Inc., a Delaware corporation (the "Company"), its wholly owned subsidiaries, and
Paradise Valley Securities, Inc. ("Paradise"), an Arizona corporation. Paradise
is sometimes referred to as the "Underwriter". The Company's wholly-owned
subsidiaries Pacific Biometrics, Inc., a Washington corporation, and BioQuant,
Inc., a Michigan corporation (collectively referred to as the "Subsidiaries")
are signatories hereto with respect to certain indemnification obligations
pursuant to Section 7 of this Agreement.
The Company proposes to issue and sell to the Underwriter 1,700,000 units
(individually a "Unit" and collectively the "Units"), each Unit consisting of
one share of the Company's authorized but unissued common stock, $.01 par value,
(the "Common Stock") and a warrant (individually a "Warrant" and collectively
the "Warrants"). Each Warrant will entitle the holder thereof to purchase one
share of Common Stock at a price of $12.00, subject to certain conditions. Such
1,700,000 Units are herein called the "Firm Units". The Firm Units, together
with (a) the shares of Common Stock and the Warrants comprising such Units and
(b) the shares of Common Stock issuable upon exercise of such Warrants, are
collectively referred to herein as the "Underwritten Securities". In addition,
the Company proposes to grant to the Underwriter an option (the "Over-Allotment
Option") to purchase up to 255,000 additional Units (hereinafter called the
"Option Units") solely to cover over-allotments, if any. The Option Units,
together with (a) the shares of Common Stock and the Warrants comprising such
Units and (b) the shares of Common Stock issuable upon exercise of such
Warrants, are collectively referred to herein as the "Option Securities". The
Underwritten Securities and the Option Securities are herein collectively
referred to as the "Unit Securities". The offer and sale of the Unit Securities
as contemplated in this Agreement are herein called the "Offering". Upon
completion of the Offering, the Units will not be traded, but the shares of
Common Stock and the Warrants shall be registered pursuant to paragraph 2 below,
and shall separately trade.
In addition, the Company proposes to sell to the Underwriter, for its own
account, warrants (collectively the "Underwriter's Unit Warrants") to purchase
170,000 Units (the "Underwriter's Warrant Units"), as more fully described in
Section 3 herein, and in such Underwriter's Unit Warrants. The Unit Securities,
the Underwriter's Unit Warrants, the Underwriter's Warrant Units, the shares of
Common Stock and the Warrants comprising the Underwriter's Warrant Units and the
shares of Common Stock issuable upon exercise of the Warrants included within
the Underwriter's Warrant Units are more fully described in the Registration
Statement and the Prospectus (as those terms are defined and referred to in
Section 2 herein), and are called collectively herein the "Securities".
2. REGISTRATION STATEMENT AND PROSPECTUS.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and amendments thereto,
on Form SB-2 (File No. 333-11551), including the related preliminary prospectus,
for the registration under the Securities Act of 1933, as amended ("the Act"),
of the Securities, copies of each of which have been delivered to the
Underwriter. The registration statement (including the prospectus, financial
statements, exhibits, and all other documents filed as a part thereof or
incorporated therein), as amended on the date on which such registration
statement is declared effective (the "Effective Date") by the Commission and
deemed by virtue of Rule 430A of the General Rules and Regulations of the
Commission under the Act (the "Regulations") to be part of such registration
statement at the time it was declared effective, is hereinafter referred to as
the "Registration Statement"; and the term "Prospectus" shall mean the
prospectus so filed with the Commission pursuant to Rule 424(b) of the
Regulations. The term "preliminary Prospectus" as used herein shall mean each
prospectus used prior to the date the Registration Statement became effective
and included as a part of the Registration Statement, including any prospectus
filed with the Commission pursuant to Rule 424(a).
3. SALE, ISSUANCE AND DELIVERY OF UNITS.
3.1 Purchase and Sale of Units; Public Offering. Subject to the terms and
conditions set forth herein and on the basis of the representations, warranties
and agreements contained herein, the Company hereby agrees to issue and sell and
the Underwriter hereby agrees to purchase from the Company the 1,700,000 Firm
Units at a price equal to ninety percent (90%) of the public offering price of
$4.75 per Unit (the "Offering Price"). The difference of $0.475 per Firm Unit
between the Offering Price and the price at which the Company will sell the Firm
Units to the Underwriter is the "Underwriter's Discount".
The Underwriter will make a public offering of the Units as promptly as is
expedient in the judgment of the Underwriter, after the Registration Statement
shall have become effective, upon the terms hereof and at the Offering Price.
3.2 Underwriter's Warrants. On the Firm Closing Date (which term is
defined in paragraph 3.4, below) the Company will issue and sell to the
Underwriter, at an aggregate price of $100, the Underwriter's Unit Warrants for
the purchase of 170,000 Units (which is equal to 10% of the total number of Firm
Units sold in the Offering), at an exercise price of $5.70 per share (120% of
the Offering Price). The Underwriter's Unit Warrants shall be exercisable during
the period commencing one year and ending five years after the Effective Date.
The Underwriter's Unit Warrants shall contain the terms and provisions
hereinbelow more fully described and as set forth more particularly therein,
including, but not limited to, provisions protecting the holder(s) against
dilution by reason of stock dividends, stock splits, combinations,
recapitalization, mergers and consolidations or otherwise, provisions relating
to registration rights (both one demand and unlimited "piggy back" registration
rights) with respect to the shares of Common Stock included within the
Underwriter's Unit Warrants and the shares of Common Stock issuable upon
exercise of the Warrants included within the Underwriter's Unit Warrants, and
such other terms as are agreed upon by the Company and the Underwriter. As
further provided therein, no transfer, assignment or hypothecation of the
Underwriter's Unit Warrants (or of any of the Units, shares of Common Stock or
Warrants included therein) shall be made except to certain directors, officers,
and employees and shareholders of the Underwriter. The Underwriter's Unit
Warrants shall be issued and sold to the Underwriter as an additional
underwriting fee. The Company shall not be obligated to issue the Underwriter's
Unit Warrants until the Firm Units have been issued, sold and paid for as herein
provided.
3.3 Over-Allotment Option. Subject to the terms and conditions of this
Agreement, the Company hereby grants to the Underwriter an option to purchase
all or any portion of the Option Units, at the same price per Unit as the
Underwriter is to pay for the Firm Units, provided that the Over-Allotment
Option may be exercised only for the purpose of covering over-allotments in the
sale of the Firm Units. The Over-Allotment Option may be exercised at any time,
in whole or in part, on one occasion within 30 days from the Effective Date and
upon written notice to the Company by the Underwriter. Such notice shall set
forth the aggregate number of Option Units as to which the Over-Allotment Option
is being exercised and the time at which such Option Units will be purchased and
delivered.
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3.4 Delivery and Payment. Delivery and payment for the Firm Units shall be
made at the offices of the Underwriter in Phoenix, Arizona, on such date (the
"Firm Closing Date") as the Underwriter shall designate, or at such other place
or date as may be mutually agreed upon by the Company and the Underwriter, not
later than the third (or if the Firm Units are priced, as contemplated by Rule
15c6-1 of the Securities Exchange Act of 1934 (the "Exchange Act"), after 4:30
p.m. Washington, D.C. time, the fourth) full business day following the date
that any of the Units are released to the Underwriter for sale to the public;
provided, however, that in the event the Registration Statement is amended or
the Prospectus is supplemented between the Effective Date and the Firm Closing
Date, the Underwriter shall have the right to delay the Firm Closing Date to a
date that shall allow the Underwriter sufficient time to distribute the
Prospectus as amended or supplemented. The certificates for the shares of Common
Stock and the Warrants comprising the Firm Units shall be delivered in
definitive form or shall be recorded by the Depository Trust Corporation in such
names and in such denominations as the Underwriter shall request by notice at
least two business days prior to the Firm Closing Date, against payment by
official bank or certified check, wire transfer to or upon the order of the
Company, in such method as is agreed upon between the Underwriter and the
Company.
Delivery and payment for any Option Units which the Underwriter may elect
to purchase shall be made at the offices of the Underwriter, on a date (the
"Option Closing Date") which shall not be earlier than two nor later than five
full business days after exercise of the Over-Allotment Option, but in no event
earlier than the Firm Closing Date, unless otherwise agreed by the Underwriter
and the Company. Delivery of certificates, in definitive form, for the shares of
Common Stock and the Warrants comprising the Units being purchased, registered
in such names and denominations as the Underwriter shall request by at least two
business days' prior notice in writing, shall be made to the Underwriter or
shall be recorded by the Depository Trust Corporation for the account of the
Underwriter (or its nominee) against payment for the purchase price thereof by
official bank or certified check or checks payable to the order of the Company
or by wire transfer to the Company's account.
The Firm Closing Date and the Option Closing Date are sometimes referred
to collectively as the "Closing Date(s)". On any Closing Date with respect to
Option Units, there shall be delivered to the Underwriter opinions and
certificates, dated as of such Closing Date, to the same effect as those
required to be delivered on the Firm Closing Date pursuant to Section 6 hereof.
3.5 Inspection of Certificates. For the purpose of expediting the checking
and packaging of the certificates for the shares of Common Stock and the
Warrants comprising the Units, the Company agrees to make the certificates
available for inspection by the Underwriter at the offices of the Transfer Agent
(as defined in paragraph 4.8 below), not less than 24 hours prior to the
respective Closing Dates.
3.6 Use of Prospectus. The Company authorizes the Underwriter and any
dealers acquiring the Units to use the Prospectus, as from time to time amended
or supplemented, in connection with the offering and sale of the Units for a
period of 25 days after the Effective Date (and for such longer period as the
Underwriter may request if, in the opinion of the Underwriter's counsel, the
Prospectus is required by the Act and applicable Regulations to be delivered
after the expiration of such 25-day period).
3.7 Selected Dealers. The Underwriter may associate itself with other duly
licensed and authorized securities dealers ("Selected Dealers") that are members
of the National Association of Securities Dealers, Inc. ("NASD"), and may allow
all members of any such selling group such part of its discount as they may
determine pursuant to the Selected Dealers Agreement between the Underwriter and
each Selected Dealer.
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3.8 Subscriptions. The Underwriter may allocate Units among, or reject,
any subscriptions, in whole or in part.
3.9 Reservation of Shares. The Company shall set aside and at all times
have reserved and available a sufficient amount of Common Stock to cover the
issuance of (i) the shares subject to the Warrants, (ii) the shares subject to
the Underwriter's Unit Warrants, and (iii) the shares subject to the Warrants
included within the Warrants which comprise a part of the Units subject to the
Underwriter's Unit Warrants.
4. AGREEMENTS OF THE COMPANY.
The Company further covenants and agrees with the Underwriter as follows:
4.1 Effectiveness of Registration Statement. The Company will use its best
efforts to cause the Registration Statement, if not effective at the time and
date that this Agreement is executed and delivered by the parties hereto, to
become effective. The Company will advise the Underwriter promptly, and confirm
that advice in writing, (a) when the Registration Statement has become effective
and when any post-effective amendment to the Registration Statement shall have
become effective, (b) of the mailing or the delivery to the Commission for
filing of any amendment or post-effective amendment to the Registration
Statement or any amendment or supplement to the Prospectus, (c) of any request
by the Commission for amendment or supplement to the Registration Statement or
the Prospectus, or for additional information, promptly supplying the
Underwriter with copies of all comment letters and all other correspondence with
the Commission, (d) of the issuance by the Commission of any stop order
suspending effectiveness of the Registration Statement or of the suspension of
the qualification of the Company's Securities for sale in any jurisdiction, or
of any initiation or threat of any proceeding for any such purpose known to the
Company, and (e) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or the exemption
from qualification of the Company's Securities under state securities or Blue
Sky laws or the initiation or threat of any proceedings for that purpose.
4.2 Rule 430A Prospectus; Amendments to the Registration Statement. If
Rule 430A of the Regulations is employed, the Company will timely file the
Prospectus pursuant to and in compliance with Rule 424(b) of the Regulations and
will advise the Underwriter of the time and manner of such filing. The Company
will give the Underwriter advance notice of its intention to file or make any
post-effective amendment to the Registration Statement or any amendment or
supplement to the Prospectus and will submit all such amendments or supplements
to the Underwriter and the Underwriter's counsel for comments, as soon as
possible, but not later than three (3) business days before the Company proposes
to file such amendments or supplements with the Commission.
4.3 Compliance with Securities Act. The Company will comply with the Act
and the Regulations, so as to permit the continuance of offers and sales of, and
dealings in, the shares of Common Stock and the Warrants for as long as may be
necessary to complete the distribution of the Units as contemplated hereby. If
at any time when a prospectus relating to the Units is required to be delivered
under the Act, any event occurs as a result of which, in the judgment of the
Company or the Underwriter or the Underwriter's counsel, the Prospectus, as then
amended or supplemented, would include any untrue statement of a material fact,
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which 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 promptly notify the Underwriter, or the Underwriter will
promptly notify the Company, as the case may be, and the Company shall promptly
prepare and file with the Commission, if the Company determines such filing to
be appropriate,
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an amendment or supplement to the Registration Statement which will correct such
statement or omission, or an amendment or supplement which will effect such
compliance, and deliver to the Underwriter in connection therewith such
prospectus or prospectuses in such quantity as may be necessary to permit
compliance with the requirements of the Act. The Company agrees to file with the
Commission all required reports on Form SR in accordance with the provisions of
Rule 463 promulgated under the Act and provide a copy of such reports to the
Underwriter and its counsel.
4.4 Copies of the Registration Statement and Prospectus. The Company will
promptly deliver to the Underwriter, without charge, (a) two copies of the
Registration Statement, as originally filed, and of each amendment thereto, and
of each post-effective amendment thereto filed at any time when a prospectus
relating to the Securities to be sold hereunder is required to be delivered
under the Act, in each such case manually executed by the proper officers and a
majority of the directors of the Company (or, in case of amendments, by their
duly constituted attorneys-in-fact) and including signed copies of each consent
of experts named in the Registration Statement and all financial statements,
schedules and exhibits filed therewith (including those incorporated by
reference to the extent not previously furnished to the Underwriter), and (b)
such number of conformed copies of the Registration Statement, as originally
filed, and of each amendment and post-effective amendment thereto (in each such
case excluding exhibits), as the Underwriter may reasonably require. The Company
will promptly deliver, without charge, to the Underwriter or such others whose
names and addresses are designated by the Underwriter as soon as possible after
the Effective Date and thereafter from time to time during the period when
delivery of a prospectus relating to the Securities to be sold hereunder is
required by the Act, as many printed copies as the Underwriter may reasonably
request of the final Prospectus and any amendment or supplement thereto. The
Company will promptly deliver without charge as soon as practicable following
the public offering or sale of the Units, and thereafter from time to time for
such period as delivery of a prospectus or any amendments or supplement thereto
may be required, to the Underwriter or Selected Dealers to or through whom Units
may be issued, as many copies as the Underwriter reasonably requests of the
Prospectus and any amendment or supplement thereto.
4.5 Blue Sky Qualification. Prior to any public offering of the Units by
the Underwriter, the Company will endeavor in good faith, using counsel
reasonably designated by the Underwriter, to take such action as may be
necessary, to register or qualify the Securities for offer and sale under the
applicable securities (or "Blue Sky") laws of any states or jurisdictions of the
United States as the Underwriter may reasonably designate and will maintain such
qualifications in effect for so long as may be required for the distribution of
the Securities. The Company shall pay for all reasonable Blue Sky counsel fees
up to a maximum of $7,500 and all filing and other reasonable expenses. The
Company will file such statements and reports as may be required by the laws of
each jurisdiction in which the Shares have been registered or qualified.
4.6 Periodic and Other Reports. The Company will deliver to the
Underwriter, for a period of at least five years from the last Closing Date(s):
(a) copies of all other statements, documents, or other information which the
Company shall mail or otherwise make available to any class of its security
holders, to the financial press or to the public, or shall file with the
Commission, including, but not limited to, periodic reports required to be filed
under Sections 13 and 15 of the Exchange Act, such as reports on Forms 10-C,
10-K (or 10-KSB), 10-Q (or 10-QSB) and 8-K (which shall be provided within the
same period that such reports are required to be filed with the Commission); and
(b) upon request in writing, such other information as may reasonably be
requested with reference to the property, business and affairs of the Company as
long as such information is available to securities holders generally.
4.7 Section 11(a) Financials. The Company will make generally available to
its stockholders, will file as an exhibit to a report filed under the Exchange
Act, and will deliver to the Underwriter, as
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soon as practicable, but in no event later than the first day of the 18th full
calendar month following the Effective Date, an earnings statement (which need
not be audited but which will satisfy the provisions of Section 11(a) of the
Act) covering a period of at least twelve (12) months beginning after the
Effective Date.
4.8 Transfer Agent. The Company shall appoint American Securities Transfer
& Trust, Incorporated, of Denver, Colorado, as the transfer agent (the "Transfer
Agent"), with respect to the Common Stock and the Warrants and will make
arrangements to have available, at the office of the Transfer Agent,
certificates representing the Common Stock and the Warrants in such quantities
as may, from time to time, be necessary. In addition, the Company shall obtain a
CUSIP number for each of the Common Stock and the Warrants as promptly as
possible after filing the Registration Statement with the Commission.
4.9 Copies for Compliance with the NASD. The Company will supply the
Underwriter's counsel with such copies of the Registration Statement, any
amendment or supplement to the Registration Statement, any preliminary
Prospectus or final Prospectus and related underwriting agreements as
appropriate to satisfy filing requirements of the NASD.
4.10 Nasdaq Small Cap Market. The Company shall use its best efforts to
meet the requirements (as the NASD may from time to time impose) for the
quotation of the Common Stock and the Warrants on the Nasdaq Small Cap Market
(the "Nasdaq Market") and continue to meet the requirements for the inclusion of
the Common Stock and the Warrants on the Nasdaq Market.
4.11 Costs and Expenses; Nonaccountable Expense Allowance. Whether or not
the transactions contemplated by this Agreement are consummated or this
Agreement becomes effective or is terminated, the Company shall bear all costs
and expenses incident to the issuance, offer, sale and delivery of the
Securities including, but not limited to, all expenses and fees incident to the
filing of the Registration Statement and other appropriate filings with the
Commission pursuant to the Act and the Exchange Act, respectively, the costs,
expenses and filing fees incurred in connection with the qualification under
Blue Sky laws (including fees of Blue Sky counsel) and in connection with the
review of the terms of the Offering by the NASD (excluding counsel fees relating
to the NASD's review, which fees shall be paid by the Underwriter), fees and
disbursements of counsel and accountants for the Company, Nasdaq Market filing
and other fees, the costs of "tombstone" advertisements agreed to by the
Company, costs of preparing and printing the Registration Statement (and all
amendments and supplements thereto) and as many copies of the preliminary
Prospectus and Prospectus as the Underwriter may deem reasonably necessary.
In addition to the foregoing, the Company shall pay to the Underwriter, as
reimbursement for the Underwriter's expenses on the basis of a nonaccountable
expense allowance, an amount equal to 3% of the gross offering proceeds from the
sale of the Units (including the Option Units sold by the Company), and all of
the Underwriter's costs in excess of the nonaccountable expense allowance shall
be paid by the Underwriter. Expenses to which the nonaccountable allowance shall
be applied include fees of the Underwriter's counsel, but shall not include any
of the following (all of which shall be paid by the Company): fees of the
Company's counsel; Commission and Blue Sky filing fees; Blue Sky counsel fees
and expenses; NASD filing fees; Nasdaq Market or other Nasdaq fees; printing;
"tombstone" advertisements; and any and all other expenses customarily paid by
the issuer in a public offering. The nonaccountable expense allowance, based on
the gross proceeds from the sale of the Units, shall be paid on each of the
Closing Date(s). The Company warrants, represents and agrees that all such
payments and reimbursements will be promptly and fully made to the Underwriter.
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Notwithstanding any other provision of this Agreement, if (a) the Company
decides not to proceed with the proposed offering, (b) there is a material
adverse change in the business or financial condition of the Company and the
Subsidiaries taken as a whole, (c) there exists any material misrepresentation
of the Company contained herein or otherwise which, in the opinion of the
Underwriter and its counsel, impairs the ability of the Underwriter to fulfill
its obligations hereunder or under applicable law or regulation, (d) the
Underwriter discovers in the course of its due diligence examination of the
Company and the Subsidiaries facts which the Underwriter reasonably determines,
in its reasonable discretion, could adversely affect the sale of the Units, or
(e) the Underwriter elects to terminate this Agreement pursuant to Section 8
hereof, the Company shall reimburse the Underwriter for its actual out-of-pocket
(accountable) expenses relating to the proposed offering, up to a maximum of
$125,000. The Underwriter's expenses shall include, but are not to be limited
to, reimbursement for the services and disbursements of the Underwriter's
counsel, plus any additional expenses and fees including, but not limited to,
postage expenses, duplication expenses, long distance telephone expenses, and
other expenses incurred by the Underwriter in connection with the proposed
offering. If the Company shall fail to pay to the Underwriter any portion of the
expense allowance set forth herein after having received five (5) days' notice
of such default, the Company shall be liable to the Underwriter for reasonable
attorneys' fees and costs incurred in the collection of said amount, and
interest on said amount at the rate of 18% per annum, or the maximum applicable
legal rate, whichever is lower.
4.12 List of Stockholders. The Company shall furnish to the Underwriter a
list of the names and addresses of all stockholders subsequent to the last
Closing Date and shall cause the Transfer Agent to furnish to the Underwriter a
copy of all transfer sheets for a period of two years from the last Closing
Date.
4.13 Compliance with Undertakings. The Company will comply with all of the
undertakings contained in the Registration Statement.
4.14 Information. Prior to the Closing Date(s), the Company will supply
and deliver to the Underwriter or its counsel, all information required to
enable them to make such investigation of the Company and its business prospects
as they shall reasonably request and shall make available to them such persons
as they deem reasonably necessary or appropriate in order to verify or
substantiate any information regarding the Company and the Subsidiaries. In
addition, the Underwriter or its counsel shall have the right to review any
materials prepared in connection with any offering of securities of the Company
conducted prior to the Offering for compliance with applicable federal and state
law.
4.15 Financial Reports. From and after the date of the audited financial
statements of the Company contained in the Prospectus through the Closing
Date(s), the Company will furnish to the Underwriter unaudited monthly operating
statements and quarterly financial statements in addition to any other reports
which may be required by this Agreement to be furnished to the Underwriter.
4.16 Limitation on Options, Warrants and Rights. The Company will not,
without the prior written consent of the Underwriter, directly or indirectly
grant any options, warrants or rights to purchase or acquire Common Stock for a
period of 120 days commencing on the Effective Date or permit to be outstanding
during such period any such options, warrants or rights, other than (i) an
aggregate of up to 700,000 options and warrants that may be outstanding as of
the Effective Date; (ii) warrants or other rights which are outstanding on the
Effective Date and described in the Prospectus; (iii) the Warrants; and (iv) and
the Underwriter's Unit Warrants. The Company will not, without the prior written
consent of the Underwriter, grant any options, warrants or rights to purchase or
acquire Common Stock for a price below the greater of the Offering Price or the
market price for the Common Stock on the date of grant, for a period of one year
commencing on the Effective Date. The Company will not, without the prior
written
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consent of the Underwriter, file a Registration Statement on Form S-8 during the
90-day period following the Effective Date.
4.17 Lock-Up Agreements. The Company shall cause each officer, each
director, and each stockholder listed on Schedule 4.17A, to enter into an
agreement substantially in the form of Schedule 4.17B (a "Lock-Up Agreement").
4.18 Limitation on Securities Issuances. Without the prior written consent
of the Underwriter, the Company will not, directly or indirectly, (a) sell,
offer, contract to sell, pledge or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock or (b) grant to any person or
entity any right to have any shares of Common Stock or any other security of the
Company registered under the Act or any state securities laws, for a period of
365 days commencing on the Effective Date (the "Lock-Up Period"), other than (i)
the shares of Common Stock, the Warrants, the shares of Common Stock issuable
upon exercise of the Warrants, and the Underwriter's Unit Warrants, and (ii)
options to purchase shares of Common Stock granted pursuant to the Company's
stock option plan(s) in effect from time to time (provided, however, that such
options shall comply with the requirements of paragraph 4.16). Prior to the
Offering, there shall be no more than 2,750,000 shares of Common Stock issued
and outstanding and no more than 700,000 shares subject to outstanding options,
warrants or other rights to acquire share,s except shares subject to Bridge
Warrants (as defined in the Prospectus).
4.19 Limitation on Compensation Increases. Without the prior written
consent of the Underwriter, neither the Company nor any direct or indirect
subsidiary of the Company shall, during the 180-day period following the
Effective Date, increase, directly or indirectly, the Compensation of any
director, officer or employee that has as of the date hereof, or had at any time
since June 28, 1996, an aggregate compensation level greater than $90,000 per
annum. As used herein, "Compensation" includes, but is not limited to, salary,
wages, bonuses, commissions and taxable fringe benefits. In addition, during
such period, the Company will not increase the Compensation paid or accrued to
any director in connection with the director's service as a member of the Board
of Directors of the Company or any direct or indirect subsidiary of the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to, and agrees with, the Underwriter
that:
5.1 Accuracy of Registration Statement. The Registration Statement
conforms, and the Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all material respects,
to the requirements of the Act and the Regulations and the Registration
Statement and the Prospectus did not and will not, as of the applicable
effective date as to the Registration Statement and any amendment thereto and as
of the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; when the Registration Statement becomes
effective, and when the Prospectus is filed with the Commission, and at all
times subsequent thereto up to and including the Closing Date(s), or for such
longer period as the Prospectus is required to be delivered under the Act and
the Regulations in connection with sales by the Underwriter or Selected Dealers,
the Registration Statement and the Prospectus and any amendments or supplements
thereto will conform, in all material respects, to the requirements of the Act
and the Regulations, and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
makes no representations or warranties as to information contained in or
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omitted from the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished in writing to the Company with respect to the underwriting, by or on
behalf of the Underwriter, expressly for use therein.
5.2 Financial Statements Accurate. Coopers & Xxxxxxx LLP, whose reports
appear in the Prospectus, is an independent public accountant within the meaning
of the Act and the Regulations. The financial statements of the Company and of
the Subsidiaries (including any supplementary financial information and related
schedules and notes) included in any preliminary Prospectus, the Prospectus and
the Registration Statement fairly present the financial condition of the Company
and the Subsidiaries on a consolidated basis as of the respective dates thereof,
and the results of operations and cash flows of the Company and the Subsidiaries
on a consolidated basis for the periods indicated therein, and such financial
statements have been prepared in conformity with generally accepted accounting
principles consistently applied and are in conformance with the books and
records of the Company. The financial data set forth in the Prospectus under the
captions "Prospectus Summary," "Selected Consolidated Financial Data,"
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" fairly present on the basis stated in the
Prospectus the information set forth therein and has been compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus. The pro forma financial statements and other pro forma financial
information included in the Registration Statement, any preliminary Prospectus
and the Prospectus have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements, have been
properly compiled on the pro forma bases described therein and, in the
reasonable opinion of the Company, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
5.3 Accounting Controls. The Company and the Subsidiaries maintain (and in
the future will maintain) a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
5.4 Compliance with Organizational Documents and Other Instruments. The
execution, delivery and performance of this Agreement, the Warrants, the
Underwriter's Unit Warrants, and the Warrants included within the Underwriter's
Unit Warrants by the Company and the execution, delivery and performance of this
Agreement by the Subsidiaries, and the consummation of the transactions
contemplated hereby and thereby, does not and will not, with or without the
giving of notice or the lapse of time, or both, (i) conflict with any terms or
provisions of the charter or Bylaws of the Company or any Subsidiary, as amended
to the date hereof and the Firm Closing Date or Option Closing Date, as the case
may be; (ii) result in a breach of, constitute a default under, result in the
termination or modification of or result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties of the
Company or a Subsidiary pursuant to any indenture, mortgage, deed of trust,
contract, commitment or other agreement or instrument to which the Company or
any Subsidiary is a party or by which any of their respective properties or
assets are bound or affected; (iii) violate any material law, rule, regulation,
judgment, order or decree of any government or governmental agency,
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any Subsidiary or any of their respective properties or businesses;
or (iv) result in a breach, termination or lapse of the power and authority of
the Company or any Subsidiary to own or lease and operate their respective
properties and conduct their respective businesses as described in the
Prospectus.
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5.5 No Material Adverse Change. Except as disclosed in the Registration
Statement and in the Prospectus, subsequent to the dates as of which information
is given in the Registration Statement and in the Prospectus, neither the
Company, nor any Subsidiary has or will have incurred any material liabilities
or obligations, direct or contingent, or entered into any material transactions
not in the normal course of business, and there has not been or will have been
any change in the Company's consolidated capitalization, or any material change
in the Company's and the Subsidiaries' condition (financial or otherwise),
business, prospects, operations, properties or assets, taken as a whole.
5.6 Incorporation and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
with all requisite corporate power and authority and all necessary licenses,
permits, certifications, registrations, approvals, consents and franchises to
own or lease and operate its properties and to conduct its business as now being
conducted and as described in the Prospectus, except where the failure to obtain
such licenses, permits, certifications, registrations, approvals, consents and
franchises would not have a material adverse effect on the Company, its business
or condition (financial or otherwise), and has not received any notice of any
proceeding relating to the revocation or modification of any thereof, nor is it
aware of any basis therefor. The Company is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Company. The Company does not own any stock or
other equity interest in, or control, directly or indirectly, any corporation,
partnership or other entity other than the Subsidiaries.
5.7 Incorporation and Standing of Subsidiaries. Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, with all requisite power and authority,
corporate and other, and all necessary licenses, permits, certifications,
registrations, approvals, consents and franchises to own or lease and operate
its properties and to conduct its business now being conducted and as described
in the Prospectus, except where the failure to obtain such licenses, permits,
certifications, registrations, approvals, consents and franchises would not have
a material adverse effect on the Company, its business or condition (financial
or otherwise), and has not received any notice of any proceeding relating to the
revocation or modification of any thereof, nor is the Company aware of any basis
therefor. Each Subsidiary is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Company and the Subsidiaries, considered as one
enterprise. Except as disclosed in the Prospectus, the Company owns all of the
outstanding capital stock of each Subsidiary free and clear of any security
interest, claim, lien, charge, encumbrance or adverse interest of any nature.
The outstanding capital stock of each Subsidiary has been duly and validly
issued and is fully paid and nonassessable. Except as described in the
Prospectus, there are no outstanding subscriptions, rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, any shares of
capital stock of any of the Subsidiaries.
5.8 Valid and Binding Agreements of the Company. Each of this Agreement,
the Warrants, and the Underwriter's Unit Warrants has been duly authorized,
executed and delivered by the Company, and constitutes its legal, valid and
binding obligation, enforceable against the Company in accordance with its
respective terms except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the rights of creditors generally or general equitable principles, and
except that the rights of indemnity hereunder and thereunder may be limited by
federal or state securities laws or the public policy underlying such laws. The
Warrants included within the Underwriter's Unit Warrants have been duly
authorized and, when executed and delivered by the Company in accordance with
the terms of the Underwriter's Unit Warrants upon the due
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exercise thereof, will constitute legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with the terms of such
Warrants except to the extent that enforceability and rights of indemnity
thereunder may be limited as aforesaid.
5.9 Valid and Binding Agreement of the Subsidiaries. This Agreement has
been duly authorized, executed and delivered by each Subsidiary and constitutes
its legal, valid and binding obligation, enforceable against each Subsidiary in
accordance with its terms except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the rights of creditors generally or general equitable
principles, and except that the rights of indemnity hereunder may be limited by
federal or state securities laws or the public policy underlying such laws.
5.10 Compliance with Applicable Law. The Company and each Subsidiary has
conducted, is conducting and will conduct its business so as to comply with all
material applicable statutes and regulations, and neither the Company nor any
Subsidiary is charged with nor, to the knowledge of the Company, is under
investigation with respect to any violation of any statutes or regulations nor
the subject of any pending or threatened adverse proceedings by any regulatory
authority having jurisdiction over its business or operations except as
disclosed in the Registration Statement and the Prospectus.
5.11 Absence of Conflict and Approvals. Except as disclosed in the
Prospectus, neither the Company nor any Subsidiary is in default, nor has any
event occurred that with notice or lapse of time, or both, would constitute a
default, in any material respect in the performance of any obligation, covenant
or condition contained in any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company or any Subsidiary is a
party or by which the Company is bound or to which any of its properties or
assets is subject; and no consent, approval, authorization, order, registration
or qualification of or with any court or regulatory authority or other
governmental body is required for the issue and sale of the Securities, or the
consummation of the other transactions contemplated by this Agreement, except
the registration of the Securities under the Act, and such consents, approvals,
authorizations, registrations or qualifications as may be required by the NASD
or under the Blue Sky laws in connection with the purchase and distribution of
the Units by the Underwriter and the purchase of the Underwriter's Unit Warrants
by the Underwriter.
5.12 Capitalization. The authorized, issued and outstanding capital stock
of the Company conforms to the descriptions thereof in the Registration
Statement and in the Prospectus, has been duly and validly issued and is fully
paid and nonassessable and, except as disclosed in the Prospectus, there are no
outstanding options, warrants or other rights for the issuance of, and no
commitment, plan or arrangement to issue, any share of capital stock of the
Company or any security convertible into or exchangeable for capital stock of
the Company.
5.13 No Pre-emptive or Registration Rights. The holders of the outstanding
capital stock of the Company are not entitled to pre-emptive or other rights to
subscribe for the Units or shares of Common Stock. Except as disclosed in the
Registration Statement and the Prospectus, the offering of the Securities as
contemplated by this Agreement and the Prospectus does not give rise to any
rights relating to the registration of any shares of Common Stock or other
securities of the Company.
5.14 Legality of Securities. The Securities, when issued and paid for in
accordance with the terms of this Agreement, the Warrants, the Underwriter's
Unit Warrants, and the Warrants issuable upon exercise of the Underwriter's Unit
Warrants, as the case may be, will be validly issued and (with respect to all
shares of Common Stock included within the Securities) fully paid and
nonassessable shares of Common Stock of the Company, free of pre-emptive rights.
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5.15 No Stop Orders. To the best knowledge of the Company, the Commission
has not issued any order preventing or suspending the use of any preliminary
Prospectus or the Prospectus or any part thereof and no proceedings for that
purpose have been instituted.
5.16 Contracts. All contracts and other documents required to be filed as
exhibits to the Registration Statement have been filed with the Commission and
are fully and accurately described in all material respects in the Prospectus.
5.17 Employee Plans. Except as disclosed in the Registration Statement and
the Prospectus, neither the Company nor any Subsidiary has any employee benefit
plans (including, without limitation, pension, profit sharing, and welfare
benefit plans) or deferred compensation arrangements.
5.18 Use of Proceeds. The Company will apply the proceeds of the Offering
substantially in the manner stated in the Prospectus.
5.19 Patents, Trademarks, etc. The Company and the Subsidiaries own or
possess, or can acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, the trademarks, service marks, trade names and
other proprietary rights and know-how (including trade secrets and other
patentable and/or unpatentable proprietary or confidential information or
procedures) (collectively, "Proprietary Rights") necessary to conduct the
business now conducted by them, and, except as described in the Prospectus or
specifically disclosed in writing to the Underwriter, neither the Company nor
any Subsidiary has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Proprietary
Rights, except where such infringement or conflict (including, without
limitation, any alleged infringement or conflict described in the Prospectus),
if the subject of an unfavorable decision, ruling or finding, would not have a
material adverse effect on the business affairs, business prospects, properties,
financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole.
5.20 Title to Property. Neither the Company nor any Subsidiary owns any
real property in fee simple, and the Company and each Subsidiary has good and
valid title to all personal property (including securities) owned by it, free
and clear of all liens, encumbrances and defects except such as are described in
the Prospectus or as do not materially affect the value or interfere with the
use of such property by the Company or any Subsidiary. Except as otherwise
disclosed in the Prospectus, the Company or a Subsidiary owns or leases all such
property, real, personal and mixed, tangible and intangible, as is necessary to
carry on its operations as presently conducted and as presently proposed to be
conducted.
5.21 No Litigation. Except as described in the Prospectus or disclosed in
writing to the Underwriter, there are no actions, suits or proceedings pending
or, to the Company's knowledge, threatened before any court or governmental
agency, arbitrator, authority or body to which the Company or any of the
Subsidiaries is a party or of which the business or property of the Company or
any of the Subsidiaries is the subject in which an unfavorable result or
decision would materially adversely affect the business affairs, business
prospects, properties, financial condition or results of operations of the
Company and the Subsidiaries, taken as a single enterprise, or which seek to
prevent or restrict the consummation of the transactions contemplated by this
Agreement.
5.22 No Undisclosed Sales of Securities. To the best of the Company's
knowledge, based on an examination of the Company's books and records by its
officers and its counsel, no securities of the Company have been sold by the
Company or any controlling person of the Company since the date of the Company's
formation, except as disclosed in the Registration Statement or Prospectus or
otherwise disclosed to the Underwriter.
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5.23 Prohibited Payments. None of the Company, any Subsidiary, or any of
its or their agents or employees in his or her capacity as such has made any
payment of funds of the Company or received or retained any funds in violation
of any law, rule or regulation the violation of which would have a material
adverse effect on the Company and the Subsidiaries, taken as a whole.
5.24 Taxes. The Company and each Subsidiary has filed all federal, state,
local and foreign tax returns which are known by the Company to be required to
be filed through the date hereof, or has received valid extensions thereof, and
has paid all taxes shown as due thereon. All such returns, as amended if
applicable, are complete, accurate and correct in all material respects. Neither
the Company nor any Subsidiary has any knowledge of any tax deficiency which
might be asserted against it which would materially and adversely affect the
business affairs, business prospects, properties, financial condition or results
of operations of the Company and the Subsidiaries, taken as a whole. The
provisions and reserves on the books of the Company and the Subsidiaries in
respect of federal, state, local and other taxes are, in the reasonable opinion
of the Company, adequate.
5.25 Insurance. The Company and the Subsidiaries maintain insurance of the
types and amounts required by governmental regulation and generally deemed
adequate for its and their assets, properties and business as it is presently
conducted or contemplated and consistent with insurance coverage maintained by
similar companies and businesses, including, but not limited to, insurance
covering real and personal property owned or leased against theft, damage,
destruction, acts of vandalism, products liability, and all other risks
customarily insured against, all of which insurance is in full force and effect
and not in default in any material respect thereunder.
5.26 Labor Relations. No labor disturbance by the employees of the Company
or any Subsidiary exists or, to the Company's knowledge, is imminent which could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), business, prospects, properties or assets of the
Company and the Subsidiaries, taken as a whole.
5.27 No Operation as Investment Company. The Company has conducted and
will continue to conduct its business and financial affairs in such a manner as
to ensure that it is not and will not become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations promulgated thereunder.
5.28 No NASD Affiliation. Except as disclosed in the Registration
Statement and the Prospectus or as otherwise disclosed to the Underwriter in
writing prior to the date hereof, no officer, director or greater than 5%
stockholder of the Company is, directly or indirectly, associated with an NASD
member broker-dealer and the Company has no management or financial consulting
agreement with any third party.
5.29 No Finders Fees. No person is entitled, directly or indirectly, to
compensation from the Company or any Subsidiary for services as a finder in
connection with the transactions contemplated by this Agreement.
5.30 Registration Under Exchange Act and Nasdaq Approval. The Common Stock
and the Warrants have been (or will be upon effectiveness of the Registration
Statement) registered under Section 12 of the Exchange Act and have been
approved for quotation through the Nasdaq Market.
5.31 Effect of Officer's Certificate. Any certificate signed by any
officer of the Company or any Subsidiary and delivered to the Underwriter or its
counsel on or prior to the Firm Closing Date or the Option Closing Date pursuant
to this Agreement or in connection with the transactions contemplated
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hereby shall be deemed a representation and warranty by the Company or the
Subsidiary, as the case may be, to the Underwriter as to the matters covered
thereby.
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITER.
The obligations of the Underwriter to purchase and offer the Units shall
be subject to the accuracy in all material respects of the representations and
warranties of the Company, in the case of the Firm Units as of the date hereof
and the Firm Closing Date (as if made on and as of the Firm Closing Date) and,
in the case of the Option Units, as of the date hereof and the Option Closing
Date (as if made on and as of the Option Closing Date), to the performance by
the Company and the Subsidiaries in all material respects of their respective
obligations hereunder, and to the satisfaction of the following additional
conditions on or before the Firm Closing Date in the case of the Firm Units and
on or before the Option Closing Date in the case of the Option Units:
6.1 Effectiveness of the Registration Statement. The Registration
Statement shall have become effective not later than 12:00 noon, Washington,
D.C. time, on the date following the date of this Agreement, or such later time
or date as shall have been consented to in writing by the Underwriter. The
information concerning the public offering price of the Shares and other
information omitted from the Registration Statement at the time it was declared
effective shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) within the prescribed period and the Company shall have provided
evidence satisfactory to the Underwriter of such timely filing (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rules 430A and
424(b)). No stop order suspending the effectiveness thereof shall have been
issued, and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company, threatened by the Commission or any state securities
commission or similar regulatory body. Any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
the Underwriter.
6.2 No Material Misstatements or Omissions. It shall not have been
discovered prior to any of the respective Closing Dates that the Registration
Statement or Prospectus or any amendment or supplement thereto contains an
untrue statement of fact which, in the opinion of the Underwriter after
consultation with its counsel, is material, or that the Registration Statement
or any amendment or supplement thereto omits to state a fact which, in the
opinion of the Underwriter after consultation with its counsel, 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 amendment or supplement thereto
omits to state a fact which, in the opinion of the Underwriter after
consultation with its counsel, is material and is required to be stated therein
or is necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading.
6.3 No Litigation. Between the date hereof and the Closing Date(s), there
shall be no litigation instituted or threatened against the Company, any
Subsidiary, or any of its or their respective officers or directors, and there
shall be no proceeding instituted or threatened against the Company, any
Subsidiary, or any of its or their respective officers or directors, before or
by any federal or state commission, regulatory body or administrative agency or
other governmental body, domestic or foreign, wherein an unfavorable ruling,
decision or finding would materially adversely affect the condition (financial
or otherwise), business, prospects, properties or assets of the Company and the
Subsidiaries, taken as a whole.
6.4 Change in Capitalization. Subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there shall not have been, except as contemplated
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in the Prospectus, any material change or decrease in any amounts described in
clause (c) of subparagraph 6.10.2 or 6.10.3 herein, which change or decrease is
specified in any letter referred to in paragraph 6.10, that makes it impractical
or inadvisable in the opinion of the Underwriter to proceed with the public
offering or the delivery, as the case may be, of the Units as contemplated by
the Prospectus.
6.5 Opinion of Company's Counsel. The Underwriter shall have received the
opinion, satisfactory in form and substance to the Underwriter and its counsel,
of Rosenman & Colin LLP, counsel for the Company and the Subsidiaries, dated as
of the relevant Closing Date, covering such matters as are set forth at Schedule
6.5.
In giving such opinion, such counsel may rely as to matters of fact
upon statements and certificates of officers of the Company and of the
Subsidiaries or public officials as to matters of fact of which the maker of
such certificate has knowledge, and as to matters of law of jurisdictions other
than the State of Delaware and the United States, such counsel may rely on
opinions of local counsel reasonably acceptable to the Underwriter, copies of
which certificates and opinions shall be attached to the said opinion.
6.6 Opinion of Underwriter's Counsel. The Underwriter shall have received
from Xxxxx & Xxxx, P.A., its counsel, such opinion or opinions as the
Underwriter may reasonably request, dated as of the Firm Closing Date or the
Option Closing Date, as the case may be, and satisfactory in form and substance
to the Underwriter, with respect to the sufficiency of corporate proceedings and
other legal matters relating to this Agreement and the transactions contemplated
hereby, and the Company shall have furnished to said counsel such documents as
they may have reasonably required for the purpose of enabling them to pass upon
such matters. In connection with the foregoing opinion, as to matters of fact
relevant to conclusions of law, such counsel may rely, to the extent that they
deem proper, upon representations or certificates of public officials and of
responsible officers of the Company.
6.7 Blue Sky Survey. The Underwriter shall have received at or prior to
the Firm Closing Date from Xxxxx & Xxxx, P.A., a memorandum or survey, in form
and substance satisfactory to the Underwriter, with respect to the qualification
or exemption for offering and sale by the Underwriter of the Units under the
state securities or Blue Sky laws of such jurisdictions as the Underwriter may
reasonably have designated to the Company. Such qualification or exemption shall
continue in effect to and including the Firm Closing Date and the Option Closing
Date.
6.8 Nasdaq Market. The Common Stock and the Warrants shall have been
approved for quotation through the Nasdaq Market.
6.9 Officers' Certificate. The Company shall have furnished to the
Underwriter a certificate, addressed to the Underwriter, of the President and of
the Chairman of the Company, dated the Closing Date, to the effect that the
signers of such certificate have examined the Registration Statement, the
Prospectus, and this Agreement and have consulted with legal counsel with
respect thereto, and that to the best of their knowledge:
6.9.1 Representations and Warranties True and Correct. The
representations and warranties of the Company in this Agreement are true
and correct on and as of the Closing Date; with the same effect as if made
on the Closing Date and the Company has complied with all the agreements
and has satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date.
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6.9.2 No Stop Orders. The Registration Statement has become
effective under the Act. No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been commenced or are threatened or, to their knowledge,
contemplated by the Commission and no stop order suspending the
qualification or registration of any of the Securities under the Blue Sky
laws of any jurisdiction (whether or not a jurisdiction the Underwriter
has specified) has been issued, and no proceedings for such purposes have
been commenced or, to their knowledge, are threatened or contemplated by
any jurisdiction.
6.9.3 Registration Statement Accurate. (a) Neither the Registration
Statement, as of the time it became effective, nor any post-effective
amendment thereto, at the time it was filed, contained an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (b)
neither the Prospectus nor any amendment thereof or supplement thereto, as
of the date thereof and as of the Closing Date, contained or contains any
untrue statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (c) since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented prospectus which has not been so set forth. None
of the representations and warranties in the certificate delivered
pursuant to this paragraph 6.9.3 shall apply to statements in, or
omissions from, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto, which are based upon and conform
to written information furnished to the Company by the Underwriter
specifically for use in the preparation of the Registration Statement or
the Prospectus or any amendment or supplement thereto.
6.9.4 No Material Adverse Change. Subsequent to the respective dates
as of which information is given in the Registration Statement and
Prospectus, and, except as disclosed or contemplated in the Registration
Statement and the Prospectus, (a) the Company and the Subsidiaries have
not incurred any material obligations, liabilities or commitments, except
in the ordinary course of business, (b) neither the Company nor any
Subsidiary has entered into any material transaction not in the ordinary
course of business, (c) the Company has not paid or declared any dividends
or other distributions on its capital stock, (d) there has not been any
change in the capital stock or debt of the Company or any Subsidiary or
any material adverse change in the condition (financial or otherwise),
business, prospects, properties or assets of the Company and the
Subsidiaries considered as a whole, and (e) the conduct of the business
and operations of the Company or any Subsidiary has not been materially
interfered with by strike, fire, flood, hurricane, accident or other
calamity (whether or not insured), or by any court or governmental action,
order or decree, and the properties of the Company and the Subsidiaries,
considered as a single enterprise, have not sustained any material loss or
damage (whether or not insured) as a result of any such occurrence.
6.9.5 Litigation; Contracts. There are no legal proceedings pending
or, to the best knowledge of such officers, threatened against the Company
or any Subsidiary of a character affecting the validity of this Agreement
or required to be disclosed in the Registration Statement; there are no
transactions or contracts required to be disclosed in the Registration
Statement which are not so disclosed; and there are no material contracts
or documents required to be filed as exhibits to the Registration
Statement which are not so filed.
6.10 Accountant's Letter. On the Date hereof, Coopers & Xxxxxxx LLP shall
have furnished to the Underwriter a letter, dated as of the date hereof, in form
and substance satisfactory to the
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Underwriter and its counsel, confirming that they are independent public
accountants with respect to the Company within the meaning of the Act, the
Exchange Act and the applicable rules and regulations, and stating to the effect
that:
6.10.1 Compliance with the Act. It is their opinion that the audited
consolidated financial statements and financial statement schedules of the
Company and the audited financial statements and financial statement
schedules of the Subsidiaries included in the Registration Statement
covered by their reports therein comply as to form in all material
respects with the applicable accounting requirements of the Act and the
regulations promulgated thereunder.
6.10.2 Examination of Company Books and Records. On the basis of
procedures (but not an audit in accordance with generally accepted
auditing standards) consisting of (a) reading the minutes of meetings of
the stockholders and the Board of Directors of the Company and the
Subsidiaries since the date of the latest audited balance sheet as set
forth in the Prospectus through a specified date not more than five
business days prior to the date of this Agreement, (b) performing the
procedures specified by the American Institute of Certified Public
Accountants for a review of interim financial information as described in
SAS No. 71, Interim Financial Information, on the unaudited condensed
consolidated interim financial statements of the Company included in the
Registration Statement and reading the unaudited condensed consolidated
interim financial statements of the Company for the period from July 1,
1996, to the date of latest available interim financial statements, and
(c) making inquiries of certain officials of the Company who have
responsibility for financial and accounting matters, nothing has come to
their attention that causes them to believe that at a specified date not
more than five business days prior to the date of this Agreement, there
was any change in the capital stock, increase in the long-term debt, or
decrease in consolidated net current assets or stockholders' equity, of
the Company as compared with the amounts shown in the June 30, 1996
audited consolidated balance sheet included in the Registration Statement
or, during the period from July 1, 1996 to a specified date not more than
five business days prior to the date of this Agreement, there were any
decreases, as compared with the corresponding period in the preceding year
in the combined net revenue, income from operations or the total or per
share amounts of net income of the Company and the Subsidiaries, except in
all instances for changes, increases or decreases which the Registration
Statement discloses have occurred or may occur, or except as specifically
stated in such letter.
6.10.3 Pro Forma Financial Statements. Although they are unable to
and do not express an opinion on the unaudited pro forma condensed
combined statement of operations (the "Pro Forma Financial Statements")
included in the Registration Statement, they have (a) read the Pro Forma
Financial Statements, (b) made inquiries of appropriate officials of the
Company who have responsibility for financial and accounting matters about
the basis for their determination of the pro form adjustments to the
historical amounts in the Pro Forma Financial Statements and whether the
Pro Forma Financial Statements comply in form in all material respects
with the applicable accounting requirements of Item 310 of Regulation S-B,
and (c) proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the Pro Forma Statements; on the
basis of such procedures, and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that caused
them to believe that the Pro Forma Financial Statements do not comply in
form in all material respects with the applicable requirements of Item 310
of Regulation S-B and that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of such
statements; and
6.10.4 Certain Procedures. They have performed certain procedures
with respect to certain amounts, percentages and financial information,
which are included in the Registration
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Statement and Prospectuses and which have been specified by the
Underwriter, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting and financial
records of the Company and the Subsidiaries identified in such letter.
6.11 Bring-Down Letter. At the Firm Closing Date or the Option Closing
Date, as the case may be, the Underwriter shall have received from Coopers &
Xxxxxxx LLP a letter, dated as of the Firm Closing Date or the Option Closing
Date, as the case may be, to the effect that (a) they confirm the statements
made in the letter furnished pursuant to paragraph 6.10 hereof, except that the
"specified date" referred to in such letter shall be a date not more than five
days prior to the Firm 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 subparagraph 6.10.4 with respect to certain amounts, percentages
and financial information specified by the Underwriter and deemed to be a part
of the Registration Statement pursuant to Rule 430(A)(b) and have found such
amounts, percentages and financial information to be in agreement with the
relevant accounting and financial records of the Company and the Subsidiaries
identified in such letter and (b) in their opinion, the audited financial
statements included in the Registration Statement comply as to form in all
material respects with the applicable requirements of the Act and the
Regulations.
6.12 Secretary's Certificates. The Underwriter shall have received, dated
as of the Firm Closing Date or the Option Closing Date, as appropriate, from the
Secretary of the Company, and from the Secretary of each Subsidiary, a
certificate of incumbency certifying the names, titles and signatures of the
officers authorized to execute this Agreement pursuant to the resolutions of the
Board of Directors of the Company or the Subsidiaries, as the case may be,
authorizing and approving the execution, delivery and performance of this
Agreement, a copy of such resolutions to be attached to such certificate,
certifying such resolutions and certifying that the Certificate or Articles of
Incorporation of the Company or the Subsidiaries and the Bylaws of the Company
or the Subsidiaries, as the case may be, have not been amended or modified,
except as described in the Prospectus.
6.13 Delivery of Shares, Warrants and Underwriter's Warrants. The Company
shall have duly executed the certificates for the shares of Common Stock, the
Warrants and the Underwriter's Unit Warrants and shall have delivered the same
to or at the direction of the Underwriter on the Closing Date.
6.14 Fees, Commissions and Expense Allowances Paid. The Company shall have
paid and delivered to the Underwriter in cash or Clearinghouse funds, free from
any rights, claims, liens or encumbrances of any other person, the
non-accountable expense allowance of 3% of the gross offering proceeds from the
sale of the Units being sold and delivered on such Closing Date.
6.15 Lock-Up Agreements.
6.15.1 Officers, Directors and Certain Stockholders. Each officer
and each director of the Company, and each stockholder of the Company
listed on Schedule 4.17A to this Agreement, shall have executed and shall
have become bound by a written Lock-Up Agreement addressed to the
Underwriter.
6.15.2 Instructions to Transfer Agent. The Company shall have
communicated appropriate stop transfer instructions to the Transfer Agent
to cause the restrictions contained in the Lock-Up Agreements to be
effective and shall have provided the Underwriter a copy of such
communication and the Transfer Agent's written acknowledgement of receipt
thereof and its agreement to comply therewith.
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6.16 Documents Satisfactory to Underwriter. All opinions, certificates,
letters and documents delivered pursuant to this Agreement will be in compliance
with the provisions of this Section 6 only if they are satisfactory to the
Underwriter and its counsel. The Company shall furnish to the Underwriter such
conformed copies of such opinions, certificates, letters and documents in such
quantities as the Underwriter shall reasonably request and such further
information, certificates and documents as the Underwriter and its counsel may
reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Underwriting Agreement, or if any of
the certificates, opinions, written statements, or letters furnished to the
Underwriter or its counsel pursuant to this Section 6 shall not be in all
material respects reasonably satisfactory in form and substance to the
Underwriter or its counsel, this Underwriting Agreement and all obligations of
the Underwriter hereunder may be canceled at, or at any time prior to, the
Closing Date(s) by the Underwriter. Notice of such cancellation shall be given
to the Company in writing, or by telephone call confirmed in writing. The
Underwriter may waive in writing the performance of any one or more of the
conditions specified in this Section 6 or extend the time for their performance.
7. INDEMNIFICATION AND CONTRIBUTION.
7.1 Indemnification by the Company and the Subsidiaries. The Company and
the Subsidiaries, jointly and severally, shall indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act or the Exchange Act and each employee or agent of the
Underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Underwriter and any such controlling person, employee or
agent may become subject, under the Act, or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or the Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and the Company will reimburse the
Underwriter and each such controlling person, employee or agent for any legal or
other expenses reasonably incurred by the Underwriter or such controlling
person, employee or agent in connection with investigating or defending any such
action or claim; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Underwriter expressly for use therein.
7.2 Indemnification by the Underwriter. The Underwriter shall indemnify
and hold harmless the Company, each of the Company's directors, each of the
Company's officers who signed the Registration Statement, each person who
controls the Company within the meaning of the Act and each employee or agent of
the Company, against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in any preliminary Prospectus, the Registration
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Statement or the Prospectus or any amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by the
Underwriter expressly for use therein; and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending against any
such action or claim as such expenses are incurred.
7.3 Claims. Promptly after receipt by an indemnified party under
paragraphs 7.1 or 7.2 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this paragraph, notify in writing the indemnifying
party of the commencement thereof. The omission so to notify the indemnifying
party will not relieve it from any liability under this Section 7, unless and to
the extent that such omission so to notify prejudices in any material respect
the indemnifying party's ability to defend such action. In case any such action
is brought against any indemnified party, and the indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel who shall be reasonably satisfactory to such indemnified
party; and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that any indemnified party shall have the right to employ separate counsel to
represent it and all other parties and their controlling or other persons who
may be subject to liability arising out of any claim in respect of which
indemnity may be sought by the Underwriter against the Company and the
Subsidiaries or by the Company against the Underwriter hereunder, as the case
may be, if (i) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict or potential
conflict of interest which, in the judgment of the indemnified party, could
affect in any material respect the defense of such action on behalf of the
indemnified party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party), (ii)
the actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded, based on the advice of counsel, that there may
be one or more legal defenses available to it and/or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, or (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action
the indemnified party or parties shall have the right to select separate counsel
to assume such defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties, in which event the fees
and expenses of one such separate counsel shall be borne by the indemnifying
party. Any such indemnifying party shall not be liable to any such indemnified
party on account of any settlement of any claim or action effected without the
consent of such indemnifying party, which consent shall not be unreasonably
withheld in light of all factors of importance to such indemnified party.
7.4 Contribution. If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an indemnified party under
paragraph 7.1 or 7.2 in respect of any losses, claims, damages or liabilities or
actions in respect thereof referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities or actions in respect
thereof in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Subsidiaries on the one hand and the Underwriter
on the other from the Offering. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only the
relative
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benefits but also the relative fault of the Company and the Subsidiaries on the
one hand and the Underwriter on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as other relevant equitable considerations.
The Company, the Subsidiaries, and the Underwriter agree that contribution
determined by per capita allocation would not be equitable. The respective
relative benefits received by the Company and the Subsidiaries on the one hand
and the Underwriter on the other hand shall be deemed to be in the same
proportion as the total price paid to the Company and the Subsidiaries for the
Units by the Underwriter (net of underwriting discount received but before
deducting expenses) on the one hand and the aggregate Underwriter's Discount
received by the Underwriter with respect to the Units purchased under this
Agreement on the other hand, in each case as set forth in the table on the cover
page of the Prospectus, bear to the aggregate public offering price of the
Units. The 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 the Subsidiaries on the one hand or the Underwriter
on the other hand and the parties' relative intent, knowledge, access to
information and the opportunity to correct or prevent such statement or
omission.
The amount paid or payable by a party as a result of the losses,
claims, damages and liabilities (or actions in respect thereof) referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim. Notwithstanding the provisions of this Section 7, the Underwriter
shall not be required to contribute any amount in excess of the Underwriter's
Discounts received by it. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. EFFECTIVE DATE AND TERMINATION.
8.1 Effective Date. This Agreement shall become effective (a) immediately
as to paragraphs 4.11 and 9.1, Sections 7 and 8 and (b) as to all other
provisions, as of the later of (i) the date and time of the execution and
delivery hereof and (ii) the date and time the Registration Statement becomes
effective.
8.2 Termination. Until the Firm Closing Date, this Agreement may be
terminated by the Underwriter, at its option, by giving written notice to the
Company, if in the opinion of the Underwriter (i) the Company or any Subsidiary
shall have sustained a loss by fire, flood, accident, or other calamity which is
material with respect to the business of the Company and the Subsidiaries
considered as a single enterprise, whether or not such loss shall have been
insured; the Company or any Subsidiary shall have become a party to any action,
suit or proceeding of the type required to be disclosed but not disclosed in the
Prospectus; or there shall have been, since the respective dates as of which
information is given in the Registration Statement or the Prospectus, any
material adverse change in the business, key personnel, capitalization,
financial position or business prospects of the Company and the Subsidiaries
considered as a single enterprise, whether or not arising in the ordinary course
of business; (ii) trading in securities generally on the New York Stock Exchange
or the over-the-counter market shall have been suspended or limited or minimum
or maximum prices shall have been generally established on such exchange or
market, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange or by order of the Commission or any court or
governmental authority; (iii) a general banking moratorium shall have been
declared by federal or New York authorities; (iv) there shall have been such a
material adverse change in general economic, monetary, political, or financial
conditions, or the effect of international conditions on the financial markets
in the United States; or (v) there shall have occurred a material outbreak of
hostilities
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or material escalation and deterioration in the political and military situation
between the United States and any foreign power, or a formal declaration of war
or national emergency by the United States of America; in each case, the effect
of which is such as to make it, in the sole judgment of the Underwriter,
impracticable to market the Units. Any such termination shall be without
liability of any party to any other party (except for the expenses to be paid or
reimbursed by the Company as provided in paragraph 4.11 hereof and except to the
extent provided in paragraph 9.1 and Section 7 hereof).
8.3 Notice of Termination. If the Underwriter elects to prevent this
Agreement from becoming effective or to terminate this Agreement as provided in
this Section 8, it shall notify the Company promptly by telefacsimile or
telephone, confirmed by letter sent to the address specified in paragraph 9.3
hereof.
9. GENERAL AND MISCELLANEOUS.
9.1 Representations, Warranties, Covenants and Indemnities to Survive
Delivery. The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Company, its officers, the Subsidiaries,
and the Underwriter set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, the
Subsidiaries, any of its or their officers or directors, the Underwriter or any
controlling person referred to in Section 7 hereof and (ii) delivery of and
payment for the Securities. The respective agreements, covenants, indemnities
and other statements set forth in Section 7 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
9.2 Information Furnished by the Underwriter. The statements set forth in
the last paragraph on the cover page of, and under the caption "Underwriting,"
in the Prospectus constitute the only written information furnished by the
Underwriter expressly for use therein.
9.3 Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of delivery if delivered personally or sent by overnight courier,
with acknowledgement of receipt, to the party to whom notice is to be given, or
on the fifth day after mailing if mailed to the party to whom notice is to be
given, by registered or certified mail, return receipt requested, postage
prepaid, and properly addressed as follows: if to the Underwriter, at 00000
Xxxxx Xxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000, attention of Xxxxxx
Xxxxxxxx, with a copy to Xxxxxx X. Xxxxxxxxxx, Esq., Xxxxx & Xxxx, P.A., 0000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000; and if to the Company,
0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, attention of Xxxx X.
Xxxxx, with a copy to Xxxx X. Xxxxxxx, Esq., Rosenman & Colin LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. Any party may change its address for purposes
of this paragraph by giving the other party written notice of the new address in
the manner set forth above.
9.4 Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors, and, to the extent and
only to the extent stated in this Section 9, the officers, directors,
controlling and other persons referred to in Section 7 herein. Nothing in this
Agreement is intended or shall be construed to give to any other person, firm or
corporation any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein. The term "successor" as used
in this Agreement shall not include any purchaser of the Units from the
Underwriter.
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9.5 Waiver. The waiver of any breach of this Agreement shall not
constitute the waiver of any different or subsequent breach. To be effective,
all waivers must be in writing and signed by the party to be charged.
9.6 Severability. Any provision of this Agreement held by a court of
competent jurisdiction to be illegal, invalid or unenforceable shall be
construed and enforced, to the extent practicable and lawful, as if it had been
more narrowly drawn so as not to be illegal, invalid or unenforceable or else
shall be deemed severable from the remainder of this Agreement. The remaining
provisions of this Agreement shall remain in effect and be enforceable in
accordance with their terms.
9.7 Headings. Titles and headings to sections herein are inserted for the
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflict of laws.
9.9 Entire Agreement. This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and supersedes all
prior agreements and understandings.
9.10 Counterparts. This Agreement may be executed in several counterparts,
each of which when together shall constitute a single document.
DATED: _______________, 1996.
PACIFIC BIOMETRICS, INC., PARADISE VALLEY SECURITIES, INC.,
a Delaware corporation an Arizona corporation
By _________________________________ By ___________________________________
Its: _________________________ Its:____________________________
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Each of the undersigned acknowledges that its agreement to be a party to this
Agreement with respect to joint and several liability arising pursuant to
Section 7 hereof is a material inducement to the Underwriter entering into this
Agreement, and each of the undersigned agrees to be bound by the terms of this
Agreement.
PACIFIC BIOMETRICS, INC.,
a Washington corporation
By __________________________________
Its: __________________________
BIOQUANT, INC.,
a Michigan corporation
By __________________________________
Its: __________________________
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